Tax mistakes are easy to make, but easy to correct. Here are a list of the most common ones (and how to avoid making them)
1 – Guessing or estimating deductions
The ATO has a close eye on claims, especially ones that seem unfounded. Simple tax mistakes are easy to make, but by estimating or guessing your deduction amounts, incurred expenses or any other number within your tax return, you risk being caught out. Inaccurate numbers are plain to see to people trained to find them. The best way to protect yourself from inaccurate numbers, and a potentially costly audit, is to keep good records and to be transparent in your income and expenses in all your dealings with the ATO.
2 – Failing to declare overseas income
It can be easy to forget to declare your income to the ATO if you’re an Australian resident for tax purposes and live or work overseas. Whether you’re overseas or not, you still need to lodge an annual Australian tax return.
In your tax return, remember to declare all foreign income, including:
- Pensions and annuities;
- Employment income;
- Investment income;
- Business income;
- Capital gains on overseas assets; and/or
- Any other income, such as rent.
3 – Overclaiming for properties
There are strict rules you need to adhere to if you own a holiday home or rental property. Particularly, you cannot claim deductions on a holiday home or rental property that is not genuinely up for rent. When you, or someone you know, are staying at the property without paying rent, these periods need to be recorded and removed when calculating your expenses. If your property is only available for a portion of the year, it is vital that you adjust your deduction claims for the actual time the property was up for rent.
If you jointly own the property with a spouse or other third party, you need to accurately split the expenses incurred between both tax returns, relevant to your percentage of ownership.
BONUS: Also note that costs of renovations and capital works on such properties can not be claimed outright – instead, they are claimed at 2.5% of the total cost each year for 40 years.
4 – No proof!
Not supporting your claims is one of the easiest tax mistakes to make. You can only claim a maximum of $300 worth of work-related expenses without receipts or documentation. You are more than likely eligible to claim more than this amount, but with no receipts you can not prove your eligibility. Keeping good records and filing habits can make a great difference, ensuring you do not miss out come tax time.
5 – Lodging Duplicate Forms
Almost every Australian with a tax file number needs to lodge a tax return every year. Duplicate returns make the processing of all returns that much slower. If you have already lodged your return but need to correct an error, you need to request an amendment. It’s best to watch the lodgement status report available on the ATO portal for information pertaining to your situation.
6 – Repeated Information
Do not repeat information if you have already answered or declared something in a previous section of your return. These forms are read by actual ATO staff, and they note the annoyance of duplicate information within the same return form. Often you feel like you are helping and being as transparent as possible but in reality, this muddles the information.
7 – Missing or incomplete information
There is a lot of information required for your return. Information often deemed incorrect or incomplete relates to health insurance or spousal information.
This incomplete information increases the time it takes to process your return. It may also delay any monies owed to you, and possibly increase the chances of an audit. Any information that is deemed incorrect could indicate deeper issues with your forms.
8 – Not getting help when you need it
Tax is complicated. There is a definite reason why over 70% of Australians use a tax agent! It can be a stressful, confusing experience. Making a mistake can severely lower your refund or make you vulnerable to ATO penalties.
It’s no wonder more and more Australians are choosing to use convenient tax agents like Online Tax Return. With so many tax laws and technicalities, our tax experts are experienced in even the most obscure tax rules, ensuring you get the best return possible. Even better, the tax agent’s fee is deductible!
Start by simply filling out our free estimate form for a free estimate. One of our team will then be in contact with you to complete your return as fast as possible. It’s the easiest way to avoid tax mistakes and make the most of your return!
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.
Lodged my Tax Return online and was happy with my refund, nice and easy process.
Easiest online return i have tried, no messy paperwork or appointments. Great experience!