Why July 1 is too early to file your tax return in Australia

You may be eager to get that refund, but filing your tax return on July 1 could land you in serious trouble with the tax office.

The lure of a $1080 tax cut, available to millions of Aussies this financial year, might entice you to do your taxes early this year.

But rushing in too quickly could see you lose out on thousands, and put you in the crosshairs of the Australian Taxation Office.

The ATO sees lots of mistakes in early July, a spokesperson said, with people forgetting to include income from banks, dividends from shares, sharing economy platforms and cryptocurrency exchange.

“This information will be automatically included in your tax return by the end of July,” they said.

“To avoid mistakes and refund delays, it’s best to wait for this information to be automatically included. If you want to lodge earlier, you must take care to manually add all your income.”

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Don’t be too eager to file as you may put in the wrong information and be audited or fined by the ATO. Picture: Getty Images

A word of warning too, the focus areas for ATO for individual’s tax affairs this year are work-related expenses, rental deductions, and capital gains from cryptocurrency, property and shares – so make sure you declare it all.

Understandably, individual taxpayers often want to get early access to their tax refunds but lodging early is a common mistake, Moore Australia Tax Committee chairman Davide Costanzo said.

“This means the ATO systems haven’t had a chance to prefill their tax return data. Often this leads to income being misreported resulting in ATO reviews or audits later,” he warned.

“We expect more people may want to lodge early this year, because of the retrospective reduction in individual tax rates. The new rates applied from July 1, 2020, but were only delivered in part when the PAYG withholding tables were updated, midway through the financial year. This means more people will potentially receive refunds this year.”

Don’t be early, but also don’t be late with tax return

While you shouldn’t lodge your tax return too early, equally you shouldn’t miss it altogether.

One in four Aussies don’t complete their tax return every year, according to Officeworks research.

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Many Aussies plan to save any money they get back in their tax return. Picture: News Regional Media

Mark Chapman, director of tax communications at H&R Block, said Aussies are set for a bumper tax return, due to the low and middle income tax offset.

“The low and middle income tax offset is also received through your tax return. If your taxable income is up to $126,000, you will get some or all of the low and middle income tax offset. Basically, if your income is less than $37,000, you will receive $255,” he said.

“If your income is between $37,001 and $48,000, the tax offset will increase steadily to $1080. Between $48,000 and $90,000, you will get the maximum of $1080. Earn more than $90,000, and the offset gradually phases out, disappearing after $126,000.

“You must lodge your tax return in order to get the offset.”