'Will I owe money?' Every question you have about the 2022-23 tax return, answered.

It's that time of year again... tax season!

When July 1 comes around - aka the beginning of the new financial year - many Aussies get excited for a boost in their bank accounts in the form of a tax return. 

Since 2019, the Australian Government has had the Low and Middle Income, Tax Offset in place. It meant that low to middle income earners (anyone earning under $126,000 a year) had up to $1,500 slashed from their tax return. It's an offset that benefitted more than 10 million of us.

But now, the Australian Government has axed the offset - and it's causing a big financial and mental load for a lot of people. 

Watch: 5 money lessons your parents told you, that you should probably forget. Post continues below.

Over the past few years, people in this income bracket have reported getting a nice chunk of money, whether it be in the hundreds or a few thousand. But now - that will likely no longer be the case. Instead, they will be having to pay the Australian Tax Office (ATO).

There's a bunch of reasons why this is now the case, according to Mark Chapman who is the Director of Tax Communications at H&R Block Australia.

One reason could be you work multiple jobs and have ticked the 'tax tree' threshold more than once on your forms. Maybe when you add up all your investment streams (including investment properties), you haven't paid enough tax overall. It can also come down to exceeding the Medicare levy threshold, having a health debt or if you have sold a property recently.

But overwhelmingly, one of the biggest reasons you might see a difference with your tax return this year comes down to the Low and Middle Income Tax Offset (LMITO) being axed.

"Unfortunately the LMITO no longer exists this year. It was abolished on June 30 2022. Having said that, I think it's fair to say that most people hadn't noticed it had been abolished," Chapman explained on Mamamia's news podcast The Quicky. 

"The way you got the offset was through your tax return, therefore the first tax return that is affected is the current one. Suddenly lots of taxpayers are noticing for the first time that the LMITO simply isn't there."

Listen to today's episode of The Quicky on this subject. Post continues after audio.

Taxpayers earning between $48,000 and $90,000 received the most from the LMITO, which was receiving an offset of $1,500. So right now, it's middle income earners who are going to feel the biggest pinch.

"For these taxpayers they're now missing out on an entire $1,500 and that's quite noticeable and painful. Having said that, all taxpayers earning less than $126,000 received at least some of the offset, so all of those taxpayers will notice a drop in their refund or may even have some tax payable this year," says Chapman.

Online, we've seen stories of people who have done their tax returns early this month, only to get a bit of a rude shock. Some say they have had to fork out anywhere between a few hundred and a few thousand dollars to the ATO - on top of what they have already paid in tax throughout the year.

As for what might leave you more susceptible to having to pay the ATO this tax season, Chapman said there are a few factors to consider.

"First of all if you claimed work-from-home deductions in the past. The ATO has tinkered with the rules and made them much tighter. Now you have to prove every single hour that you've worked from home, in addition, you've got to have support evidence for each of the individual expenses. Therefore, a lot of taxpayers can't meet all those requirements. They're potentially cut out of claiming home-related deductions."

Another factor - the tax thresholds haven't changed.

This year in particular, we've seen very high rates of inflation, but not much difference in terms of wage increases across the board. And if you did get a pay rise this year, chances are it could have pushed you into a higher tax bracket, and therefore you've got more tax to pay - and not much benefit from the pay rise. 

Indexation has also seen debts rise a substantial amount. This will likely impact the 2023-24 tax season more than the current one, Chapman notes, but it definitely will make some form of impact on this tax season too.

So if you are someone who has student debt - if feasible, it might be wiser to try and pay it off this year, rather than wait for the next year. As it will be a tougher slog to pay off in the 2023-24 season. 

For those feeling a decent amount of financial stress after hearing this news - we don't blame you. And right now, the cost of living is having a profound impact on a lot of Aussies.

As Chapman told The Quicky though, it's important to know these things ahead of time so that you can plan your finances accordingly. Knowledge is power. 

"If you can't pay a tax bill, I would certainly advise that you don't bury your head in the sand. You can enter into a payment plan with ATO, they're relatively generous in their terms. You can spread out the repayments over a longer period, rather than an upfront payment as that can be quite painful," he said.

So to all middle to low income taxpayers this tax season - we're thinking of you. 

For more tax information, you can visit the ATO's website here. 

Feature Image: Mamamia.