‘Not a race’: Why the tortoise beats the hare to a big tax refund

When it comes to tax, you want to be a tortoise, a leading expert says.

When it comes to tax, you want to be a tortoise, a leading expert says.

Australians should avoid rushing towards their tax return this year, according to a leading tax expert, who says it pays to be the “tortoise, not the hare” when July 1 rolls around.

CPA Australia spokesperson Gavan Ord says Australians who take their time to prepare all their tax evidence and wait for the Australian Taxation Office to pre-fill any income will have an easier experience.

“With cost-of-living pressures and the desire to ‘just get it done’, many taxpayers will likely submit their returns early, but doing so risks making costly mistakes,” he said.

“The best tip for tax time is to walk, don’t run; it’s not a race.

“Don’t be the first person at your accountant’s door, because chances are you won’t have all of the information you need to properly do your tax return.”

Rushing doesn’t pay

Australians, sometimes egged on by government ministers, often rush to get their tax returns done, believing that they’ll get any refund they’re owed faster if they move quickly.

But as the tax office has repeatedly said, those who file before automatic pre-fill information has been submitted by their employers are far more likely to face hurdles.

That includes the ATO flagging your return for audit, which can put any return in jeopardy.

Ord said that could mean waiting until the end of July to do your taxes, or even into August.

“Check that your end-of-year income statement from your employer says ‘tax ready’ and that your private health insurance, dividend and interest information is available,” he said.

“Otherwise, it could include unfinalised data, and you may need to amend your tax return and pay additional tax.”

Ord’s advice is timely because the tax office says it’s specifically targeting Australians this year that fail to declare all their income in their returns.

“By lodging in early July, you are doubling your chances of having your tax return flagged as incorrect by the ATO,” ATO assistant commissioner Rob Thomson said recently.

“We know some prefer to tick their tax return off the to-do list early and not have to think about it for another 12 months, but the best way to ensure you get it right is to wait for just a few weeks to lodge.”

ATO eyes on expenses 

Similarly, the ATO also has its eye on workers claiming expenses incorrectly this tax time, Thomson said, with a specific focus on how work-from-home (WFH) costs are included in returns.

As previously explained, the ATO has moved to a new method for WFH expense claims that allows people to use a so-called fixed rate method of 67 cents per hour – though you need timesheet records.

Many taxpayers struggled with the new method last year, partly because it was announced midway through the year.

Thomson said the key for workers this year is keeping “good records”, which means recording when you’re working from home in real time (not in retrospect when tax time rolls around).

“Deductions for working-from-home expenses can be calculated using the actual cost or the fixed-rate method, and keeping good records gives you the flexibility to use the method that works for you, and claim the expenses you are entitled to,” Thomson said.

“Copying and pasting your working-from-home claim from last year may be tempting, but this will likely mean we will be contacting you for a ‘please explain’.”

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