Tax time can often induce a sense of dread. We all aim to stay compliant with tax laws, and more importantly, avoid paying more tax than necessary. However, navigating through tax jargon and complex calculations can lead to errors. At MaxMargin Accountants, we have collated a list of common tax return mistakes that individuals often make. In this article, we’ll walk you through each of these errors, shedding light on how to avoid them and make your tax return process hassle-free.
1. Filing Late or Not at All
One of the most common mistakes individuals make is missing the tax return deadline. It’s crucial to remember that the Australian Taxation Office (ATO) sets a due date for tax returns, usually October 31st for most individuals. Filing late can lead to penalties, so ensure your tax return is completed on time. If you are unable to meet the deadline, contact the ATO or a registered tax agent to discuss possible extensions.
2. Incorrect or Incomplete Information
Tax return errors often stem from incorrect or incomplete information. Ensure that all your personal details, such as name, address, and Tax File Number (TFN), are accurate. Cross-check the income details you provide with your payment summaries, financial statements, and bank records.
3. Overlooking Income
All income should be declared on your tax return, not just the salary from your primary job. This includes income from side gigs, rental properties, dividends from investments, and even money made from a hobby. Remember, the ATO has data-matching capabilities, making it easier for them to detect undeclared income.
4. Incorrectly Claiming Deductions
Claiming tax deductions can significantly reduce your tax liability, but it’s important to get it right. Only claim deductions for expenses that directly relate to earning your income, and always have evidence to substantiate your claims. Be wary of standard deductions as your circumstances may entitle you to claim more.
5. Neglecting to Declare Capital Gains or Losses
If you’ve sold a capital asset, such as property or shares, during the financial year, you may need to pay Capital Gains Tax. Ensure you correctly calculate and declare any capital gain or loss in your tax return.
6. Not Keeping Records
Keeping comprehensive and accurate records is critical when it comes to tax returns. Receipts, invoices, bank statements, and other documents should be stored safely for five years from the date you lodge your tax return. Good record-keeping will not only help validate your claims but will also make the process of preparing your return much smoother.
7. Failing to Understand Residency for Tax Purposes
Residency status can significantly impact how you are taxed. Many individuals incorrectly assume their residency status, leading to errors in their return. Be sure to understand the ATO’s criteria for determining residency for tax purposes.
8. Not Seeking Professional Help
While you can lodge your tax return independently, seeking help from a tax professional can be beneficial. They can guide you through complex tax laws, find deductions you may overlook, and help ensure your tax return is accurate and compliant.
Avoiding these common mistakes can save you time, stress, and potentially, a lot of money. It’s important to take the time to understand and accurately complete your tax return.
At MaxMargin Accountants, we believe in making tax time as straightforward and stress-free as possible. Our team of experienced tax professionals can help you navigate through the tax return process, ensuring accuracy, maximising deductions, and maintaining compliance.