Don’t be too quick getting your tax return in.
I know a lot of people are hanging out for a potential tax refund but don’t be too quick. Chartered Accountants Australia and NZ is encouraging Australians to keep calm and take time lodging their tax return to avoid making costly mistakes.
It takes a few weeks for the ATO to pre-fill tax returns with information from employers, banks, health funds, government agencies and other third parties. If you rush to lodge your tax return before the information is pre-filled, you have a higher chance of making a mistake and you may forget to include some amounts.
Mistakes can be expensive as not only is tax payable, but tax debt attracts interest of more than 11 per cent and you could also face penalties. 31 October is the date to remember – you must either submit by then, or appoint a registered tax agent, giving you extra time to get your return ready.
The deadline to lodge a return when you have a registered tax agent usually falls on either 31 March or 15 May of the following year, depending on the tax liability of the last return you lodged.
According to Chartered Accountants, there are three golden rules when it comes to tax deductions. These are:
- Golden rule 1: You need to have paid or been charged the expense. If you have been reimbursed for the expense or someone else paid the expense, you cannot claim a deduction.
- Golden rule 2: You need to have proof of the expense. It helps to have copies of tax invoices.
- Golden rule 3: You need to ensure that it is a work expense. The deduction cannot be for expenses that are used for private or capital purposes. You need to apportion expenses to ensure that only the work component is claimed, not the private component.
The ATO has 25 data-matching programs that include information from investment property loans, motor vehicle registries and insurance companies, so it can ensure that people are complying with their tax obligations and detect any fraud.
ATO ‘red flags’
The following may attract the ATO’s attention:
- Taxpayers claiming deductions for higher expenses than others in their line of work or industry.
- Taxpayers claiming deductions for expenses which conflict with third party data.
- Taxpayers not reporting income which conflicts with third party data, including online shared economy platforms.
- Taxpayers who work in an industry that typically receives cash payments.
- Failure to lodge a tax return on time.
- A history of previous non-compliance.
- A failure to substantiate expenses by maintaining adequate records.
