As tax season approaches, accountancy group CPA Australia warns that one of the most common and costly mistakes taxpayers make is rushing to lodge their tax returns too early.
While it might seem tempting to submit your return quickly to get a refund sooner, CPA Australia’s Tax Lead Jenny Wong says this impulse can lead to errors and missed claims.
Last year, nearly three million individual returns were lodged by July 23, and this surged to 5.8 million by August 20, according to ATO data. This rush can cause taxpayers to overlook important details or file inaccurate information, often resulting in the need to amend returns later. “Lodging early doesn’t necessarily mean you get your refund first,” Ms Wong explains. “It’s better to wait, gather your evidence, and ensure your return is accurate. This patience could save you headaches down the line.”
Don’t autopilot your tax return
Ms Wong highlights a common pitfall where taxpayers simply copy and paste information from their previous year’s return without considering changes in their circumstances. This autopilot approach risks missing legitimate deductions or incorrectly declaring income.
“Take a moment to reflect on what’s changed in your work and personal life this year,” she advises. “Have you taken on a new role requiring different tools or subscriptions? Did you travel more for work without reimbursement? These are the details that could affect your claim.”
CPA Australia recommends checking the ATO’s detailed guide on industry and occupation types to identify what expenses are relevant to your work. Importantly, they caution against relying on AI-generated tax advice, which might not fully capture your unique situation or the nuances of tax laws.
For those with more complex finances such as owning rental properties, managing crypto assets, or running a business, professional advice can be invaluable. CPA Australia notes that fees paid to registered tax agents for preparing your return are themselves tax deductible.
How to maximise your legitimate claims and avoid costly Errors
To get your tax return right, keeping evidence and understanding allowable deductions is key. CPA Australia offers practical tips for taxpayers to make sure they’re claiming what they’re entitled to without overstepping:
- Out-of-Pocket Work Expenses: If you’ve paid for tools, subscriptions, uniforms, or other work-related items yourself, these could be tax deductible. But the Australian Taxation Office (ATO) requires proof receipts, invoices, or bank statements to validate your claims. CPA Australia urges you to gather these documents now, whether they’re buried in emails, apps, or the junk drawer.
- Working From Home: With more Australians working remotely, it’s essential to understand what home office expenses qualify. Internet costs, stationery, printing, and electricity can sometimes be claimed, but only to the extent they relate directly to your work. You’ll need to choose between the fixed rate method (currently 67 cents per hour) or the actual cost method, which can yield a larger deduction if you’ve tracked expenses meticulously.
- Vehicle Expenses: If you use your car for work travel—excluding your regular commute—you may claim related costs. However, keeping an accurate logbook or diary for at least 12 weeks is necessary to distinguish business use from personal travel. Without these records, it’s safer to claim a lower amount than risk an audit.
- Buying Work Essentials Before June 30: The final weeks of the financial year offer a chance to purchase essential items that could be claimed in your 2024–25 return. But be cautious—only buy what you genuinely need for your job. CPA Australia reminds taxpayers that tax deductions reduce taxable income; they don’t provide a dollar-for-dollar refund.
- Review Your Prepayments: Consider whether prepaying expenses like professional memberships or insurance before June 30 could benefit your tax situation, especially if you expect income changes in the following year.
Ms Wong emphasises the importance of honesty and accuracy. “Getting your tax return right is your responsibility. Claiming appropriate expenses and declaring all income keeps you compliant and helps avoid costly audits.”
Find out more at cpaaustralia.com.au
Disclaimer: This article provides general information only and does not constitute financial or tax advice.
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