Your tax returns are due on 31 October and if you haven’t got around to getting your affairs in order, now would be a good time to start.
Sitting down to think about the refunds you can claim from the Australian Tax Office is probably one of the better parts of tax time, but there are risks involved if you don’t do things correctly.
In a recent article published on its website, the ATO revealed the top 10 tax myths and misunderstandings which lead to incorrect claims.
The ATO said that people are often given incorrect advice by non-professionals, which is why it might be a good idea to run things by your accountant first. If you want to know the Top tips to get through tax time , read this post.
ATO’s message – Get the right tax advice
Assistant Commissioner Kath Anderson says unreliable tax advice about tax returns is leaving taxpayers exposed. “Taxpayers listen to advice from many sources, including tax agents, colleagues, family and friends, and even helpful shop assistants. While some tax returns advice is correct, some isn’t and it’s leading to mistakes and errors that can be costly.”
She said that there is no such thing as a standard deduction and that people need to prove that they are eligible for a justified refund, adding that credit card statements alone are not enough.
Ms Anderson also warned taxpayers that it’s a myth that their agent is responsible for their claims.
“Whether you prepare your own return or you use an agent, you are ultimately responsible for ensuring your claims are correct.”
Here’s the ATO’s official list of tax returns myths debunked!
Myth: Everyone can automatically claim $150 for clothing and laundry, 5000 kilometres for car-related expenses, or $300 for work-related expenses, even if they didn’t spend the money.
Fact: The record-keeping exemptions provide relief from the need to keep receipts in certain circumstances. However, they are not an automatic entitlement or a “standard deduction” for everyone. While you don’t need receipts for claims under $300 for work-related expenses, $150 for laundry and 5,000 kilometres, you still must have spent the money, it must be related to earning your income, and you must be able to explain how you calculated your claim.
Myth: I don’t need a receipt, I can just use my bank or credit card statement
Fact: To claim a tax deduction in your tax returns you need to be able to show that you spent the money, what you spent it on, who the supplier was, and when the purchase occurred. Bank or credit card statements usually won’t contain this information. The only time you don’t need these details is if record-keeping exceptions apply.
Myth: I can claim makeup that contains sunscreen if I work outside
Fact: We all like to look good but cosmetics are usually a private expense and the addition of sun protection does not make it tax deductible. However, it may be deductible if the primary purpose of the product is sunscreen (it has a high SPF rating), the cosmetic component is incidental, and you were required to wear it because you work outdoors in the sun.
Myth: I can claim my gym membership because I need to be fit for work
Fact: While you might like to keep fit, there are only a very small number of people who can claim gym memberships, such as special operations in the Australian Defence Force. To be eligible, your job would have to depend on you maintaining a very high level of fitness, for which you are regularly tested.
Myth: I can claim all my travel expenses if I add a conference or a few days’ work for my holiday
Fact: If you decide to add a conference or some work to your holiday, or a holiday to your work trip, you must apportion the travel expenses between the private and work-related components.
Myth: I can claim my work clothes because my boss told me to wear a certain colour
Fact: Unless your clothing is a uniform that is unique and distinct to your employer, or protective or occupation-specific clothing that you were required to wear to earn your income you, won’t be able to claim it in your tax returns. Plain clothes, like black pants, are not deductible even if your boss told you to wear them.
Myth: I can claim my whole Netflix or Foxtel subscription because I need to keep up to date for work
Fact: Unless you only use your subscriptions for work purposes, you will have to apportion the cost between business and private usage, and only claim the work-related portion of your expenses. You will also need to be able to show a strong connection between earning your income and the subscription.
Myth: I can claim home-to-work travel because I need to get to work to earn my income
Fact: For most of us, home to work travel is private since your boss doesn’t pay you until you get to work. There are limited circumstances where someone who has to transport bulky equipment can make a claim.
Myth: I’ve got a capped phone plan, so I can claim both personal and private phone calls
Fact: Unless you only use your phone for work, you will have to apportion the cost between business and private usage and only claim the work-related portion of your expenses.
Myth: If I use an agent, they will take responsibility for my claims
Fact: Even if you use a tax agent, you are ultimately responsible for ensuring the information in your return, including the deductions you claim, is correct. You cannot transfer that responsibility to your agent so make sure you give them complete and accurate information.
Take the stress out of tax time – contact us today
If you want to be sure that your tax claims are justified and correct, our agents are here to help you. You might also want to read this blog post about what businesses can claim back at tax time. Call us today on 1300 996 928 or send us an email on firstname.lastname@example.org