Common tax mistakes costing you $500 as ATO issues new warning

New research has shown many are missing tax deductions, with one in three Aussies only realising their mistake. See the list and latest ATO advice.

As Australians rush to get their tax returns filed, many are missing deductions that could be worth more than $500 — and the tax office has warned workers to stop claiming private expenses as work-related.

With cost-of-living pressures still high, the Australian Taxation Office (ATO) has advised that the best time to lodge returns is from late July.

“We often see mistakes in early July as people rush to get their tax return done. Waiting allows us to collect information on your wages, bank interest, private health insurance, dividends, and government payments,” an ATO spokesperson said.

“We then pre-fill this into your tax return when you lodge online using myTax. All you need to do is check your info, add anything that’s missing, and include any deductions.”

The Australian Taxation Office (ATO) has advised that the best time to lodge returns is from late July. Picture: iStock

New research from H&R Block Australia has also revealed 66 per cent of myTax returns contained missed claims worth more than $500.

The research found that 32 per cent of Aussies discovered they missed deductions after lodging their return, meaning 1 in 3 Australians only realised they’d missed deductions after lodging and those entitlements may then never be recovered.

Only 18 per cent were confident in what they can and can’t claim.

Mark Chapman, H&R Block Australia Director of Tax Communications, shared the five most commonly missed deductions when it comes to tax time.

“If you’re a member of a professional or trade association as part of your work, you can claim a deduction for the amount you pay in subscriptions,” he advised.

“This also covers union fees if you’re a member of a trade union, as well as subscriptions to trade or professional magazines or – if you’re an investor – subscriptions to investment magazines, such as those focusing on shares or investment properties.”

Those with rental properties can claim a deduction for the interest element of the mortgage, but there are other smaller deductibles available too.

These include: gardening and lawn mowing, bank fees, pest control, security patrol fees, bookkeeping/secretarial fees, repairs, end of lease cleaning costs, letting agent fees (including marketing), strata title costs, land tax, credit checks on prospective tenants, advertising for tenants, hiring a debt collector to collect rent arrears, getting new keys cut, servicing items such as hot water heaters, smoke alarms, airconditioning systems and garage door mechanisms, and quantity surveyor for preparing a depreciation report.

Mark Chapman, H&R Block Australia Director of Tax Communications, shared the five most commonly missed deductions when it comes to tax time.

Anyone who paid for a tax professional to complete last year’s tax return can claim a deduction for the cost in this year’s return too.

“Better still, you can also claim a deduction for any travel costs you incurred in getting to and from your agent. If you’ve paid for any tax advice during the year, that too is deductible,” Mr Chapman said.

“And if you pay for insurance premiums against loss of income, those amounts are tax deductible. But be careful; that doesn’t include life insurance, critical care insurance or trauma insurance. It also excludes policies paid for out of your superannuation contributions.”

The other most missed tax deduction is superannuation.

“You can make additional concessional contributions up to your concessional contributions cap, currently $30,000, and claim an income tax deduction for doing it,” he said.

“This means you can tax effectively top up your super, provided you don’t breach your concessional contributions cap.

The super guarantee payments made by your employer, as well as any salary sacrificed contributions, are also included in your concessional contributions so effectively the amount you can pay into super through a tax deductible contribution is the difference between those other contributions and the $30,000 cap.”

Superannuation deductions are commonly missed during tax time. Picture: iStock

Mr Chapman’s comments come as the ATO warned Australians to stop claiming private expenses as work-related.

“To claim a deduction for a work-related expense, you must have spent the money yourself and not been reimbursed, the expense must directly relate to earning your income and you must have a record, usually a receipt, to prove it,” an ATO spokesperson advised.

“There must be a close connection between the expense, and the tasks and duties you complete for your job. If you incur the expense for both work and private purposes, you can only claim a deduction for the work-related portion.

“Expenses like everyday clothing, meals, drinks and shelter are private expenses and can’t be claimed as work-related expenses; even if your employer requires you to purchase these items.”

Reasearch from Officeworks confirmed the ATO’s warning, with 43 per cent of Australians wrongly thinking $300 could be claimed without any actual expenses and 35 per cent mistakenly believing commuting from home to work is deductible.

The research also revealed that myths and common mistakes are still holding Australians back from maximising their tax returns, with 32 per cent admitting they didn’t claim deductions they were entitled to and 28 per cent saying they lost receipts and therefore claimed less.

The ATO advised that if you prepare your own tax return, the deadline to lodge it is October 31, and if you use a registered tax agent you may have longer, but the return should be on their books by the end of October.

The majority of taxpayers lodge their tax returns on time — the ATO’s five-year performance trend shows on-time lodgements are consistently within the range of 82 to 84 per cent.

Those who do leave it to the last minute could be fined up to $1650 if they miss the deadline, with a current charge of $313 for every 28-day period.

However, if a tax deductible item is missed after a ta return has been lodged, there is still hope.

“It might not really be too late,” Mr Chapman said.

“You can amend your tax return up to two years after its original lodgement day, so you have plenty of time to correct any mistakes.”

Originally published as Common tax mistakes costing you $500 as ATO issues new warning