Experts are warning Australians not to make “incorrect” deductions on their tax return this year or risk costly refunds.
To make it easier to understand deductions, the Australian Taxation Office (ATO) lists the items that taxpayers can and cannot claim based on their work needs and demands.
“You are entitled to claim a deduction for any expenses 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 have the documentation to prove it, don’t hesitate to claim it.”
Chapman said the problems begin when taxpayers start making claims that are incorrect or cannot be proven.
“You can only claim what you have spent,” he said.
“So, don’t inflate deductions to get a bigger refund and only claim expenses you can prove you incurred, by submitting an invoice, receipt or bank statement, for example.”
If the ATO determines that your deduction claims are incorrect, you may have to repay the avoided tax, plus interest.
“If the ATO considers you have acted carelessly, you may also be charged a penalty of between 25 per cent and 95 per cent of the tax avoided,” Chapman said.
What you can and cannot claim
The ATO says that as a general rule, personal care or cosmetic costs cannot be claimed.
However, there are exceptions for artists and actors in which makeup and hairdressing expenses are sufficiently related to their work income.
If you work outdoors and need sunscreen, you can also claim this expense, however the ATO warns people trying to claim cosmetics with added sunscreen that this will not be covered.
You also cannot claim gym memberships or expenses related to physical activity, except in very limited circumstances – for example, if you need to maintain an extremely high level of physical fitness that is essential for your job.
Claiming travel expenses can be confusing, as you may be able to claim the cost of parking your vehicle as a deduction if the trip is work-related.
For example, if you need to drive from the office to another location for work reasons and need to pay for parking, you can claim this money back on your taxes.
But, if you commute to work from home and need to pay for parking to get to the office, you won’t be able to claim it as an expense.
“If you have spent money on something to do your job, such as buying uniforms and paying for travel or continuing education expenses, you may be entitled to claim that cost as a tax deduction,” Chapman said.
“Remember to only claim what is due to you; you cannot claim personal expenses or things that have been reimbursed by your employer.”
How to complete your tax return
Mr Chapman advised taxpayers not to rely on data pre-filled by the ATO as incorrect information can cause lengthy delays.
“Today, with the push of a button, you can pre-populate much of your income information directly from the ATO’s systems,” he said.
“But be careful not to assume that income data is accurate or complete.”
Taxpayers who wish to file early are urged to always verify that their information is correct and to use only their own information as a key source of data.
“Some people assume that because the data comes from the ATO, it must be correct. This is a dangerous assumption, especially in July and early August.”
Don’t forget the basics
Many tax returns are held up by the ATO due to basic errors made by taxpayers, these include:
Change of name or address
Inform the ATO before you file your return if you have changed your name or address.
“If you file your return with different details, the ATO will not be able to match it to your tax file number. This will cause delays!” Chapman said.
The bank account details are incorrect or have not been added
Taxpayers must include their bank details on their return to obtain a refund. No bank details, no refund.
Spelling mistakes
Spelling mistakes are a sure way to delay your refund.
“That keyboard slip could send your return into a black hole as the ATO tries to manually cross-check your data,” Chapman said.
The tax return filing dates are after June 30 and before October 31, which is the last day for filing.
If you need an extension, you can contact the ATO before the last day to file and submit a written request.
If you decide to use a tax agent for your return, you may be granted an extension until May 15 of the following year.
