Tax time is approaching in Australia, and tax expert Belinda Raso has outlined the frequent mistakes taxpayers make, which could potentially cost them hundreds in refunds. Raso, the director of Tax Invest Accounting, highlighted that many of these errors arise from rushing through tax returns or not having all necessary information.
Here are the five most common pitfalls to avoid:
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Work from Home Deductions:
Taxpayers often overlook the dual methods available for claiming work-from-home deductions. Under the fixed rate method, individuals can claim 70 cents for each hour worked from home. Meanwhile, the actual cost method involves a more detailed calculation of additional home office expenses. Raso noted that many who opt for the fixed rate method fail to include separate claims for things like computer equipment, furniture, and stationery, which could result in significant losses. -
Medicare Levy Surcharge Misunderstanding:
It’s essential to correctly identify whether one is liable for the Medicare Levy Surcharge. The income thresholds for the 2024-25 financial year are $97,001 for singles and $194,001 for families. Raso observed that single parents often mistakenly classify themselves as singles when they should be classified as families, leading to unexpected tax liabilities—potentially over $1,000. -
Misclassifying Reimbursements and Allowances:
Employees receiving reimbursements or allowances need to distinguish between the two. For instance, a kilometre allowance should not be treated as a reimbursement for expenses. If the kilometre allowance is noted on the income statement, taxpayers should claim the actual expenses incurred, as they’ll be taxed on the allowance. Other common items affected include mobile phone and laundry allowances. -
Failure to Claim Mixed-Use Expenses:
Taxpayers frequently neglect to claim deductions for items used for both work and personal purposes, such as laptops or computers. Raso advised that they can apportion claims based on personal versus work use— for example, claiming 60% for business use if applicable. - Not Maintaining a Logbook for Vehicle Expenses:
For those using their vehicles for work, keeping an accurate logbook is crucial. Raso suggested that if someone travels over 5,000 kilometres for work in a year, they should use either the logbook method or the cents per kilometre method (allowing claims on up to 5,000 business kilometres). The logbook method requires valid documentation covering a minimum of 12 weeks and must be maintained within the financial year of the claim.
Raso emphasised the significance of careful record-keeping and understanding tax obligations to maximise refunds and avoid penalties. Taxpayers have a legal window of two years to amend any mistakes on their returns, ensuring that they can rectify issues before facing tax implications.
With these insights, taxpayers in Australia can approach the upcoming tax season with greater confidence, ensuring they don’t miss out on their rightful entitlements.
