MILLIONS of taxpayers who do their own tax returns are being warned to watch out for the traps that can be costly at this time of the year.
As tax return season moves into full swing, financial experts say there are plenty of things people can do to make sure they get the maximum refund without getting targeted by the Australian Taxation Office.
The ATO says 2.8 million people lodged their returns online with e-tax last year, and it contacted more than 400,000 people about discrepancies that resulted in nine out of ten returns being adjusted.
“The most common errors we’ve seen this year include supplying incorrect bank account details, spelling errors in your name, providing your year of birth rather than your full date of birth, not fully completing your spouse details, and incorrectly filling out your private health insurance details,” ATO assistant commissioner Karen Anstis says.
“We will issue most returns within 12 days of when we receive them, but if you lodge your return with errors it may take us a little longer.”
H & R Block regional director Frank Brass warns taxpayers to beware of a trap with the ATO’s online pre-filling option that automatically adds income from bank accounts, shares and other investments to people’s tax returns.
“The information provided in it is only as good as the timing of the information being sent by employers, banks, Centrelink and other organisations to the Tax Office,” he says.
“If taxpayers rely on pre-filling information as the source of the income information to complete their tax return, and the information is not complete, it is the taxpayer who will be audited and will be required to pay back the tax refund and may be charged interest on this money they have incorrectly received.”
Brass says people should check their own records, at least until the end of August when all the pre-filling information has arrived.”
He says other traps include wrongly claiming travel expenses between home and work, claiming for work clothes that do not have the required logos, lodging returns late and making capital gains tax mistakes.
“They can charge you anywhere between 20 per cent and 100 per cent of the tax avoided, depending on the severity of what you’ve done, and pay back the tax and interest on the money you owe, so it does hurt.”
Adrian Raftery, a senior lecturer at Deakin University’s School of Accounting, Economics and Finance, says the ATO’s technological advances have made it much easier for it to spot dodgy tax claims, and it has the power to go back through your records indefinitely.
However, one of the biggest traps is people not claiming enough, Raftery says.
“Some people are afraid and don’t want to claim everything because they want to stay under the radar,” he says.
“You owe it to yourself and your family to claim every dollar you are legally entitled to. The ATO won’t send you to jail because you’ve claimed everything you should.”
Small mistakes – such as calculation errors, transposing figures or getting decimal points wrong – can cause big problems, Raftery says.
“If they claim too much that leaves them wide open for a Tax Office investigation.”
Original article published here on news.com.au on 24 July 2014.