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Common Tax Errors Australians Make
As the tax season approaches in Australia, many taxpayers prepare to file their returns. However, tax expert Belinda Raso warns that common mistakes made during this period could cost individuals dearly in potential refunds. The director of Tax Invest Accounting shared insights with Yahoo Finance on the most prevalent errors Australians encounter annually.
Key Tax Mistakes to Avoid
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Incorrect Deductions for Working from Home
Many Australians overlook the two methods available for claiming work-from-home expenses. The fixed rate method allows for a claim of 70 cents per hour, while the actual cost method requires a detailed calculation of additional expenses. Raso emphasises that those opting for the fixed rate method often neglect to claim other deductible expenses such as internet fees, electricity, and even furniture used for home offices. This oversight could lead to missed deductions worth hundreds of dollars annually. -
Misunderstanding the Medicare Levy Surcharge
It’s essential to accurately report your status regarding the Medicare Levy Surcharge. The ATO reviews tax returns based on income thresholds, which for the 2024-25 financial year are $97,001 for singles and $194,001 for families. Raso notes that single-parent households often mistakenly classify themselves as singles when they may qualify as families, potentially incurring additional tax costs. -
Misinterpreting Reimbursements and Allowances
Taxpayers often confuse reimbursements for work expenses with allowances. For instance, if an employer provides a kilometre allowance, it must be declared as income, which necessitates claiming corresponding deductions. Failure to do so could result in taxpayers paying tax on allowances without compensating deductions, leaving them out of pocket. -
Neglecting Dual-Use Expenses
Many individuals claim they cannot deduct costs for items used for both personal and work purposes, such as laptops or mobile phones. Raso asserts that taxpayers should apportion their claims based on usage percentages. For example, if a computer is used for work 60% of the time, taxpayers can claim that proportion in their returns. - Failure to Maintain a Logbook for Vehicle Expenses
Those who use their vehicles for work-related travel must maintain a logbook if they travel over 5,000 kilometres for work. The ATO allows two methods for claiming motor vehicle expenses: the logbook method and the cents per kilometre method. The logbook method can yield greater claims, but it demands consistent tracking of vehicle usage along with all related costs for a full 12 weeks within the claiming year.
Conclusion
Tax time can be daunting, but understanding common pitfalls can help taxpayers maximise their refunds. By avoiding these common mistakes, Australians can ensure they navigate tax season more effectively and potentially save themselves from unnecessary costs. Raso advises everyone to take the time needed to understand their entitlements and maintain accurate records throughout the year.
For those who have made mistakes, they can amend their returns within two years from the date of their notice of assessment. As tax season approaches, it’s crucial for Australian taxpayers to be vigilant and thorough in their filing processes to avoid leaving money on the table.
