Ranging from honest mistakes to deliberate over-claiming, ATO assistant commissioner Karen Foat has offered up her own insight to make the process as pain-free as possible.
Lodging too early
Tax time will be “an easier process for you” if you wait a few weeks before lodging, the office said.
The assistant commissioner said people are OK to lodge now if they have all the information they need to do their returns accurately.
“However, we know from previous years that the early birds who lodge in the first weeks of July are far more likely to make mistakes or submit incomplete data,” she continued.
Such mistakes may slow down your return, or result in a debt owing to the ATO if information needs correcting later down the track.
The ATO’s sophisticated data-matching systems will “process an unprecedented amount of information and will track money moving around the economy” this year, Ms Foat outlined.
She said more than 650 million pieces of data will be analysed “from banks and financial institutions, employers, the sharing economy, rental property managers, cryptocurrency exchanges and share registries”.
“Our data-matching will help us match what you’ve earned, whether from a traditional 9-5 job, a casual position or sharing economy income. Failing to declare all your income will result in you ending up with a bill when we later match your data,” the assistant commissioner continued.
Claiming the wrong thing
According to the ATO, work-related expenses is an area “where people commonly make mistakes”.
It offered “three golden rules” when considering claiming a work-related deduction.
- You have to have spent the money yourself and not been reimbursed.
- The claim must be directly related to earning your income.
- You must have a record to prove it.
The ATO highlighted that you may only claim the work-related portion of expenses and not any parts that relate to personal use.
“Many people rely on advice from friends and co-workers on what is an acceptable claim, and the information may not always be accurate,” Ms Foat stated.
She explained that as a result, the ATO rejects thousands of ineligible claims each year “for things like gym memberships, travelling to and from work, conventional clothing and the private portion of phone and internet costs”.
Not keeping receipts
A large percentage of claims are reportedly rejected by the ATO where taxpayers are unable to produce records or receipts when asked.
Even where the claim’s value is below a record-keeping threshold, the Tax Office said they may ask for claim calculations to be shown.
“Do away with the shoebox and try myDeductions in the ATO app instead – it’s the easiest way to store your receipts,” Ms Foat offered, noting deduction details can be uploaded into your tax return or sent on to your tax agent.
Claiming for something not paid for
The ATO said it “often” sees people making claims at the record-keeping limit, thinking that the ATO will never question a claim where they don’t require receipts.
“But you still need to have spent the money yourself and be able to show us how you’ve worked out your claim,” Ms Foat said.
According to the assistant commissioner, “exceptions to the record-keeping rules are there to make things simpler – they do not allow you to claim an automatic deduction up to the specified amount where the money has not been spent”.
No one is entitled to a “standard deduction”, Ms Foat said.
“A little bit of over-claiming across a lot of people adds up to billions of dollars. No matter how small, claiming deductions you are not entitled to means essential community services miss out,” she continued.
Grace Ormsby is a journalist for Momentum Media's Nest Egg.
Before moving into the finance realm, Grace worked on Nest Egg's sister site Lawyers Weekly, and was previously a staff reporter at the NSW Business Chamber.
She holds a Bachelor of Communication (Journalism), a Bachelor of Laws (Hons) and a Diploma of Legal Practice from the University of Newcastle.