Assistant Commissioner Karen Foat said that errors ranged from honest mistakes to people deliberately over-claiming to increase their refund.
A small amount of over-claiming by a large number of individuals adds up to billions of dollars, meaning that essential community services are missing out.
For example, incorrect work-related expense claims have been highlighted as one of the key drivers of the $8.7 billion tax gap generated by individuals not in business.
Here are the top four mistakes to avoid:
- Lodging before all your prefill data is available or failing to report all your income
“People can lodge now, and if they have all of the information they need to do their returns accurately, that’s ok,” Ms Foat said.
“However, we know from previous years that the early birds who lodge in the first weeks of July are far more likely to make mistakes or submit incomplete data. These mistakes may slow down your return, or result in a debt owing to the ATO if we later need to correct the information.
“This tax time will see our sophisticated data-matching systems process an unprecedented amount of information and will track money moving around the economy.
“We will be analysing over 650 million pieces of data from banks and financial institutions, employers, the sharing economy, rental property managers, cryptocurrency exchanges and share registries.
“Failing to declare all your income will result in you ending up with a bill when we later match your data.”
- Claiming the wrong thing
We know that work-related expenses is one area where people commonly make mistakes. To help you work out what you can claim, the ATO has developed 30 occupation guides and accompanying posters for specific occupations (ato.gov.au/occupations).
Remember, to claim a deduction for work-related expenses, follow the three golden rules: You have to have spent the money yourself and not have been reimbursed; the claim must be directly related to earning your income; and you must have a record to prove it.
You can only claim the work-related portion of expenses. You can’t claim a deduction for any part of the expense that relates to personal use.
“Many people rely on advice from friends and co-workers on what is an acceptable claim, and the information may not always be accurate,” Ms Foat said.
“This sees the ATO rejecting thousands of ineligible claims each year for things like gym memberships, travelling to and from work, conventional clothing and the private portion of phone and internet costs.”
- Forgetting to keep receipts
The ATO refuses a large percentage of claims where taxpayers are unable to produce records or receipts when asked.
Even if the value of a claim is below the record-keeping threshold, we may ask you to show how you calculated your claim.
Do away with the shoebox and try myDeductions in the ATO app instead – it’s the easiest way to store your receipts. The deduction details can even be uploaded into your tax return or sent on to your tax agent.
- Claiming for something they never paid for
“We often see people making claims at the record-keeping limit, thinking that the ATO will never question a claim if we don’t require receipts. But you still need to have spent the money yourself and be able to show us how you’ve worked out your claim,” Ms Foat said.
“If you can’t explain it, we won’t accept it, and we may penalise you for failing to take care when lodging your tax return.
“Exceptions to the record keeping rules are there to make things simpler – they do not allow you to claim an automatic deduction up to the specified amount where the money has not been spent. No-one is entitled to a ‘standard deduction’.
“A little bit of over claiming across a lot of people adds up to billions of dollars. No matter how small, claiming deductions you are not entitled to means essential community services miss out.”