Year-end tax return preparation is a crucial task for individuals and businesses alike. In Australia, the Australian Taxation Office (ATO) has stringent guidelines and uses advanced technology to detect discrepancies in tax returns. Avoiding common mistakes can save you from potential penalties and ensure that you claim all the deductions you’re entitled to.
1. Not Claiming All Entitled Deductions
- Ensure you claim all work-related expenses you’ve incurred and have the paperwork to back it up. This includes costs of using your car for work (excluding commuting), travelling for work, and tools or equipment used for work purposes.
- However, avoid embellishing deductions. Only claim what you’ve spent and can prove with an invoice, receipt, or bank statement.
2. Relying Solely on ATO’s Pre-filled Data
- While the ATO provides pre-filled income information, always cross-check with your records. Any discrepancies can lead to issues, and the responsibility will fall on you.
3. Overlooking Basic Details
- Ensure your name, address, and other details are updated and accurate. Also, provide your bank account details for refunds.
4. Guessing or Estimating Income and Deductions
- Always use accurate figures for your income and tax paid. The ATO compares your submitted data against their records.
- Be genuine with your tax deductions. The ATO compares your claims against benchmarks and may flag suspicious claims.
5. Not Declaring Overseas Income
- If you’re an Australian resident for tax purposes and have worked overseas, you need to declare all foreign employment income and other income from that country.
6. Over-claiming Expenses for Rental Properties
- Ensure you only claim expenses for the period the property is available for rent. Also, be aware of the rules regarding holiday rental properties.
7. Not Keeping Receipts
- Always keep receipts for your work-related expenses. Without them, you can only claim up to $300, and even then, it must be a genuine expense.
8. Avoiding Professional Help
- Tax laws can be complex. Consider seeking help from a tax agent to ensure your return is accurate and maximizes your deductions.
In conclusion, preparing your tax return accurately is essential to avoid potential issues with the ATO. By being diligent, keeping thorough records, and seeking professional advice when needed, you can navigate the tax season smoothly and efficiently.