Why Your Tax Refund Might Look Different to Your Mate’s (Even If They Earn Double)

Why Your Tax Refund Might Look Different to Your Mate’s (Even If They Earn Double)

Ever had that moment where you hear what someone else is getting back on their tax return and think,

“Wait, how come they’re getting $4,000 and I’m only getting $400?”

Whether it’s a family member, friend, or colleague at work, it’s one of the most common tax season head-scratchers I see.

One client recently asked a great question — her son earns nearly twice as much as she does, yet their refunds were about the same. Understandably, she wondered if that was correct.

So let’s clear up a few things about how the Australian tax system actually works, and why comparing tax refunds can be a bit like comparing apples to oranges.

🧮 The Tax System Isn’t a Straight Line

Australia uses a progressive tax system, which means that the more you earn, the higher your marginal tax rate — but only on the portion above each threshold. So while someone may earn more, they’re also likely to be taxed more along the way.

But here’s the catch: your tax refund isn’t based on how much tax you should have paid — it’s based on how much tax you actually paid during the year compared to what you needed to pay.

🤔 Why Two People Can Have Totally Different Refunds

Here are a few reasons two people with different incomes might end up with similar — or vastly different — tax refunds:

✅ How much tax was withheld during the year

Your tax refund often comes down to how much tax your employer withheld from your pay during the year — not necessarily how much you earned overall.

Employers are required to withhold tax according to the Australian Taxation Office (ATO) tax tables, which are based on your weekly, fortnightly, or monthly earnings. This system generally works well, but it can’t always perfectly account for what happens across the entire year.

Here’s why:

  • Overtime, bonuses, and pay rises can push your income higher at different times, but your employer can only withhold based on the income level at the time you were paid.

  • If you earned less at the beginning of the year and more later, you may have been taxed correctly each pay period — but your total tax across the year may be a little short, resulting in a smaller refund or even a payable amount.

  • Conversely, if your income dipped (e.g., you took unpaid leave or changed jobs mid-year), you might end up having more tax withheld than necessary, leading to a higher refund.

So, even though employers can’t legally withhold less than the prescribed rate, the timing and pattern of your income can cause small mismatches that impact your final refund.

✅ Work-related deductions and offsets

One person might have lots of deductible expenses like uniforms, tools, or education costs. Another might be eligible for tax offsets such as the low income tax offset, zone offset, or private health insurance rebate.

✅ Other income streams

If someone has rental income, shares, or investment earnings, these can affect how much tax is payable and whether they’re owed a refund or have to pay extra.

✅ Medicare levy and other obligations

Some taxpayers pay extra levies or lose offsets depending on their income level. That can quickly eat into any expected refund.

🔍 It’s Not Just About Income — It’s About Your Whole Tax Picture

It’s natural to compare returns with someone close to you, especially if your jobs or lifestyles seem similar. But the truth is, there are so many individual factors that can affect your tax outcome. Even small differences — like the timing of a payment, use of a novated lease, or whether you claimed private health insurance — can shift the result.

💡 Want to Know How Your Return Stacks Up?

If you’re curious or unsure about your refund (or lack thereof), it’s always worth asking. I’m happy to explain how your return was calculated and what impacted the result — no jargon, no judgement.

And if you’d like to get the best possible outcome next year, we can chat about ways to structure your income, deductions, or even review your PAYG withholding if needed.

⚠️ Disclaimer

This blog is intended as general information only and may not consider all your personal circumstances. It should not be relied upon as advice. Please seek tailored advice from a registered tax agent or financial advisor to ensure the method you choose aligns with your situation.