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Watch out: ATO reveals top 3 mistakes taxpayers are making this year

A record amount of Australians have already lodged their tax returns – but the ATO warns that those who have lodged are making certain mistakes. (Source: AAP, Getty)

We’re seven weeks into tax return season, and the Australian Taxation Office (ATO) has already received a whopping 5.5 million lodgements – here are the three most common mistakes.

Whether its failing to report your full income or over-claiming interest, Australians need to watch out: these common mistakes could result in further action from the ATO.

According to an ATO spokesperson, these are the three most common areas where taxpayers are tripping up.

1. Tax claim mistake: Failing to report income

The ATO spokesperson said their “sophisticated data matching systems” are able to identify when income has been left out of a tax return.

So don’t forget to report any income you make from short-stay online rental platforms such as Airbnb, other sharing economy apps, or any temp jobs you did over the year.

2. Tax claim mistake: Over-claiming for deductions

There are two categories of errors taxpayers are making: rental property expense claims and work-related expense claims.

Rental property-related claim mistakes:

  • Over-claiming interest: For example, a taxpayer who has refinanced their investment loan to purchase a private asset like a car or boat, or pay for private living expenses, has claimed the full amount of interest on their loan

  • Wrongly classifying capital works as repairs: For instance, a taxpayer who has renovated the bathroom in their rental property and has claimed the entire cost in the same year must instead claim 2.5 of the cost every year over 40 years.

  • Claiming for private use: Taxpayers who own a holiday home and rent out only occasionally have wrongfully claimed deductions for the times they’ve used the property themselves, or when the property is not in use.

Workplace-related claim errors:

  • Claiming for items the taxpayer didn’t pay for: For instance, claiming a ‘standard’ deduction for amounts to the maximum limit of record-keeping thresholds, e.g. $150 for laundry or $300 for total work-related expenses. “These thresholds are there to make record keeping easier, but taxpayers still need to be able to show us how they have worked out their claim, these amounts are not a ‘free entitlement’ for everyone,” the ATO spokesperson said.

  • Claiming for private expenses or not apportioning for private use: For example, claiming the cost of an entire private holiday if you happen to attend a work-related course at that location.

  • Claiming for non-work expenses: For example, claiming for private trips like between home and work; clothing and laundry (e.g. claiming for plain clothing); and working from home (e.g. claiming the entire personal mobile phone and internet bill when you use them only partly for work).

3. Tax claim mistake: Failing to keep records

If the ATO has refused your claim, it’s most likely because you weren’t able to produce records or receipts when asked, the tax office spokesperson said.

“To claim a tax deduction you need to be able to show that you spent the money, what you spent it on, who the supplier was, and when the purchase occurred.”

“Even where record-keeping exceptions apply, you will still need to be able to show you spent the money and how you calculated your claim,” the ATO spokesperson told Yahoo Finance.

Need help with keeping your records? The ATO has an app for that; the myDeductions tool in the ATO’s app can help taxpayers store details of their expenses, include a photo of the receipt in the app, and upload the details of their claim straight into their return or send it to their tax agent.

There are other apps that can help you with your tax return: Yahoo Finance handpicks five here.

ATO in overdrive but not everyone will get the full $1,080 tax cut

Record numbers of Australians are filing their tax returns promptly this year in order to get the Coalition’s promised tax cut, sending the ATO into overdrive.

However, not all taxpayers will get the full $1,080 – to get that sum, you’ll have to earn between $48,000 and $90,000.

2.3 million Aussies who earn up to $37,000 will get up to $255, while the 1.7 million taxpayers who earn between $37,000 and $47,999 will get between $255 and $1,080.

The tax cut starts to taper off for the 1.6 million Australians whose salaries are between $90 to $126,000, who will receive anywhere between $1,080 to $0.

The ATO told Yahoo Finance it is expecting about 13.2 million tax returns to be lodged this year.

However, there’s a chance you might not see any of the money at all: if you’ve got a Centrelink or child support debt that you haven’t paid, or that you weren’t even aware of, the tax offset will go straight to that.

If you haven’t done so already, the ATO has said that now is the best time to lodge your tax return.

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