The Top 5 Common Tax Return Mistakes
Author │ Tommy Li – MAS Tax Accountants Landsdale/Morley
July 2018
According to the Australian Taxation Office (ATO), there are a few common tax return mistakes that the average tax payer will encounter from time-to-time. While a majority of tax errors are unintentional and can be resolved, you can save yourself a lot of time and worry by ensuring that the correct tax information is initially recorded. Our Tax Accountants Morley can help you to complete your tax return with efficiency and ease this tax season.
To ensure that your tax return is completed correctly, we’ve put together the Top 5 Common Tax Errors and the steps you can take to avoid tax return mistakes this year.
These errors can be costly and highly stressful for tax payers. As the ATO continue to improve their data matching technology, any unusual or irregular information can raise a red flag on their system. This could lead to a tax audit or penalties, so it is important to ensure that your return is correct and true.
For personalised tax services or advice, please speak with our Tax Accountants Morley.
The Top 5 Common Tax Return Mistakes and How To Avoid Them
(Tax Accountants Morley)
Mistake 1:
Not declaring the full amount of their income
Solution:
More and more people are earning their income from multiple sources. It is not uncommon that taxpayers forget to include irregular income which they get from the odd temp jobs or money earned from the sharing economy such as Uber or Airbnb. To avoid this mistake, always keep up to date records of all your income. If you are still unsure, delay lodgement until mid-August when ATO will have received all your income data.
Mistake 2:
Claiming deductions for private expenses
Solution:
Before claiming the full amount which you spend for work, check if there are any private components. For example, if you use your phone for work, you are entitled to claim on the calls which relate to work. You would need to determine the percentage of calls to work out the amount of deduction which can be claimed. Any calls made for personal reasons are disallowed for deduction.
Mistake 3:
Forgetting to keep receipts
Solution:
It is important that every expense or deduction claimed is supported by evidence or receipts. Typically, you are required to keep them for five years after the lodgement date. These records can be kept in printed or electronic format, and the ATO app has a useful function which allows you to take photos of any receipts on the go.
Mistake 4:
Claiming for expenses they never paid or are reimbursed for
Solution:
One of the three golden rules for claiming work-related expenses is you must have spent the money and not have been reimbursed for it. A classic example is the $150 limit claimed for laundry expenses without receipts. The ATO’s focus this year is this type of standard deduction where taxpayers claim the maximum amounts without actually spending the money not paying attention if the expense is required to earn their income. To avoid any potential ATO penalty, only claim what’s spent and make sure you can prove that the expense is directly related to your income.
Mistake 5:
Claiming personal expenses for rental properties
Solution:
If you own an investment property, any period of private use or when the property was rented at a price significantly lower than market rents, will reduce the amount claimable in deductions. Therefore, it is important to consider if apportionment is required and calculated to prevent a red flag by the ATO leading to further investigations.
Hopefully these hints help you in preparing your tax return this year. If at any time you are unsure and need some advice, please feel free to contact our expert Tax Accountants Morley and Landsdale. We would be more than happy to have a friendly chat and sort out your tax enquiry to have a stress-free tax time!
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