The ATO recently claimed that there was an $8.7 billion shortfall between the tax individuals are expected to pay and the tax they actually are paying. Therefore they are likely to be paying close attention to a few key areas.
There are several common errors that people make on their Australian tax returns, including:
Incorrect or incomplete information
Failing to provide accurate or complete information can result in mistakes in calculations, missed deductions, or incorrect amounts of tax owed.
Claiming ineligible deductions
Deductions can only be claimed for expenses that are directly related to earning income, and individuals often mistakenly claim expenses that are not eligible.
Failing to report all income
All sources of income, including wages, interest, dividends, and capital gains, must be reported on tax returns. Failure to report all income can result in penalties and interest charges.
Incorrectly claiming work-related expense
While some work-related expenses can be claimed as deductions, they must be directly related to earning income and not reimbursed by an employer. The ATO are likely to look closely at work-related expenses claims this year post COVID-19.
Make sure you understand what you can and can’t claim for, and retain invoices, receipts, diaries etc.
Not keeping adequate records
Keeping accurate records is important for claiming deductions and providing evidence of income, and failing to keep adequate records can result in penalties and fines. If you can’t prove it, you can’t claim it!
Failing to report rental property income and deductions
The ATO are likely to focus on this area due to rental losses being higher due to the hit that rental returns have taken due to COVID-19.
Keep good records including invoices, receipts and bank statements for all property expenditure along with proof that the property has actually been for rent.
Failure to report capital gains from crypto assets and shares
Increasing numbers of investors have decided to invest in cryptocurrencies such as Bitcoin. The ATO will be looking closely to see if profits or losses have been declared. Remember that investing in cryptocurrency can lead to Capital Gains Tax on profits. Traders’ profits can also be taxed as business income.
When you dispose of shares, you will normally have to pay capital gains tax on any profits but this can be a confusing area with many opportunities to get the tax treatment wrong.
Sharing economy
Data-matching is coming into force from 1 July 2023. This will see a statutory obligation on sharing economy platforms to share their participants. Examples of this include ride sourcing, renting out parking spaces, renting rooms, providing skilled services, completing odd jobs and supplying equipment. The ATO will be looking closely to ensure that expenses are reported correctly.
How we can help
It’s essential to seek professional advice or use tax preparation software to ensure that your tax return is accurate and complete to avoid making these common errors. Contact TaxAssist Accountants today for a free initial consultation.
Date published 04 May 2023 | Last updated 31 Jan 2025
This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
