Five most common tax mistakes Aussies make that could cost you

Canberra Times

2 days ago

Five most common tax mistakes Aussies make that could cost you
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This is branded content for H&R Block Tax Accountants.
Over the coming months, 13 million Australians will lodge their annual tax returns, with 84 per cent expecting a refund. The average size of refunds last year reached more than $3,000.
With the potential for such a handy windfall, why would you risk leaving anything behind for the tax man, or having your refund delayed because you made an error or overlooked details when filling in your return?
Tax expert Mark Chapman from Australia's largest tax agency, H&R Block Tax Accountants, says there are some common tax return traps people tend to fall into. Here are his five tips for avoiding the pitfalls, getting your tax return right, and that refund in your pocket.
1. Claim what you're entitled to
You're entitled to claim a deduction for any expense you incurred in earning your income.
"So, if you have incurred a work-related expense, and you have the paperwork to prove it, don't hesitate to claim it," said Mr Chapman.
A good tax accountant, like H&R Block, will be able to tell you exactly what you can and can't claim, minimising the chances of an audit at a later date, but consider claiming these:
Working from home expenses. You should claim the work-related costs of your home running costs, like gas, electricity, mobile phone, internet and so on. There are two methods for claiming; your tax accountant can help you find the best one.
Clothing and uniforms. You can claim the cost of buying and cleaning occupation-specific clothing, such as work uniforms.
Car expenses . You can claim the cost of all work-related journeys (excluding home-to-work expenses). Either claim actual costs (which will require a logbook to have been kept, plus copies of receipts/invoices incurred) or claim the ATO's fixed rate of 88 cents per kilometre for each work-related kilometre covered (you need to keep a diary of all your work-relatedjourneys).
Handbags. If you've bought a handbag that you use for work-related purposes, such as carrying documents and files, you can score a tax deduction for the work-related proportion of the cost.
2. But don't embellish deductions
Exaggerating the facts might be okay when you're telling a fishing story, but not when it comes to tax returns.
"You can only claim what you've spent," said Mr Chapman, "so don't inflate deductions in order to get a bigger refund. And only claim for costs you can prove you spent, by producing an invoice, receipt or bank statement, for instance."
H&R Block's Mark Chapman. Picture supplied
Self-lodgers using the ATO's myTax program are monitored as they prepare their return by the ATO's computer systems to ensure they're not over-claiming. The ATO's computer systems compare your claims to those of others like you.
If your claim rings alarm bells, myTax will give you a stern warning inviting you to rethink that deduction. Ignore that message, and you could be headed for an audit.
"If your deduction claims are found to be incorrect, you'll be required to repay the tax avoided, plus pay interest," said Mr Chapman. "If the ATO believes you've acted carelessly, a penalty between 25 per cent and 95 per cent of the tax avoided may also be charged."
3. Get some help
There's a reason 65 per cent of Australians use a tax agent to prepare their tax return; tax is complicated. Get your tax return wrong and the comeback is on you, either with a lower refund or ATO penalties.
"Most people find it far less stressful to simply pass on all their information to a tax agent and leave it to the agent to complete their return, safe in the knowledge that the return will be accurate and complete," said Mr Chapman.
"Experienced agents, like those at H&R Block, are good at sniffing out those obscure tax deductions you didn't know you could claim, so they can often pay for themselves several times over. Best of all, the tax agent's fee is also tax-deductible."
4. Don't rely on pre-filled data from the ATO
These days, you can pre-fill lots of your income information straight from the ATO's systems with the push of a button. But you still need to take care to check it.
"Don't assume income data is correct or complete," said Mr Chapman. "Particularly if you're lodging early, always use your own information as the key source data.
"Some people assume that it must be right because the data comes from the ATO. That's a dangerous assumption, especially in July and early August. If you omit income and get questioned by the ATO, the legal burden will be on you, even though you've taken the information straight from the ATO's pre-filled data.
5. Don't forget the basics
Many tax returns get held up by the ATO because taxpayers have made basic mistakes like not updating their name or address, or omitting bank details.
"If you lodge under different address details or name, the ATO won't be able to match it with your Tax File Number and delays will ensue," Mr Chapman said. "Tell the ATO about the changes before you lodge your return.
"The correct bank details are also vital - the ATO doesn't send out refund cheques these days, so no bank details, no refund."
Also, take care with spelling. If you've added an extra letter to a key field, such as your name, that slip of the keyboard could consign your return to a black hole whilst the ATO tries to match your details manually.
To maximise your tax refund book an appointment, visit hrblock.com.au.