Money Bite-Size Read:
- With the end of a tax year, it’s time to do your taxes.
- That means doing a tax return to show the taxes you need to pay.
- Here’s 5 mistakes Australians are making with their taxes so that you can submit your tax return this year with confidence.
The Money Bites Take:
We show you the tax mistakes that the ATO has flagged to avoid making these in your tax return.
1 July signals the start of a new tax year.
That means you have a new financial year ahead of you to start new financial habits. It also means that you need to submit a tax return for the year.
From 1 July, you’ll need to likely submit a tax return outlining how much money you earned and if you have any relevant deductions. When it comes to submitting your tax return to the Australian Tax Office (ATO), you must lodge it or engage with a tax agent by 31 October at the time of writing.
So what are tax mistakes being highlighted by the ATO?
It’s important to talk about tax and why we pay this. That gives you a background to the need for the ATO to talk about the tax returns process. The full story was covered in the Australian newspaper, The Herald Sun on 12 July 2021.
Why is the ATO talking about tax mistakes?
In 2020, countless people were impacted by COVID, with many also working from home for the first time. That will change your circumstances, including having to set up a home office to earn money.
More people are lodging their tax returns early this year, with over 1.7 million individual tax returns received at 16 July, an increase of 12% on 2019. By highlighting tax mistakes they’ve spotted so far, the ATO wants more people to know how to get it right, so fewer people make these errors.
Here’s 5 mistakes Australians are making with their taxes and how to avoid them:
1. Leaving out income
Your employer provides income information to the ATO via PAYG summaries. You can avoid this issue by keeping accurate records and ensuring the PAYG statements are finalised before you lodge your tax return.
2. Not updating your bank details
Many of us focus on the tax return itself and forget about updating our bank details. Make sure that you check your information is still accurate so that you receive any tax return you might be eligible for this year.
3. Incorrectly using the COVID shortcut rule
Due to the COVID pandemic, the ATO introduced a temporary shortcut method to help people calculate their working from home expenses. Make sure you read the shortcut rules and only use it for the period that you are working from home.
4. Copying last year’s return
A tax return involves adding how much you earned for the year and deducting any eligible work-related expenses. Given these amounts change each year, make sure you submit an accurate tax return for each individual year.
5. Claiming tea and coffee as deductions
While tea and coffee might be complementary at work, you don’t get to claim for those perks at home. Your deductions should be directly related to earning your income, so you should pay for your daily caffeine dose from your own pocket.
It’s easy to make tax mistakes if you haven’t done a tax return before.
That’s why it’s so important to read about tax and how it operates in your country. Remember that COVID has disrupted the way we earn money, so check in with your national tax office to read up on how your tax return rules have changed this year.