The ATO is an expert in identifying errors on tax returns, and with increasing tools and access each year, their job is becoming easier. So, if you are considering adding a few extra deductions or omitting income from your side gig, reconsider.
Nowadays, the ATO gathers extensive information about individuals, including details about employment and Share Economy income, bank and credit transactions, health insurance, Centrelink, child support, and bank interest—it’s all within their reach. In this blog post, we’ll explore tax filing mistakes that you should avoid.
What are tax mistakes and How to avoid them?
It’s important to file accurate tax returns to avoid paying penalties to the ATO. A lack of receipts or guesswork will often lead to costly penalties. The following are tax mistakes that you should avoid to prevent yourself from paying penalties or fines to the ATO:
- Guessing your income and tax paid
When lodging your tax return, ensure you enter the accurate amount of your income and the tax you have paid. The ATO can access records to compare your submissions with their existing information. While they might not have records for certain income types, they can still view your accounts. Given that some employers send PAYG statements, others use single-touch payroll, and some may provide no documentation at all, it can be challenging to monitor your income. All your entries must be complete and accurate, as even minor errors can draw the ATO’s attention. This is why you should consider seeking help from small business accountants in Melbourne for your business.
- Estimating your tax deductions
The ATO has started paying attention to tax deductions claimed by Australians. They may be hiding all their profits overseas and avoid paying taxes, but that is more difficult. The fact is, the ATO notices everything. The ATO analyses every expense you claim. The company, your tax deductions with other people in your field, your location, and your age group. If your tax deductions are too high, then reconsider your deductions. It would help if you claimed the deduction for which you are eligible. Once you are caught by the ATO, you will have to pay penalties.
Not declaring overseas income
Many Australians work overseas for a longer period of time. Often they fail to pay their Australian taxes. Others simply believe that they don’t need to file a tax return, which is a big mistake. If you have recently worked overseas, contact any professional accounting firm in Melbourne to ensure your Australian tax returns are up to date. They will keep you out of problems and help you avoid paying tax bills. The fact is, if you are an Australian resident for tax purposes, you must still file an annual tax return in Australia, even if you live or work overseas at the moment. You must declare all your foreign employment income and any other income you obtain from that country. Foreign income includes pensions and annuities, employment income, investment income, business income, or capital gains on overseas assets.
- No receipts for deductions
Paying money for work-related items and not having a receipt is a big mistake – one that many people make. Generally, without receipts for your expenses, you are allowed to claim up to a maximum of $300 worth of work-related expenses. However, even then, it cannot be a made-up tax deduction. It should be a genuine expense. Don’t forget that if you over-claim your deductions and receive a larger tax refund than you are liable to, the ATO can ask you to repay some or all of your tax return – plus interest charges and penalties as well. However, with small business bookkeeping services, you can be sure that your bookkeeper has a record of all deductions.
Conclusion
Making tax-related mistakes can cost you big. If you are unaware of tax-related matters, consider getting help from professional tax accountants. Reliable Melbourne Accountants invest the time to know your business and what you want to achieve for your business. We follow a holistic approach to present creative solutions to give you a financial edge.