Half a million Aussies making ‘painful’ tax mistakes

Don't fall for these major tax myths. Images: Getty
Don't fall for these major tax myths. Images: Getty

Australians rushing to file their tax returns have been told to wait or risk delays.

Last year, nearly 500,000 Australians were forced to amend their tax returns due to errors or incomplete information, potentially slowing down the processing of their refund, the Australian Tax Office (ATO) has warned.

This year, as millions of Australians face financial pressures, H&R Block director of tax communications Mark Chapman has called for patience where possible.

“If you're in a financial position to do so, it’s probably worthwhile holding off on lodging until the second half of July,” he said.

“I know a lot of people are in financially distressed positions and they want to get their refunds as fast as possible, and I understand that, but generally preparing your tax return is easier once you get into the second half of July because all of that information downloaded into the ATO is generally available by then.”

In early July, it’s often not available.

And if you lodge without having all the necessary information, the chances are that you will have to amend and re-lodge your tax return.

“It’s a bit of a pain, it is a nuisance. It’s the kind of thing that people can do without.”

The ATO said it was a major “myth” that things like bank details update themselves, and can cause major consternation at tax time.

“While we receive information from banks, this doesn’t extend to updating details for the bank account you nominate to have your refund deposited into,” the ATO warned.

“Last year many people in their rush to lodge early forgot to update bank details and delayed their refund.”

Continuing, it wanted that lodging earlier doesn’t mean you’ll get a refund sooner.

“Each year the ATO automatically includes information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) in people’s returns. For most people this information is ready by the end of July,” the ATO said.

“Since leaving out income can slow your return down, if you are lodging before we have automatically included this information for you, it’s really important that you ensure you include all of the information.”

What other tax time myths should I know?

“Every year we see people tripped up by tax time myths. Unfortunately, this often results in slowing their return down when either they or we realise their mistake as the return is processed,” assistant ATO commissioner Karen Foat said.

“Where it doesn’t delay the initial return, it can result in a surprise tax bill later on.”

She said 2020 has a range of new myths that need busting.

Double dipping

“We are concerned that some taxpayers may either accidentally or deliberately double dip by claiming their working from home expenses using the all-inclusive shortcut method while also claiming for specific items such as laptops or desks,” Foat said.

“It’s important to remember that if you’re claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.”

According to Chapman, if you’re willing to do the work, claiming your actual expenses rather than using the ATO’s 80c flat rate can result in a deduction that is four times higher.

“A lot of people logging into myTax will just use the flat rate because they’re not aware of how to use the more complicated method, but if you use a tax agent they will do that for you,” he said.

The 80c flat rate is a trade-off between simplicity and value of the claim, he said.

Work-related expenses

The ATO said every year it sees Australians trying to claim work-related expenses that aren’t actually related to work.

“We have been reminding taxpayers recently that if they are in jobs that require physical contact or close proximity to customers and they had to buy their own hand sanitiser, gloves or masks for use at work, that they can claim these items,” Foat said.

“However, people who aren’t in jobs that aren’t in close proximity to the public or people who have purchased these items for their general use, cannot claim these items.”

That means that if you’re trying to claim hand sanitiser, but you’ve been working from home, you’re going to raise some red flags.

“People also cannot claim for the costs of setting their children up for homeschooling. These costs are private expenses.”

Home to work travel

Unless you’re required by your employer to transport bulky tools or equipment to and from work, and there’s no safe place to store this equipment at work, you can’t claim your commute.

“If you are working from home due to COVID-19, but need to travel to your regular office sometimes, you still cannot claim the cost of travel from home to work as these are still private expenses. Even though you are working from home, your home is still a private residence – it is not a ‘place of business’,” Foat said.

Standard deductions

Foat said the ATO regularly sees people believing they’re entitled to a standard deduction of up to $300.

“While you don’t need receipts for claims of expenses up to $300, you must have actually spent the money and be able to show us how you worked out your claim.”

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