Australians are being warned by experts not to make any “incorrect” deductions on this year’s tax return, or else risk pricey repayments.
To make understanding deductions easier, the Australian Taxation Office (ATO) lists the items taxpayers can and cannot claim based on their employment needs and demands.
“You’re entitled to claim a deduction for any expense which you incurred in earning your income,”H&R Block Tax Communications director Mark Chapman told 7NEWS.com.au.
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“If you have incurred a work-related expense, and you have the paperwork to prove it, don’t hesitate to claim it.”
Chapman said the issues start when taxpayers start claiming things that are incorrect or cannot be proven.
“You can only claim what you’ve spent,” he said.
“So don’t inflate deductions in order to get a bigger refund and only claim for costs you can prove you spent, by producing an invoice, receipt or bank statement for instance.”
If the ATO finds your deduction claims are incorrect, you may be required to repay the tax avoided, plus pay interest.
“If the ATO believes that you have acted carelessly, a penalty between 25 per cent and 95 per cent of the tax avoided may also be charged,” Chapman said.
What you can and can’t claim
The ATO says, as a rule, you can’t claim the costs of personal grooming or cosmetics.
However, there are exceptions for performers and actors where makeup and hairdressing expenses have a sufficient connection to employment income.
If you work outdoors and need sunscreen, you may also be able to claim this expense, however, the ATO warns people trying to claim cosmetics with added sunscreen that this will not be covered.
You also can’t claim gym fees and fitness-related expenses, except in very limited circumstances — for example, if you need to maintain an extremely high level of physical fitness that is essential to your job.
Claiming travel costs can be confusing, as you may be able to claim the cost of the car parking as a deduction if the travel is work-related.
For example, if you are required to drive from the office to another location for work-related reasons and need to pay for parking, you can claim this back on tax.
But, if you are travelling to work from home and need to pay for parking to go to the office, you will not be able to claim this as an expense.
“If you have spent money on something in order to do your job, such as purchasing uniforms, and paying for travelling or ongoing education expenses, you may be entitled to claim that cost as a tax deduction,” Chapman said.
“Remember to only claim what you are entitled to — you cannot claim private expenses or things that have been reimbursed by your employer.”
Filling in your tax return
Chapman advised taxpayers not to rely on pre-filled data from the ATO, where incorrect information can cause lengthy delays.
“These days, with the push of a button, you can pre-fill lots of your income information straight from the ATO’s systems,” he said.
”Take care, though, and don’t assume that income data is correct or complete.”
Taxpayers wanting to lodge their returns early are urged to always check their information is correct, and only use their own information as the key source of data.
“Some people assume that because the data comes from the ATO, it must be right. That’s a dangerous assumption, especially in July and early August.”
Don’t forget the basics
Many tax returns get held up by the ATO due to basic mistakes made by taxpayers, these include:
Change of name or address
Tell the ATO before you lodge your return if you have changed your name or your address.
“If you lodge under different details, the ATO won’t be able to match it with your tax file number. Delays will ensue!” Chapman said.
Bank account details incorrect or not added
Taxpayers need to include their bank details on their return to get a refund. No bank details, no refund.
Spelling mistakes
Spelling mistakes are a sure way to delay your refund.
“That slip of the keyboard could consign your return to a black hole while the ATO tries to manually match your details,” Chapman said.
The dates for tax return are after June 30 and before October 31, which is the last day for lodgement.
If you need an extension, you can reach out to the ATO before the last day of lodgement and put in a written request.
If you chose to use a tax agent for your return, an extension may be granted as late as May 15 the following year.