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June 2, 2021

7 Common Mistakes to Avoid on your tax returns

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1. Quoting a wrong income
When you work more than one job or have multiple sources of income, it is sometimes possible to miscalculate or forget a certain job or payment.
For whatever reason, according to the ATO, this is one of the most common mistakes people make when lodging their taxes. This is why the ATO suggests that you wait until mid-June when you are able to pre-fill the details.

That said, it is always best to double check everything. If you omit something and get audited by the ATO, the blame will be yours alone, even if the information was taken straight from the ATO’s pre-filled data.

2. Failing to claim everything you're entitled to7 common mistakes
The ATO allows you to claim all expenses related to earning an income. Commonly, people will forget to claim some of the deductions they are entitled to. The most common expenses people forget to claim include:

- Motor vehicle expenses
- Home office expenses
- Mobile phone
- Income protection
- Union fees
- Self-education expenses
- Sun protection – for people who work outside
- Tax agent fees

3. Trying to claim more deductions than you're due
On the other hand, the ATO finds people who attempt to claim more deductions than they should. Remember, you may only claim a refund for expenses you paid yourself and that you were not reimbursed for.

Attempting to over-claim might attract the attention of the ATO’s computer system, leading to myTax giving you a stern warning asking you to rethink the deduction. Failing to respond might set you up for an audit, and if your claims are incorrect, you will be required to repay the tax avoided plus approximately 9% interest.

4. Misplacing receipts and expense records
When making a claim, it is very important that you hold on to the receipt or invoice proving that you made it. In the event that you lose the invoice, any email receipt, bank record, or any other written evidence should be enough. However, failing to produce proof for an expense you paid in cash might set you up for an audit from the ATO.

Avoid this by upgrading to a cloud-based bookkeeping app, or by snapping pictures of all your receipts and emailing them to your tax agent or accountant.

5. Mis-claiming for rental properties
You can only claim deductions for rental properties if the property is rented or genuinely available for rent. This means that the property is either being paid for by a tenant – at the same average market value of similar properties in the neighborhood, or it is on the market for a similar price.

It must be in a location and condition that people will want to rent it, and you must have proof that you attempted to advertise its availability. Attempting to claim deductions for a property that you own and use as a holiday home will open you up to potential ATO audits and charges.

6. Forgetting to declare overseas income
If you are an Australian resident and you’ve made an income overseas, it needs to be declared. Foreign income is taxable if it arises from:
- Pension and annuities
- Business activities
- Employment and personal services
- Assets and investments
- Capital gains on overseas assets

If your income is taxed in the country where it originates, it may be subject to double taxation. In this case, you may apply for a tax offset if the country of origin is one of more than 40 nations that Australia has signed tax treaties with.

7. Not asking for help
If your taxes are a little complicated or you find yourself stressing about them, leave it to the professionals. Enlisting the help of a tax agent will ensure that your taxes are completely in order, that you claim all the obscure deductions you didn’t know you could, and that you avoid the liability of any potential mistakes that an untrained eye would be otherwise unable to spot.

Avoid the headache, and give us a call.

This is what we're here for and our fees are fully deductible!

Disclaimer: Information included in this post is of general nature, it has been prepared without taking into account your specific situation. It is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice. You should not make any decision, financial or otherwise, based on any of the information presented here without undertaking independent due diligence and consultation with a professional accountant or financial adviser.