It’s tax time, and as with every year the ATO is warning individuals to take care with their returns. But did you know that the ATO is using increasingly sophisticated data analytics to detect problem claims? It’s more important than ever to get it right.
Here are the top four mistakes the ATO says you should be avoiding.
1. Lodging before you have all of your income data: Have you confirmed your income from all sources? The ATO says taxpayers who lodge early are more likely to submit incomplete data that requires correction later – and a tax bill – when the ATO eventually uncovers this.
The ATO matches data with a wide range of third parties including banks, sharing economy platforms, rental property managers, cryptocurrency exchanges and share registries. This may take place several months after you’ve lodged your return. If you do realise you’ve made a mistake about income, you should tell the ATO promptly. If penalties apply, voluntarily coming forward about the undisclosed income will generally work in your favour.
The ATO recommends waiting for your original return to be processed and your notice of assessment to be issued before you or your tax agent lodge your amendment.
2. Getting work-related deductions wrong: Work-related expenses are some of the most popular deductions claimed, but the rules can be tricky. Clothing, self-education, home office expenses and travel all have rules about what you can claim, how to calculate your claim and what records to keep, and this is where a professional tax adviser can help ensure you get the deductions you’re entitled to.
3. Not keeping receipts: Generally, you must keep adequate records to support your claims, including receipts. In some cases, you’re exempted from having to keep receipts (eg for clothing claims under $150). However, the ATO can still ask you to explain how you calculated your claim. The ATO’s “myDeductions” app helps taxpayers to track their expenses, record their work-related car trips and store photos of receipts. You can upload the data to prefill your tax return, which your tax agent can also access through their online portal.
4. Claiming expenses you never incurred: In order to claim a deduction, you must have spent the money, so there’s no such thing as an “automatic” deduction. You also can’t claim expenses that your employer has reimbursed you for. Don’t risk headaches with the ATO – get the tax professionals on side.