ATO reminder to beat tax deadline and avoid common mistakes

One week before tax time ends, investors and other individuals are being urged to act fast and smart or face a financial sting.

A last-minute rush is under way by Australians to file their tax returns before October 31’s deadline to avoid potentially-painful penalties, and there is a new warning for rental property investors following a spike in deductions.

New figures from the Australian Taxation Office show more than 9.5 million people have lodged so far, slightly more than the same time last year following a surge of 1.6 million returns since late September.

More than 14.8 million are expected to file a tax return for 2022-23, although millions get a deadline extension by registering with a tax agent before October 31.

Missing the deadline could mean a $313 penalty unit for each period of 28 days late, plus interest.

The ATO has noted a sharp rise in interest deductions from rental property investors this year after interest rates soared, and assistant commissioner Rob Thomson said interest claims were the largest contributor to a $1 billion rentals tax gap caused by incorrect reporting from landlords.

“Why we are focused on these is because you can only claim on the loan part that is used to purchase a rental property and earn the income,” Mr Thomson said.

“We know that when some people take out an investment loan or refinance, they might also look to cover some private expenses such as buying a family car or going on a holiday.

“We want to remind them to apportion their interest expenses.”

Mr Thomson said the ATO was also focusing on capital gains tax and work-related expenses, particularly working-from-home expenses.

Accountants say some changes this year caused confusion and prompted people to delay their tax returns. The end of the government’s Low and Middle Income Tax Offset shrunk individuals’ returns by up to $1500, fewer people were working from home, and there are new working-from-home deduction methods.

ATO assistant commissioner Rob Thomson says using myTax is simple. Picture: Supplied

Accounting group HLB Mann Judd said taxpayers who were working from home were being caught off-guard by changes.

HLB Mann Judd Sydney tax consulting director Bill Nussbaum said a simplified WFH shortcut method of 80c per hour was no longer available, while the common fixed rate method of 67c per hour now included more costs so “some may inadvertently claim expenses twice”.

“A lot of people won’t be aware of the changes, which is concerning given the ATO has indicated work-related expenses are an area of focus this year,” he said.

“People should familiarise themselves with the changes that impact them, and if they are still unsure, seek advice from a qualified tax professional.”

Chartered accountant and Mr Taxman founder Adrian Raftery said some people delayed their tax returns because they did not understand the LMITO and WFH changes.

“Also there is an increase in interest income with people now starting to get some decent returns on their savings again,” he said.

Dr Raftery said people with a tax shortfall who lodged late could face an interest charge, “which is currently a whopping 11.15 per cent”.

“Whatever you do, don’t try to fudge tax deductions and claim stuff that you are not eligible to claim purely to try and get a bigger refund than what you are legally entitled to,” he said.

“The ATO’s systems are pretty sophisticated these days so you could expect the follow-up down the track and some pretty stiff penalties for noncompliance.”

The ATO’s Mr Thomson said people with simple tax affairs could do their own return using the myTax software via myGov in “less time than mowing the lawn or folding laundry”.

“Go to ato.gov.au/occupations and check out the 40 occupation and industry specific guides that can help you understand what you can and can’t claim,” he said.

“The due day for payment is 21 November, regardless of when you lodge.”

Originally published as ATO reminder to beat tax deadline and avoid common mistakes