Let’s start with some interesting facts about Australian’s and their tax! We can hear your mind ticking over… you are wondering what could possibly be interesting about tax? It is a task that you must do, that you put off and put off, or rush through so quickly in the hopes of getting a great refund. However, doing your tax effectively can save you money in the long run, and you are joining the other 13,870,745 individuals1 who also have to do their tax! That’s right approximately 60% of Australian’s are also doing their individual tax returns. And the average deduction that we claimed in 2016/2017 was $2,631.2
With this in mind we need to make sure a) we are maximising what we can get back on our tax returns, and b) that we are being honest with our tax returns to ensure that we declare everything that we have earnt and that we are not claiming deductions that we aren’t entitled to.
So, what are the common mistakes that 13.9 million individuals are bound to make once or twice and how can we avoid them? The first thing you can do, is have a chat to an accountant about your tax. Did you know that you can claim your accountant’s fees back as a deduction on your next years tax! Give us a buzz today if you want to have a chat: https://libertywealth.com.au/
The 2nd best thing you can do is to keep records throughout the year. Did you know that under tax law, you are in fact guilty until proven innocent! So, it is up to you to keep your records so you can prove your claims to the tax office. Your tax will be a breeze if you know exactly where all your key documents are. Now is the time to set up a great system to help you cruise through your tax next year!
We have mentioned that word deduction frequently – why is that? Because the most common mistake that people make with their tax returns is overclaiming deductions to try and boost their return. We often hear the urban myths about what other people are claiming that aren’t actually allowable deductions. For example, travel to and from work is not usually a valid claimable expense, however, there are exceptions to this also. Most deductions require that you have a valid invoice or receipt for an expense incurred to derive your taxable income. However, there are some deductions that can be claimed without receipts. The rules around these substantiation exemptions can be complex and are often misinterpreted. So, it is important that you correctly interpret and apply the tax rulings regarding these exemptions.
In the inverse, the second most common mistake people make is not actually knowing what they can claim and missing out on a whole range of deductions. Some of the things that you may be able to claim back on your tax include – work-related travel expenses, car expenses, home office and internet expenses, mobile phone, income protection insurance, self-education expenses, tax agent/accountant fees, protective clothing and laundry expenses. Some of the rules around these deductions can be confusing – so it pays to get advice from qualified professionals.
Number three is trusting in technology – we now think that because the ATO online tax system pre-fills many of the details we need to complete our tax, that it is a completed document and it must all be accurate. The ATO can only pull data that has been submitted by various agencies and systems such as wages information from your employer and interest from your bank. If you are using the online tax system try not to do your tax too early – as many agencies won’t upload details until August and don’t assume it then knows everything. If you have income from various sources, make sure they are all there. Did you do some work on Airtasker or become a Mystery Shopper? Did you earn interest on shares from overseas – this will not be submitted to the ATO. Have you put your holiday house up on Air BNB, you need to make sure you declare this as income, or if you have earnt interest on your various bank accounts, ensure it has all been entered before you submit. The most basic thing people forget to check is that their address is still correct!
If you do make an error in your tax return, or you have submitted early and realise you have more items to add to your return, you can make an online amendment or get a tax agent to handle it for you.
We would love to assist you with your tax, and help you avoid some of these common mistakes. At Liberty Wealth Group we have a great checklist we provide to our clients to ensure they are declaring everything and maximising their deductions! Check out more here: https://libertywealth.com.au/our-services/individual-tax-return/