Filling out your tax return correctly can be a minefield, and one simple mistake can lead to major hassles down the track. Advancements in technology have enabled the Australian Taxation Office to be more efficient than ever when assessing our tax returns, and they can easily spot discrepancies and unusual patterns.
Even if you go into it with the best of intentions, it’s easy to make a multitude of errors when it comes to completing your online tax return. Here are 5 of the most common tax return mistakes and what their consequences can be.
- Failing to declare all your income
While it goes without saying that you need to declare all of the main income from your job on your tax return, it doesn’t end there. If you have a side hustle, investments or have held multiple jobs over the financial year, you’ll have to declare all the money earned through those as well.
If you’ve worked overseas at all, you’ll also have to declare any of your overseas income as well. Many Australians don’t realise this and forget to pay their Australian taxes or lodge an Australian tax return even if they’re working internationally. Failure to do so can result in large tax payments and major trouble from the ATO.
- Taking advantage of deductions
Deductions are the one thing that the ATO doesn’t already know about your taxes, and it can be tempting to embellish your claims in order to get a bigger return. Whether it’s inflating your travel expenses or completely fictitious dry cleaning bills, many people believe that they can get away with a few sneaky additions to their claimed deductions here and there.
It’s important to remember that the ATO analyses every claim that you make, and compares them to other people in your line of work, industry, age and location, amongst others. Any claims that raise a red flag may result in an audit and a more thorough investigation into your return.
- No receipts or proof of purchase for claimed deductions
Even if all the deductions you claim are legitimate, you must have receipts or proof of purchase for every single item. Whenever you pay for any work-related expenses, always make sure that you hold onto the receipts or else you won’t be able to claim them.
Without proof of purchase, you’re only able to claim up to $300 for work-related costs on your tax return. If you claim big deductions that you can’t prove, you may have to pay back your refund, possibly with added interest and penalties.
- Relying on pre-filled data by the ATO
When completing your online tax return, the ATO will have lots of information pre-filled for you thanks to the data they have access to. While it can be tempting to glide through your return due to this, it’s important that you double-check that all of this information is correct and up to date.
If the information is wrong this will fall on you, even if it was the ATO that pre-filled it out.
- Guessing or estimating your total income and paid tax
While you’re filling out your return, you must use the exact figures of both your total income and the tax you’ve paid. The ATO will have access to this information and will compare the numbers to submit to what they have in their records.
Being even just a few dollars off can catch the attention of the ATO, so always make sure that the information you’re providing is accurate.
Making these mistakes is easy, and we recommend working with a tax accountant to make sure that all your information is filled out correctly and in compliance with the current laws and guidelines. Not only with this help you avoid an audit, but you may also be surprised at what deductions you can claim and how you can ensure that you get the best tax return possible.