Filing a tax return in Australia may seem straightforward, but many taxpayers make mistakes that can lead to delays, penalties, or missed refunds. To help you avoid this fate here are some common tax return mistakes to watch out for—and how to prevent them.
1. Failing to Report All Income
One of the most common mistakes is not reporting all sources of income. The Australian Taxation Office (ATO) receives data from employers, banks, and other institutions, so they can quickly spot discrepancies.
Tip: Double-check your payslips, bank statements, and any other income documentation to ensure everything is included.
2. Incorrectly Claiming Deductions
Claiming deductions that you’re not entitled to is another frequent error. Common mistakes include claiming deductions for home office expenses without proper documentation or for clothing that isn’t considered work uniform.
Tip: Keep detailed records and receipts for any work-related expenses and only claim deductions that meet ATO guidelines.
3. Not Keeping Proper Records
The ATO requires taxpayers to keep records of income and deductions for at least five years from the date you lodge your return. Failing to keep accurate records can make it difficult to justify claims and may result in penalties if the ATO conducts an audit.
Tip: Use digital tools or apps to track your expenses and store important documents, making it easier to retrieve information when needed.
4. Overlooking Tax Offsets and Credits
Many taxpayers miss out on valuable tax offsets and credits. For example, the Low Income Tax Offset (LITO) and Private Health Insurance Rebate can reduce your tax bill, but they’re often overlooked or misunderstood.
Tip: Speak to Sixth Sense Tax or read our article on Tax Offsets
5. Incorrectly Reporting Capital Gains or Losses
If you’ve sold an asset, like property or shares, you need to report any capital gains or losses. Incorrectly calculating or omitting these can result in hefty fines. Remember that you need to report the sale price, the cost of the asset, and any associated expenses to determine your capital gain or loss.
Tip: Make sure you have all the relevant purchase and sale documents or consult Sixth Sense Tax if you’re unsure about how to calculate capital gains.
6. Missing Tax Deadlines
Failing to file your tax return on time can result in late fees and interest on any outstanding tax liability. Even if you can’t pay your tax bill right away, it’s better to file on time and make a payment arrangement with the ATO.
Tip: Mark important tax deadlines on your calendar and file your return early to avoid last-minute rushes.
How to Avoid These Mistakes
The easiest way to avoid these common mistakes is to seek professional help. A tax professional can help you navigate the complexities of the Australian Tax System, ensuring you’re compliant and maximising your refund.
At Sixth Sense Tax, we specialize in providing expert tax advice and services to ensure that your return is accurate and timely. By working with professionals, you’ll have peace of mind knowing your tax return is in good hands.