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Tax Returns: A Cautionary Tale from a Melbourne Woman
In a recent shocking revelation, Melburnian Jen Rothwell has sparked a conversation about the timing of submitting tax returns, after receiving an unexpected bill of $1,130 from the Australian Taxation Office (ATO). This scenario has unfolded as Australians begin filing tax returns for the 2024-25 financial year, with experts urging individuals to consider delaying submissions for a few weeks.
Jen’s Experience
Rothwell, a 28-year-old, fell victim to an audit due to a $2,000 interest income from a term deposit that she failed to report in her 2023-24 tax return. She stressed to Yahoo Finance that banks report interest payments to the ATO, which then pre-fills this data into tax returns. However, this information may not be finalised until late July.
By lodging her return too early—at the start of July—Rothwell missed including that critical information. Consequently, she discovered her refund should have been a mere $115 instead of the $1,200 she initially received, leaving her with a daunting tax bill after the recalculation.
Financial Strain
“This came as a tremendous shock. I’ve never owed such a significant amount to the ATO before,” Rothwell shared, adding that with wedding savings at stake, unexpected financial burdens are unwelcome. In her eagerness to secure any additional funds during a period of unemployment, she lodged her return prematurely.
Now, Rothwell has established a payment plan with the ATO, which, while straightforward, is set to take approximately 64 weeks to settle. Any refund from her upcoming tax return will automatically contribute to this debt.
A Lesson for Others
Rothwell encourages others to heed her experience as a cautionary example against early lodgement. She advises that anyone choosing to lodge their tax returns before all information is made available must take extra care to ensure accuracy.
The ATO has echoed this sentiment, advising taxpayers to only file their returns once their income statement is marked as ‘tax ready’ with all necessary data pre-filled. The tax office has reported that over 142,000 taxpayers who lodged in early July faced amendments or investigations into inaccuracies.
Best Practices for Lodgement
ATO assistant commissioner Rob Thomson emphasised that waiting until late July is ideal, as it allows for accurate pre-filling of information from various entities such as employers and financial institutions. "The optimal time to lodge is from late July when everything is ready,” he stated.
Hripsime Demirdjian, founder of Hive Wise, described mid-July as a "safe zone" for preparing tax returns, especially for salaried employees without investments. However, she cautioned those with more complex financial situations—such as investments in managed funds—should wait until August or September.
Consequences of Late Payments
If taxpayers find themselves facing a tax bill, it’s vital they meet payment deadlines set by the ATO. For those unable to pay promptly, the option of a payment plan is available to break down the tax debt into manageable amounts. It’s important to note that any outstanding balances after the due date are subject to a general interest charge of 10.78% annually, which compounds daily.
Conclusion
Rothwell’s experience serves as a critical reminder for Australians regarding the importance of timing in tax return lodgement. While the temptation to file early is understandable, waiting for all necessary information can prevent unexpected financial repercussions. The ATO’s guidance reinforces this, advocating for a more cautious approach to maximise accuracy and minimise surprises when tax time rolls around. Potential filers would do well to take heed and plan their lodgements accordingly to avoid the pitfalls faced by Rothwell and others in similar situations.
