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Tax return 2017: Mistakes to avoid this financial year

Jun 28, 2017

STUPIDITY, carelessness, greed, arrogance, forgetfulness, dishonesty and laziness.

Most of us are guilty of some, or all, of these qualities at some stage and we probably don’t even know it.

But when it comes to tax time, it’s best to avoid all of them because committing just one of these sins can land you in a heap of hot water.

Associate Professor at Deakin University Dr Adrian Raftery said there were seven tax sins people should avoid when lodging their returns this year.

The tax guru and author of 101 Ways to Save Money on Your Tax — Legally said while the process of lodging a return could be painful the benefits of doing it correctly were worth it.

But he said simple mistakes can send you straight to tax hell.

Dr Raftery said people could avoid committing the seven deadly tax sins in the following ways.

We all want a bit more of this come tax return time, but it has to be claimed the correct way.

We all want a bit more of this come tax return time, but it has to be claimed the correct way.Source:istock

1. STUPIDITY

According to Dr Raftery, even small mathematical errors can lead to huge mistakes later on.

“A wrong number here or a bad calculation there may cost you thousands,” he said.

Those doing their returns themselves should check their calculations at least twice.

2. CARELESSNESS

It’s all well and good having a log book for your car, but you might find yourself in trouble if it’s not done in the correct format and method.

“It must be for a continuous 12 week period and prepared within the last five years,” Dr Raftery said. “If you have changed your car or your job duties since you did your log book then you must prepare a new one.”

3. GREED

Investors with a home loan are eligible to claim deductions, but if you claim what you’re not entitled to then the tax man won’t be happy.

Dr Raftery said the ATO regularly finds a number of errors in regards to over-claiming expenses when it comes to rental property tax returns including initial repairs, interest on loans which include a private component and borrowing costs.

When it comes to rental properties, there’s plenty you can claim, and plenty that you can’t.

When it comes to rental properties, there’s plenty you can claim, and plenty that you can’t.Source:Supplied

But he said it also worked the other way with some investors not realising exactly what they can claim, particularly when it comes to land tax and strata levies.

“If you have a real estate agent managing your property, then ask them for a summary of income and expenses to make the tax return process easier,” Dr Raftery said.

4. ARROGANCE

While most of us are capable of filing our own returns, Dr Raftery said it always paid to have someone look over it for you.

“The last thing you need is a knock on the door from the taxman because you claimed too much,” he said.

“A registered tax agent knows where the boundaries are in terms of what you can and more importantly can’t claim.”

5. FORGETFULNESS

Procrastination or not lodging at all could be costing you thousands, according to Dr Raftery.

He said he once submitted 33 years of returns for one client who was entitled to $70,000 in refunds.

“If you know that you have to pay then lodge your return to avoid unnecessary late lodgement penalties,” he said.

“The ATO is always willing to negotiate payment plans.”

If you don’t lodge your returns you could be doing yourself out of thousands of dollars.

If you don’t lodge your returns you could be doing yourself out of thousands of dollars.Source:istock

6. DISHONESTY

Income which you’ve forgotten to mention or simply left off altogether won’t go down well with the ATO which is going to keep a sharp eye on discrepancies in interest, dividends and managed fund income.

And with the process proving lucrative to the ATO, generating $1.1 billion in tax revenue last year alone, the taxman will be keen to pounce on any mistakes.

“Overseas income as well as income from the cash and sharing economies for example, Airbnb and Uber are areas of particular focus this year,” Dr Raftery said.

“You might think you can run from the taxman but you can’t hide.”

7. LAZINESS

Claiming more than you’re entitled to is far from ideal but equally as bad are those people who don’t claim everything they’re entitled to.

Dr Raftery said he didn’t get why people wouldn’t claim money they’re entitled to.

“You wouldn’t walk past a $100 note if you saw it on the ground so why do people think that it is OK to claim less than what they are legally entitled to so that they stay under the ATO’s radar,” he said.

Doing your tax doesn’t have to be stressful, but if you do it yourself make sure you check it thoroughly and only claim what you’re entitled to.

Doing your tax doesn’t have to be stressful, but if you do it yourself make sure you check it thoroughly and only claim what you’re entitled to.Source:Supplied

‘PROVE IT’

Australian Tax Officer Assistant Commissioner Kath Anderson told news.com.au while mistakes were common on tax returns, they could easily be avoided.

Ms Anderson said common mistakes included claiming a deduction despite no money being spent and claiming a deduction for a private expense.

“You are responsible for the claims you make in your tax return, whether you prepare it yourself or use a tax agent, so make sure you can demonstrate you actually spent the money,” she said.

“You can’t claim a deduction for a private expense. However, if you have an expense that has both a private and work-related component, you can claim the work-related portion.”

Forgetting to declare all your income and not having records to prove claims were also common mistakes.

“You typically need to keep any documents relevant to your tax affairs for five years after you lodge your tax return,” she said.

“The ATO may ask you to substantiate your claims — even after your tax return is processed — and you could find yourself in hot water if you don’t have the records you need to back up your claims.”

Original article publishe here on News.com.au on 28 June 2017

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