Source: Yahoo Finance
The Australian Taxation Office has warned taxpayers to avoid three big mistakes regularly spotted in early tax returns filed in the past fortnight.
First of July this year broke an all-time record, with the ATO receiving 740,000 tax returns.
“This is up from just over 100,000 online lodgements across our channels on 1 July 2019,” said ATO assistant commissioner Karen Foat.
In just two weeks, 1.7 million lodgements have already been received.
“More than $1 billion has hit around 457,000 taxpayers bank accounts. Most returns that are lodged electronically are processed within two weeks so refunds for the first returns lodged will continue to be issued into the first half of next week.”
But the tax office has seen some common errors in these early lodgements, which potentially means no or delayed refunds for those Australians.
“While we’re pleased that many early lodgers are getting it right, there are some trends in the issues we’ve been seeing,” said Foat.
“One thing we don’t want to see is a record-breaking number of easily avoidable errors. These errors slow down returns or might lead to an unexpected debt down the track.”
Here are the three frequently seen errors, according to the ATO:
Tax return mistake: Forgetting income
The ATO has confirmed that 20 per cent of the early lodgers – a stunning 340,000 people – will not receive their refunds in the first batch paid out because of this error.
Items like job income, bank interest and health insurance numbers are often electronically sent to the ATO and pre-filled – but plenty of other sources of income have to be manually entered in.
“We are asking taxpayers to add any amounts that aren’t automatically included to your return. This includes cash wages, foreign sourced income, or even gains from cryptocurrency,” Foat said.
“Leaving out income can delay your return, particularly when we receive those income details from third parties whilst we are processing your return.”
Even the auto-filled income data, which may not even be ready yet, should be sanity-checked by the taxpayer before lodgment.
“For most people this information is ready by the end of July. If you’re lodging early, it’s crucial you check this information is there and manually add it if it’s not.”
Tax return mistake: Claiming multiple work-from-home methods
With the coronavirus pandemic this year, millions more Australians are claiming work-from-home expenses – and using the Covid-19 shortcut hourly rate method.
But the tax office has seen double-dipping in some early lodgements.
“It’s important to remember that if you’re claiming under the working from home shortcut method for 1 March–30 June 2020, you can’t claim any other expenses for working from home for that period,” said Foat.
“If you want to specifically claim the depreciation of big-ticket items like laptops or desks, you can use one of the existing methods, but you can’t double-dip and claim under the shortcut method as well.”
If you avoid using the shortcut, the traditional methods can be complex.
“If you want to claim under one of the existing methods, it’s really important that you either work through the detailed guidance on our website or talk to your tax agent because it is complicated and it’s an area that we see a lot of people making mistakes.”
Tax return mistake: Not reducing costs
Many taxpayers have claimed extra expenses because of the Covid-19 lockdown – such as remote work costs – but not reduced claims where costs have gone down for the same reason.
“We know that more people have been working from home, working reduced hours or unfortunately not working at all,” Foat said.
“So, if you aren’t travelling for work, you can’t claim travel expenses. If you aren’t wearing your work uniform, you can’t claim laundry expenses.”
Stephen is the CEO of Accountants Direct and is a Professional Director, ASIC Agent, Startup Advisor & Investor & Capital Raising Specialist.
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