Tax time 2023: six good habits to start now and mistakes to avoid

Tax time 2023 is in full swing with digital data now available via the ATO. Here’s how to build habits to deliver bigger deductions.

Tax time is shifting into top gear as Australians’ returns are automatically loaded with pre-filled data, but mistakes continue to cost people time and money.

Accountants say now is a great time to begin good tax habits and prevent tax return errors – particularly following rule changes in recent times.

Working-from-home deduction requirements are much stricter in 2023-24, just as millions of Australians face smaller refunds because of higher interest income and the end of the $1500 Low and Middle Income Tax Offset, they say.

The Australian Taxation Office says from late July most information from employers, banks, government agencies and health funds is loaded into peoples’ tax returns.

“Once the information we collect is available, all you need to do is check it and add anything that’s missing,” says ATO assistant commissioner Tim Loh.

H&R Block director or tax communications Mark Chapman says up to 45 per cent of Australians’ income disappears in tax, so it makes sense to build good tax habits “as soon as the new financial year kicks in”.

People have until October 31 to lodge their return, longer if using a tax agent. Picture: iStock

“Setting a goal to minimise your taxes makes perfect sense and there are numerous ways to legitimately do it,” he says.

“For example, you can claim the maximum deductions that you are legally entitled to, in relation to work-related expenses and investment properties. Also, you can look at maximising your concessional super contributions.”

Here are six positive tax habits to start today.

1. RECORD EVERYTHING

Rather than play catch-up next June and potentially miss out on handy deductions, people should get into the habit of keeping all invoices, receipts and diaries for tax deductions from July 1, Chapman says.

“It will make the process of preparing your tax return next year so much simpler and less stressful,” he says.

Chapman says at a minimum keep records of work-related expenses, motor vehicle use and hours worked from home.

“Time sheets will do, as will a copy of any rosters, or a work diary,” he says.

“It is important that you keep records for the entire year, not just a four-week period as you might have done in the past.”

2. WORK FROM HOME WISELY

Understand the rule changes that came into force in March and now require hour-by-hour records for time worked at home, and the new deduction amounts and rules for home office expenses.

“If you are working from home, record all the hours you have worked from home for the entire income year,” says dmca advisory accountant Thomas Roberts.

The ATO has information about the working from home changes on its website.

3. DRIVE BIGGER DEDUCTIONS

If you use your car for work-related purposes, understand the rules and consider a more detailed logbook rather than the simple cents per kilometre method.

Most people cannot claim work-related car expenses for travel between home and work, but can for travel between workplaces.

Roberts recommends producing a 12-week logbook of all car use, “if you intend to use the actual method to claim your work- related car expenses, which you should because the alternative cents per kilometre method is only good for up to 5000 work-related kilometres and probably won’t give you the best deduction”.

4. GET HELP

“Using Australian Taxation Office free record-keeping tools such as myDeductions is a great way to keep track of your expenses throughout the year,” Roberts says.

“It has the ability to upload these records tax time to make lodging your tax return easier.”

If uncertain, use a tax agent. “The cost of managing your tax affairs is tax deductible – therefore your out of pocket cost is reduced,” Roberts says.

5. SUPER STRATEGIES

Chartered accountant and Mr Taxman founder Adrian Raftery says starting tax planning early gives people a better chance of bigger deductions.

For example, making regular personal superannuation contributions now is simpler than finding a lot of money in June 2024.

“It’s a lot easier to find $20 per week for the super co-contribution, or put more away over the year for other superannuation thresholds,” Raftery says.

Salary sacrifice into super is another good habit, he says.

6. REMEMBER THE BASICS

Chapman says make sure your bank account details, name and address is up to date, and avoid simple spelling errors.

“If you lodge under different details, the ATO won’t be able to match it with your Tax File Number, and delays will ensue,” he says.

Tax time can be stressful for some, but there are ways to avoid mistakes. Picture: iStock

SIX COSTLY ERRORS

1 Lodging too early and with incomplete records.

2 Incorrectly apportioning work-related expenses.

3 Claiming deductions you cannot prove.

4 Failing to maximise claims for cars, home offices and super.

5 Calculating capital gains and losses incorrectly.

6 Not apportioning private use, such as with holiday homes.

Source: Accountants

Originally published as Tax time 2023: six good habits to start now and mistakes to avoid