ATO: Common tax mistakes

Common tax mistakes

As tax time 2018 kicks off, the Australian Taxation Office (ATO) has profiled the five most common tax mistakes and the personalities most likely to have tax time troubles.

Assistant Commissioner Kath Anderson said it’s often simple mistakes and misunderstandings that trip people up. “While we know most people want to get it right, our audits and reviews show that there are five main areas where taxpayers are most likely to get it wrong.”

The top five mistakes include taxpayers who are:

leaving out some of their income – forgetting a temp job or money earned from the sharing economy
claiming deductions for personal expenses – home to work travel, normal clothes or personal phone calls
forgetting to keep receipts or records of their expenses
claiming for something they never paid for – often because they think everyone is entitled to a ‘standard deduction’
claiming personal expenses for rental properties – claiming deductions for times when they are using their property themselves

How to avoid tax mistakes

Ms Anderson says many of the mistakes are avoidable. Taxpayers can do a few things to make sure their tax time experience is stress-free.

“Know what you can legitimately claim. There are three golden rules for work-related expenses. You must have spent the money yourself and not have been reimbursed, it must be directly related to earning your income, and you must have a record to prove it,” Ms Anderson said.

“This tax time we will be paying close attention to claims for private expenses like home to work travel, plain clothes, and private phone calls. We will also be paying attention to people who are claiming standard deductions for expenses they never paid for.”

Keep good records

Tax can sometimes be tricky, but it’s not tricky to keep good records.

“Around half of the adjustments we make are because the taxpayer had no records, or they were poor quality. Yet it’s so easy to keep your records, using the myDeductions tool in the ATO app. Just take a photo, record a few details and then at the end of the year upload the information to your agent or to myTax.”

Another tip is to include all your income. “A temp job, cash jobs, capital gains on cryptocurrency, or money earned from the sharing economy is all income that must be declared. We are constantly improving our data matching tools and even a one-off payment may be enough to raise a red flag.

“We know some people lodge early because they want their refund, and that’s fair enough. But we amend returns for thousands of taxpayers that leave out some of their income. This can delay your refund or even see you owing money to the ATO. If you wait until mid-August, we will have pre-filled most of your income information for you, to help you get it right to start with.”

Pre-fill is available whether you choose to lodge online with myTax, or with a registered tax agent.

ATO increasing reviews and audits

For those intending to push the boundaries, the ATO has you in its sights.

“We are increasing our investment in education and assistance, as well as reviews and audits. This year we are expecting to make contact with more than 1 million taxpayers either directly or through their agents,” Ms Anderson said.

Finally, if you make a mistake, don’t panic.

“We know people sometimes make mistakes or forget to include something on their return. If you’re in that situation, try to fix it as soon as you can to minimise any interest and penalties. Either contact your agent or lodge an amendment online.

“Remember: Whether you use a tax agent or lodge it yourself, you are responsible for the claims you make. Take the time to check your deductions are legitimate and you have listed all your income before lodging.”