Common Tax Return Mistakes You Need To Avoid 2024

Are you the one looking to smoothly run their tax filing process while remaining compliant with ATO regulations? Well, we have got you covered here. Whether it’s misunderstanding work-related expenses, inaccurately reporting overseas income, or guessing the deductions, our blog addresses these issues head-on.

No worries, if you are in the process of filing your tax return or have made a mistake and are not aware of how to effectively respond to the letters from the ATO regarding variations or inconsistencies. We have simplified things for you.

Let’s get straight into it.

What Happens If You Made a Mistake on Your Tax Return?

Did you make a mistake while lodging your return? No need to worry, there are ways to amend your tax return mistakes.

We see lots of people making mistakes when they rush to lodge in early July, which can also delay their return from being processed,” an ATO spokesperson said.

First of all, there might be the following reasons for which you have to fix your return:

There’s a misunderstanding in the calculation of claims and deductions.

You might have entered the wrong figure.

Omission to file an income, expense or deduction.

There’s a subsequent change in your filed return.

You need to request an amendment to your income tax assessment from ATO. Let’s see how you can process your request.

Amending your tax return

When it comes to amending your tax return, there are some ways and limits to it. For some mistakes, there’s a legal limit to amending them and a delay can lead to penalties and interest, let’s proceed to the ways of amending your tax return mistakes:

The fastest and most convenient is through ATO online.

Through a tax agent, if it sounds difficult for you to handle it.

By completing the amendment form

Or, by sending a letter to ATO.

To avoid processing delays, remember that before you proceed to lodge your amendment, check out for the notification of “tax return successfully processed”.

Through ATO online

Now, if you’re thinking of amending the ATO online then it would take about 20 days for ATO to process tax returns. You need to sign in to your myGov account and make sure that’s connected to the ATO.

To lodge your amendment, after signing in:

Browse to your linked services, and select ATO

Click on Manage tax returns

You can also make use of the ATO app,

Select the View option

Click on Your tax return

View tax return

Select amend.

Paper Return

If you can’t process your amendment through online ATO, you can try sending a form. Fill out the form, this may take a maximum of 50 days. Remember to put a sign, if you’re filing it on your own.

Letter to ATO

Choosing to opt for writing a letter to ATO to make amendments to your tax return? Make sure to add all these relevant details:

• Complete name;

• Postal address;

• Tax file number (TFN)

• Your bank information (to receive a refund, if any)

• Your mobile number

• The total sum as well as any income or deductions

• Amount of tax offsets

• Justification for the change you’d like to make

•Finally, write the date and sign as follows:

I certify that the information I have provided in this letter, along with the attachments, is accurate and true.

I have the required invoices or other documentation to back up my navigation/amendments requests.

Now, you or your tax agent can either post or fax to ATO.

Amending Tax Return Penalty

Many of you might be thinking “What happens when I amend my tax return?”. The type of consequences depends on whether making a false or misleading statement results in a lack of money. Either way, if the taxpayer made the statement with reasonable care or if their statement complies with published statements then you will not be required to pay the penalty.

Let’s examine the calculation of penalties associated with tax deficiencies. Imagine this: your penalty base rate is a certain percentage of the tax shortfall, if there is a difference between what you should have paid and what you paid. However, the penalty is based on a certain amount of penalty units if there is no shortfall. Now, why may you be penalized? Here are some examples:

Absence of Due Diligence

Let’s say you failed to take the precautions that a prudent person in your situation would have taken. In this instance, you may be fined twenty penalty units or 25% of the amount of the shortfall.

Recklessness

If you overlook or ignore a real risk of a shortfall that a reasonable person would have noticed, it’s considered recklessness. The penalty for this jumps to 50% of the shortfall or 40 penalty units.

Intentional Disregard

This one’s serious. It’s when you knowingly flout the law, maybe by underpaying tax or claiming more than you’re entitled to. The penalty? A steep 75% of the shortfall or 60 penalty units.

Failing to File Necessary Documents

Forgot to submit a key document for your taxes? If the tax authority (like the ATO) has to step in and determine your tax liability without it, you could be hit with a 75% penalty on the tax-related liability.

Furthermore, you always have the right to ask for the cancellation of the penalty in full or half. Amending your tax return penalty includes penalties for failing to lodge your documents on time, withholding an amount required by PAYG, or meeting any other tax obligations.

IMPORTANT NOTICE: Now, requests can be made through three modes; by phone (for small penalties), through the Online ATO services or by sending the mail at:

Australian Taxation Office
PO Box 327
ALBURY NSW 2640

Are you still curious about the penalties’ outcome? According to the ATO, a taxpayer may most likely claim the GST on the incorrect activity. If there isn’t a total deficit following the changes, the penalty might be fully reimbursed.

Similarly, if a deduction or credit is claimed in the incorrect taxpayer’s activity statement or return but there isn’t a total deficit amount, the penalty can be fully waived.

If the two taxpayers have different tax rates, each will have a unique shortfall amount, with a net overall shortfall amount. If this occurs, the fine may be reduced to equal the fine that would be assessed on the entire net deficit.

Let’s see what you can do if you still have your tax return in the process.

Why is your amendment still in process?

