The pressure to get everything right on your tax return can feel overwhelming. With ever-changing tax laws and complex forms, it’s easy to make mistakes that could delay your refund or even lead to penalties.
But don’t worry—by being aware of some common pitfalls, you can ensure that your tax return is accurate and complete. Here are some of the most frequent tax return mistakes and tips on how to avoid them.
1. Incorrect personal information
It might seem simple, but one of the most common mistakes on tax returns is incorrect personal information. A misspelt name, wrong date of birth, or incorrect Tax File Number (TFN) can lead to processing delays.
Tip: Double-check all personal details before submitting your return. Ensure that your information matches exactly with what’s on file with the Australian Taxation Office (ATO) and any other relevant agencies.
2. Failing to report all income
Another frequent mistake is failing to report all sources of income. This includes wages, investment income, capital gains or losses from sale of shares or cryptocurrency, rental income, and even side gigs. The ATO receives data from employers, financial institutions, and other sources, so they’ll know if something is missing.
Tip: Keep a record of all income sources throughout the year and ensure they are all included in your return. If you’re unsure whether something counts as taxable income, consult with a tax professional.
3. Overlooking deductions and credits
Tax deductions and credits can significantly reduce your tax liability, but many taxpayers miss out on them because they don’t know what they’re eligible for or fail to keep proper documentation.
Tip: Familiarise yourself with the deductions and credits you can claim, such as work-related expenses, charitable donations, and education costs. Keep all receipts and records organised throughout the year to make claiming these deductions easier.
4. Claiming ineligible deductions
While it’s important to claim all the deductions you’re entitled to, it’s equally important not to claim deductions for which you’re ineligible. This can lead to audits and penalties.
Tip: Understand the eligibility criteria for each deduction. If you’re unsure whether an expense is deductible, it’s best to consult a tax professional before including it in your return.
5. Incorrectly calculating expenses
If you’re claiming work-related expenses, it’s crucial to calculate them accurately. Overestimating or underestimating expenses can cause problems with the ATO.
Tip: Use a reliable method for tracking and calculating expenses. Many apps and software tools can help you keep accurate records and make the calculations easier.
6. Forgetting to include offsets
Tax offsets, such as the Superannuation Income Stream Offset, can reduce the amount of tax you owe. However, they’re often overlooked by taxpayers.
Tip: Review your eligibility for any tax offsets before submitting your return. Tax software often automatically applies these offsets, but not all so it’s good to know what you’re entitled to claim.
7. Not lodging on time
Missing the tax return deadline is a common mistake that can result in penalties and interest on any tax owed.
Tip: Mark your calendar with key tax deadlines and aim to lodge your return well before the due date. If you’re unable to meet the deadline, consider requesting an extension or working with a tax professional who can help you manage the process.
8. Failing to keep adequate records
Good record-keeping is essential for accurate tax reporting. Without proper records, you might miss out on deductions or face challenges if the ATO questions your return.
Tip: Develop a habit of keeping all financial records, such as receipts, invoices, and bank statements, organised and accessible. Store these records for at least five years in case the ATO requests them.
9. Ignoring Tax Law Changes
Tax laws are updated regularly, and what was applicable last year might not be the same this year. Failing to stay informed about these changes can lead to mistakes on your return.
Tip: Keep up to date with any changes in tax laws that might affect your return. A tax professional can help you navigate these updates and ensure your return is compliant.
10. Not seeking professional help when needed
Preparing a tax return can be complex, especially if your financial situation has changed or you have multiple income streams. Many taxpayers make mistakes by attempting to handle everything themselves without professional guidance.
Tip: If your tax situation is complicated or you don’t have the time to manage it yourself, don’t hesitate to seek help from a qualified tax professional. They can ensure that your return is accurate, help you maximise your deductions, and offer advice tailored to your unique circumstances.
Chat with the team at APS Tax & Accounting
This article was written by Stephen Fry, a dedicated accountant with over 13 years of expertise in taxation and accounting. As a senior tax accountant at APS Tax, Stephen provides comprehensive guidance and ensures compliance in all tax-related matters. He has developed a specialised focus on self-managed superannuation funds, cryptocurrency taxation, and leveraging software and technology to help clients streamline their processes.
Stephen’s approachable nature and in-depth knowledge make navigating tax complexities straightforward and stress-free for his clients. When he’s not working, Stephen cherishes quality time with his family and enjoys relaxing on the golf course. He’s also an avid AFL fan and loves watching British comedy television on the weekends.