5 Tips:Avoid Common Mistakes While Lodging Your Tax

If you own a business in Australia, you have to lodge your tax return by the deadline set by the Australian Taxation Office (ATO). The ATO will check all the details, and if satisfied, you will get your money back. In 2021, it was reported that Australians would receive an approximate amount of $2820 at the end of the financial year. Unfortunately, people make vital mistakes, which lead to heavy ATO penalties for incorrect tax returns. This blog points out some valuable tips you must follow to avoid common tax return mistakes. 

Do not leave out some of your earnings

One of the crucial mistakes people often make is that they forget about their earnings from any part-time employment. Various part-time jobs are available in Australia, like pet sitting, babysitting, childcare jobs, and other freelance jobs. If you have done any of these while being employed in a full-time position, it will be important to mention all of them in your tax return.

• Because of the restrictions imposed as a direct effect of the COVID-19 pandemic, many Australians have chosen the gig economy to sustain. 
• The Australian Taxation Office is fully aware of all these jobs and uses Airbnb, Uber, and Airstaker to check the data while assessing the lodged tax returns. So, you must be careful about it. 
• One thing to note here is that while the gig economy workers work as independent contractors, the term, on a broader scale, applies to people earning income from even sharing or bartering. 
• So, if you work as a driver, provide your car on rent to people, look after social media accounts, do freelance jobs, or sell products, you must declare the income in the tax return. The good thing about it is that the expenses incurred while doing such a job will be deductible. These expenses include vehicle, travel, financing, marketing, and home-office costs.

For convenience, you may consult a professional business tax accountant to get the correct guidance on how to proceed.

Do not claim deductions for your personal expenses

As a business owner, you must know what you can lodge as tax deductions. For example, you may think you can claim costs associated with covering the distance between your home and work. But, you can claim the costs incurred while travelling from your office to any other place of commitment. The reason is that according to the ATO, the time you spend going to your office and returning to your home are outside the work hours, and thus the associated costs will be considered personal.

• However, exceptions are made in some cases. If you are assigned to carrying heavy equipment for office purposes or travel to different work sites every day because you have no fixed office, these claims can be made without any difficulty. 
• You can claim calls related to your work and not the entire bill regarding your telecommunication costs. 

Keep all the receipts and records of the expenses organised

You must keep all the documentary evidence of the claimed expenses safely. Keep it for a maximum of five years from the date of lodging the tax return. The reason is that you may receive a call from the ATO anytime, and if you cannot show appropriate evidence, you may face trouble.

Documentary evidence includes paperwork related to work expenses, rental property income, bank interest statements, etc. You may arrange them in a folder and keep the folder in a safe drawer. If you want to store them digitally, you may use accounting platforms like myDeductions. Hnry is another platform that suits the requirements of a contractor or self-employed individual. 

Do not include a deduction for which you did not pay

Many times, it has been found that people try to claim for items and services they did not actually pay for, which may include dry cleaning. It happens because they think they are subject to a ‘standard deduction.’ Be careful about it as it may lead to an audit. 

• Usual areas under standard deductions include $300 of job-related costs, $150 of laundry expenses, and $200 of small-item costs. If you try to claim these costs, the ATO will ask you what you have done with the money. So, you must claim these only when you have solid evidence.
• However, among these standard tax deductions, there are some rules that you can consider using to get benefits.
• You must be aware that you can claim tax deductions for various charitable donations your company does. But this donation deduction can be spread over the next five years through an election. 

Consult with your business advisor Perth for valuable guidance.

Do not claim personal expenses if you have rental properties

You may have a property to rent out to tenants. In that case, you have to include the rental income in your tax return. You have to include the expenses you have to bear for providing basic amenities for the tenants. However, you will not be able to claim the money you had to bear while staying there for a few months.

• You must note that thousands of dollars are sometimes associated with investment properties, and according to experts, these costs can easily be claimed as tax deductions. One of the most significant tax deductions you can claim for a maximum of forty years is tax depreciation. Also, if your property gets old, damages are unavoidable; in that case, you will need to hire workers for wiring and plumbing jobs. These services can lead to a total tax depreciation of about $16000.

Final words

If you have made mistakes and want to know how to amend your tax return lodged with the ATO; you may take help from an accountant. Through your myGov account, you can do it online. Alternatively, you can go for offline processes, too, like filling out the relevant amendment form or sending a letter. Having an accountant by your side means you can get the necessary guidance. To hire such a professional, you may contact Palladium anytime.