Have you lodged your amendment before processing the original tax return? There are many other examples due to which some tax returns may take longer than usual to process. ATO-amended tax return processing time can take 14 to 30 days from the calendar date. This depends on how to file your amendment either online ATO or through a paper return.

Checking your progress

You can readily check the progress through:

Online ATO Services

ATO app

Through your phone

If you noticed “Processing” even after 20 days, which the amendment tax return usually takes then there might be the following reasons for this:

There’s an underlying tax debt or previously unresolved debt

You lodge the tax return amendment again after you had made it previously

You might be under any an insolvency administration (Bankruptcy, debt)

You have a re-raised or unpursued tax (meaning, it was held on in a prior period)

If none of these relates to you then there’s a possibility that ATO would approach you or your registered tax agent for more information and ongoing delays in processing of your tax return.

In case, there’s an emergency and you require the process to speed up then you may be eligible for priority processing. However, you need to present evidence of serious hardship

ATO-Amended Tax Return

After your tax return has been processed, make sure to check the “notice of assessment”. It will be in your myGov inbox. You will be receiving an SMS or Email advising you to check the unread emails.

Preventing Tax Return Mistakes: Best Practices

Aussies watch out before you file your tax returns. Here are some common tax return mistakes highlighted by the ATO:

Rental Deduction

Consider an example,

You were gone living on your holiday home with your friends, will this period be included while calculating your overall expenses? Well, no.

Remember that you can’t claim deductions on a holiday rental property that is not genuinely available for rent. However, if it is available for a part of the year then you can adjust the deduction specifically for that portion of the year. Similarly, here are more such examples where you might be wrongly expensing out;

You may be incorrectly allocating interest costs when you take out a loan or borrow money for purposes other than the investment property, when the property is only partially rented out, or when the rental period is only partially completed.

Thinking of making an instant claim for expenses required to fix flaws, deterioration, or damage that existed when the property was purchased? You cannot as these are regarded as capital expenses and must be made over a period of time.

Another example is about failure to declare or under-report rental revenue.

Work-Related Expenses

Your work-related expenses may be incorrect, but there’s no need to be anxious. This is one of the most common tax return mistakes in Australia.

First and foremost, your claim on work-related expenses depends upon your occupation for which ATO (Australian tax office) has developed a guide related to industry-specific practices. However, here are some things you can check for yourself:

Requesting a prompt deduction for the price of tools and equipment that exceeded $300.

Travel expenses between home and work;

Double-dipping on deductions: taxpayers deduct automobile expenses using the cents-per-kilometer method, then deduct gasoline, auto insurance, repairs, and registration separately.

There might be a chance you got the “work-related expenses may be incorrect” letter from the ATO. In this scenario, make sure you have enough receipts to substantiate the claims you made for the expenses. ATO has a far-reaching end in benchmarking you against others of your occupation and receiving the letter from ATO could also mean an audit would be made. Make sure to get your receipts and justifications ready to lodge an amendment.

Capital Gains

Either you’re a business owner, ordinary trader or investor. You need to check these boxes to protect yourself against wrongly claimed expenses under CGT (Capital Gains Tax):

Look for a loss you would have incurred in selling out your rental property. If you think you are eligible for the main residence exemption then must check the Eligibility for the Main residence exemption, ATO.

Another thing to consider is the swapping, transferring or gifting of the cryptocurrency and the gain or loss arising thereof.

Lastly, don’t forget to include all investment income, including staking rewards, airdrops or yield farming associated with crypto assets

Failing to declare overseas income

Aussies working internationally often forget to pay their Australian taxes. There’s a difference when it comes to being a resident or citizen individual under tax laws. Some people assume simply they don’t require lodging their return, well this can be an alarming situation.

No matter where you work internationally, if you are an Australian resident for tax purposes, you should still lodge an annual tax return in Australia, even if you are living and working overseas at the moment. Let’s see what a foreign income includes:

Your business income

Income earned from an investment

Employment income

Annuities and pension

Gains from trading (capital gain)

Overseas assets

Still in doubt? You can trust us.

Having someone who can handle the difficulties for you is quite a blessing. You can trust us in tax matters as we have sound experience in handling our small business. For this reason, we choose to share the insights with Aussies.

Whether you are an employee or a business owner about the scenarios one can face in amending the tax return mistakes and ways to avoid discrepancies.

FAQs

Making errors in your tax return can lead to various outcomes, including ATOaudits,penalties, or the need to amend your return.

If you discover a mistake in your income tax return, it’s advisable to amend it promptly to avoid potential penalties.

Incorrectly claiming deductions, especially work-related expenses, is a frequent error among taxpayers.

Yes, the ATO may request receipts to substantiate claims on your tax return, especially if they are conducting an audit or reviewing your deductions.

Final Say

For these past years, I have witnessed many common mistakes made in filing tax returns. Following the guide, I have shared, it’s reasonably assured you won’t be encountering any inconveniences in filing, processing or amending your tax returns.

Still, if you are facing any problem regarding tax return or having any trouble regarding the lodging process, you can ask us.

In case, you want to know more? Don’t hesitate to reach out to us.

Read Our Some Of Previous Articles:
(Fringe Benefits Tax)
(Tax Deductions Australia)
(Super Fund Complaints)

Information and statistics for This Post provided by My Tax Daily.