Yahoo Finance 6 most common tax return mistakes, revealed
It’s tax return time, which also means it’s get-your-affairs-in-order time.
Over the next four months, 13 million Aussies will lodge a tax return, with 84 per cent of us expecting a refund.
With the Australian Taxation Office (ATO) already flagging areas under the microscope, such as work-related expenses, false work-from-home expenses, and mobile and internet costs, it’s worth knowing the common pitfalls to side-step when completing your tax return:
1. Not claiming what you’re entitled to
If you incurred an expense while earning your income and you’ve got the paperwork to prove it, you can claim a deduction.
According to Etax and Dolman Bateman, here are the ten most commonly forgotten by deductions, so make sure you don’t miss out:
Work-related car expenses
Home office expenses
Mobile phone
Income protection
Union fees and donations
Self-education expenses
Sunglasses, if required to work outside for long periods
Laundry expenses for occupation-specific clothing
Tax agent fees
Medical fees
Gig economy or share economy workers have to be particularly careful about what they’re claiming, warned Will Davies, a founding member of gig economy start-up accelerator The Sharing Hub and CEO of Car Next Door.
There are certain things you can claim if you earn money in the gig economy, such as any fees you pay to be a member of a sharing community or to use the platform, but gig economy workers need to be particularly careful of over-claiming for shared assets that they also use for personal use.
Read now: What can I claim on my tax return?
Read now: 7 surprising things you didn’t know you could claim on tax
2. Embellishing or inflating your deductions
Don’t inflate your deductions just to get a bigger refund – only claim costs for things you can prove you spent that’s backed up by an invoice, receipt, or bank statement.
3. Forgetting or failing to declare certain things
Forget to declare certain things and you can find yourself on the ATO’s radar.
Here’s a list of things which you need to include in your tax return, according to Davies, online tax agent eTax, and the ATO itself;
All income earned, such as a temp job done or any money earnt from the sharing economy
Super pensions, annuities, and government payments
Investment income (including interest, dividends, rent, capital gains tax)
Business, partnership and trust income
Crowdfunding
Compensation and insurance payments
Any prizes and awards from an investment body
Any income earned overseas (including pensions, annuities, employment income, investment income, business income, capital gains on overseas assets)
Any cryptocurrency gains
Any income earned on holiday and rental properties
4. Relying on pre-filled information from the ATO
You can pre-fill lots of income information straight from the ATO’s systems at the push of a button, but don’t blindly trust that it’s all accurate or complete, H&R Block director of tax communications Mark Chapman said.
Make sure to use your own information as your key source of data, especially if you’re lodging early.
This year, something called Single Touch Payroll officially kicks in, meaning employers will no longer provide payment summaries (also known as PAYG). Instead, your year-end wage information goes straight to the ATO and can be pre-filled upon your tax return.
But your employer has until the end of July to do it, and third parties such as banks or insurers pass on information to the ATO about you in July or August, so early lodgers can find a lot of information missing or not up-to-date.
5. Forgetting the basics
They’re so rudimentary you wouldn’t think you’d get it wrong – but forgetting the basics can cost you dearly.
Make sure you’ve changed your name and address, have included your bank details and that your tax return is void of any spelling mistakes, Chapman pointed out.
6. Not engaging a tax agent
If you’d rather leave your tax affairs up to the experts and cruise through tax-time, you might be better off using a tax expert.
It will only take minutes, and tax agents will be able to help you sniff out more tax deductions to boost your refund.
An accountant or tax expert can also double-check your lodgement before it goes off to the ATO, noted Etax.
And, to sweeten the deal, the tax agent’s fee is also tax deductible.
What happens if I make a mistake?
If you’re lodging your own tax with the ATO’s myTax website, be warned that you’re being monitored by the ATO’s computer systems that prevent people from over-claiming, Chapman cautioned.
If your claim raises alarm bells, myTax will give you a stern warning – and then you’ll be headed for an audit if that warning is ignored, he said.
If your deduction claims are found to be wrong, you’ll have to pay the tax avoided, plus interest of about 9 per cent every year.
And if the ATO thinks you were careless, you could cop a penalty of 25 per cent or 95 per cent of the tax avoided.
Did we miss anything? Let us know at jessica.yun@yahoofinance.com.
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