The Australian Taxation Office says taxpayers should brace for smaller returns or even debts this year, which will be cold comfort for households struggling with the high cost of living and surging mortgage repayments.
H&R Block tax expert Mark Chapman said the end of the so-called "lamington" offset could shrink returns by as much as $1500 for those earning less than $126,000.
Formally known as the low- and middle-income tax offset, the relief mechanism was introduced as the first phase of three-stage reforms, and effectively saved this cohort up to $1080 each year.
While never meant to be permanent, the measure was extended three times and was actually bolstered to a maximum saving of $1500 by the former coalition government in 2021/22.
The offset has since been abolished and Mr Chapman said many taxpayers may not have noticed because it had been applied automatically when returns were lodged.
The scrapped offset measure will affect anyone earning less than $126,000 a year, with the amount lost depending on individual incomes.
Changes to the way taxpayers claim working-from-home deductions may also come as an unpleasant surprise.
Mr Chapman said the 80-cent shortcut rate and the 52 cents per hour fixed rate method had been dumped in favour of a more complex and time-consuming alternative.
Those hoping to claim a deduction on the costs racked up by working from home, such as heating and new stationery, must now deal with a 67-cent fixed rate that comes with a tougher compliance regimen and a new mix of items that can be claimed.
Compared to the old system, which had few record-keeping requirements, taxpayers now have to produce schedules and time sheets of their working-from-home hours.
The new rate also includes a different mix of items, with the inclusion of phone usage and internet expenses meaning they cannot be claimed as separate expenses.
Mr Chapman said while the dumped tax offset and the changes to working-from-home deductions could result in smaller returns for many taxpayers, there are still "plenty of deductions to go around".
"You need to make sure that, basically, you're claiming all of the deductions that you actually are entitled to claim," he said.
The ATO has also urged taxpayers to wait until late July to lodge their returns.
Assistant commissioner at the tax office, Tim Loh, said there may be missing information in returns lodged too early.
"If you forget to include everything, it will slow down the progress of your return, and you'll likely end up with more work to do down the track,'' Mr Loh said.
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