Regional Business Forum 2019

5 Most Common Tax Time Mistakes

As the typical rush kicks in for everyone to get their tax returns lodged and their refunds back as quickly as possible, the ATO has profiled the five most common mistakes that are most likely to cause tax time troubles. 

The ATO has identified that taxpayer’s are regularly:

  1. Leaving out some of their income;
  2. Claiming deductions for personal expenses;
  3. Forgetting to keep receipts or records of their expenses;
  4. Claiming for something they never paid for; and
  5. Claiming personal expenses for rental properties.

Let’s take a closer look at some of these.

Are you including all of your income?  Did you earn some extra cash on the side?  Do you have bank accounts that have earned interest?  Have you been dabbling in buying and selling of cryptocurrencies or shares and potentially have a capital gain?  Are you renting out a room in your home for some extra cash, or making a few extra bucks from ride-sharing (ie. Uber) or similar activities? 

Income from all of these types of activities needs to be reported in your tax return.  Some of these, such as bank account interest, will be automatically reported to the ATO and will appear on an ATO generated pre-filling report.  The ATO is constantly improving their data matching tools and even a one off payment may be enough to trigger a red flag.  If you lodge your return early and do not declare this income, the ATO will amend your return to include it, and you will be required to repay any tax that arises as a result of this income and you may potentially incur penalties as well. 

For those who intend on pushing the boundaries when claiming deductions, or maybe even fudge some parts of their return, the Assistant Tax Commissioner Kath Anderson reiterates the three “golden rules” for claiming work related expenses:  “you must have spent the money yourself and not have been reimbursed, it must be directly related to earning your income, and you must have a record to prove it”.

The ATO also warns: “remember, whether you use a tax agent or lodge it yourself, you are responsible for the claims you make.  Take the time to check your deductions are legitimate and you have listed all of your income before lodging”.

For instance, just because you are able to claim a deduction up to $150 for laundry and maintenance of work clothing, doesn’t mean you are entitled to claim a standard $150 deduction every year.  Your workwear is still required to meet some very specific requirements, you are still required to have incurred the expense of laundering that workwear, and you need to be able to prove how you obtained your deduction amount.  Similarly, just because your employer requires you to wear black pants, a white shirt and closed in shoes, does not mean you can automatically claim a deduction for those expenses, or the cleaning of them.

Another example might be that while your employer may require you to be contactable at all times and use your personal mobile phone for work related telephone calls, this does not necessarily entitle you to claim a deduction for your entire telephone bill for the entire year.  You need to have a kept a record of all of your work related telephone calls, the date and time they occurred and the duration of those calls.  A deduction can then be calculated based on the percentage of time that your mobile was used for work related purposes.

These are just a few of a myriad of examples that we can provide, of deductions and claims, that the ATO will be cracking down on this year.

Ms Anderson states “We are increasing our investment in education and assistance, as well as review and audits.  This year we are expecting to make contact with more than 1 million taxpayers (regarding their claims)”.

Are you inadvertently making some of these common tax time mistakes?  Don’t panic! 

If you are unsure of whether something should be included in your tax return, or you are worried that you may have inadvertently claimed an expense that you shouldn’t have, please contact us and we can assist you in either completing and lodging your return, or reviewing your previously lodged return and amending if necessary. 

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