The new financial year has arrived which comes with it the annual obligation to submit our income tax return by 31 October. For many of us, the process is as painful as having your teeth pulled but the rewards can be great. Adrian Raftery, author of 101 Ways to Save Money on Your Tax – Legally! 2012-13 edition shares with us seven common traps to avoid when doing your tax this year:
‘Omitted income – this year the ATO data-match over half a billion transactions and expect to contact 400,000 taxpayers with discrepancies on their interest, dividend, trust and managed fund income. This process is quite lucrative as almost $330 million in tax revenue was generated last year due to audit investigation by the ATO. Overseas income and the cash economy are particular areas of focus this year. You can run from the taxman but you can’t hide.
Car log books – if you make a claim for motor vehicles expenses under the log book method then it is obvious that make sure that you actually have a log book prepared in the correct format. It must be for a continuous 12 week period and prepared within the last five years. If you have changed your car or your job duties since you did your log book then you must prepare a new one.
Rental properties – the ATO always sees a number of errors with rental property tax returns including initial repairs, interest on loans which include a private component, borrowing costs and claiming depreciation without a quantity surveyor’s report. I have also seen a number of returns where the taxpayer simply didn’t realise everything that they could claim, particularly land tax and strata levies. If you have an agent, then ask them for a summary of income and expenses to make the return process easier.
Not lodging – there are a number of slackos out there that simply procrastinate and not only don’t lodge a tax return on time, but have several returns outstanding. Get them in as you could be costing yourself thousands in unclaimed refunds. My record was submitting 33 years’ worth of tax returns which netted the lucky person over $70 thousand in refunds!! If you know that you have to pay then lodge your return to avoid unnecessary late lodgment penalties. The ATO is always willing to negotiate payment plans.
Medicare levy surcharge – if you have private health cover or a low income earning spouse, then make sure you put in those details to avoid inadvertently getting slugged with the extra 1% Medicare levy surcharge.
Mathematical errors – small errors could result in big mistakes. A wrong number here or a bad calculation there may cost you thousands. So if you do your return yourself then make sure you “measure twice” and avoid any unnecessary headaches. Make sure that you go through all your receipts and graze through every line of all bank account and credit card statements because there are a myriad of deductions that you might be missing out on. If you have more than $300 worth of total deductions then you must have documentary evidence for the full amount – not just the amounts over $300.
Doing it yourself – just as most people can change a tyre, most of us have the ability to do our tax ourselves but it usually pays to get an expert to look at your tax for you. The last thing you need is a knock on the door from the taxman because you claimed too much. A registered tax agent knows where the boundaries are in terms of what you can and more importantly can’t claim. And their fee is tax deductible too!’
101 Ways to Save Money on your Tax- Legally! is available now.
Note: This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.