We’ve almost hit the end of the financial year, which means if you’ve earned income in the past 12 months, it’s time to add up your income and deductions, and prepare to file a tax return.
Many Australians is hoping for a tax refund due to cost-of-living pressures. Being aware of what the Australian Tax Office (ATO) is targeting at the moment can help get returns processed quickly and seamlessly.
The government agency has warned taxpayers not to rush through their returns, as any mistakes or omissions will probably hold up their refunds.
“We see lots of mistakes in July where people have forgotten to include interest from banks, dividend income, payments from other government agencies and private health insurers,” ATO assistant commissioner Rob Thomson said.
The ATO has also announced the three key focus areas for this tax time, so here’s what to pay extra attention to before you file your tax return.
Work-related expenses
Since the COVID-19 pandemic, many workplaces have adopted flexible working arrangements, which allow some Australians to work from home at least part of the week.
There are a variety of valid expenses related to working from home, but the ATO is watching for taxpayers who overclaim or don’t have valid records.
Workers can choose between the ‘fixed rate’ method or ‘actual cost’ method when filing their return. Those who wish to use the ‘fixed rate’ method can claim 67 cents an hour, but must be able to substantiate their time working from home – for example, by keeping a diary or spreadsheet.
“Copying and pasting your working-from-home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’. Your deductions will be disallowed if you’re not eligible or you don’t keep the right records.” Mr Thomson said.
Rental property claims
If you own an investment property, there are a number of legitimate expenses you can claim; however, the ATO said most owners get their income tax returns wrong, which can hold up the process and raise red flags.
As a result, rental property claims will be firmly in the Tax Office’s sights this year.
“We encourage rental property owners to carefully review their records before lodging their return and take care to ensure they are claiming deductions correctly,” Mr Thomson said.
Common mistakes include claiming an immediate deduction for renovations (which are classed as capital improvements) and not keeping proper records.
Additional income
As Mr Thomson pointed out, pre-filled tax information doesn’t always come in by July 1.
As a result, taxpayers can end up having to amend their return when additional information comes through, such as dividends, extra work income or health insurance information.
“We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge,” Mr Thomson said.
“You can check if your employer has marked your income statement as ‘tax ready’, as well as if your pre-fill is available in myTax before you lodge. That way, an amendment doesn’t need to be made later, which could result in unnecessary delays.”
To read more about what you can and can’t claim, visit the ATO website.