The End of Financial Year is just weeks away — but while most of us know June 30 is a key date, there’s a big and potentially costly mistake many Aussies make at tax time.
Plenty of workers rush to lodge their tax returns as soon as possible, either in the hope of scoring a nice refund as quickly as possible, or due to fear of falling foul of the tax man.
But it turns out it’s actually far better to hold out.
That’s according to Ben Johnston from leading Sydney accounting firm Willett Johnston Partners, who said taxpayers usually had far longer to lodge their tax return than many realised.
“If you lodge a tax return yourself via myTax or via paper, which is becoming less and less common, you have until October 31, 2019 to submit your tax return,” he said.
“If you engage a tax agent to lodge one on your behalf, generally most people have until May 15, 2020 to lodge because we get a longer extension.
“But it can be case-by-case, depending on your lodgement history, so if you have been a serial non-lodger or late lodger in previous years, sometimes you can’t enjoy that extended deadline even if you use an agent.”
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And while many people are tempted to lodge as early as possible on July 1, Mr Johnston said the Australian Taxation Office won’t start processing tax returns until July 5, and won’t begin issuing refunds or assessments until after July 16.
“Even if you get in nice and early, you’re not going to see your refund for at least two weeks anyway,” he said.
“The general turnaround is 10 days between lodgement and refund but that’s the quickest turnaround — it can go up to 28 days.”
Another key date to note is July 14, which is the latest point Australian employers can give employees their PAYG summary or group certificate.
That means even the most organised taxpayer might be stuck waiting for their summary for two weeks into the new financial year.
But perhaps most importantly, Mr Johnston said lodging your tax return too early could land you in hot water.
That’s because these days, the ATO uses data matching to automatically add the bulk of your income and other financial information to your return.
It means that when you start lodging your return online via myTax — or when an agent starts to lodge it on your behalf — key information regarding your salary, health fund, dividends, interest and the sale of things like property or shares is usually already there waiting — although it takes time for all of that information to become available.
If you lodge your return earlier, you run the risk of making a glaring omission.
“We are finding a lot of people try and rush in and do their returns early, but … we are encouraging people to wait until the end of July to early August, once most of the information about health funds, dividends, interest and payment summaries have been added,” he said.
“If you rush in and do it in the first week, there’s every chance you could omit details regarding your income or private health cover, but if you wait a month or so, it will be available automatically.
“It happens a lot that people forget they’ve earned interest on an account, and then two months later they get a letter telling them they’ve failed to declare all their income by lodging their tax return without waiting for all the information to arrive.”
It’s advice echoed by Etax.com.au senior tax agent Liz Russell, who urged taxpayers to take their time.
“Don’t rush in July to try to get it through because if you haven’t got all of your ducks in a row, suddenly a month down the track you realise you’ve missed something and have to do an amended return, or you forgot to claim something and you’ve done yourself a disservice,” she told news.com.au.
Meanwhile, from July 1, 2017, tax payers have been able to claim super contributions as a tax deduction.
To be eligible, the money must be in your super fund by June 30, and you must notify your fund in writing that you intend to claim a tax deduction by filling out a form available from the ATO website.
But Mr Johnston said many taxpayers didn’t realise the rules had changed and were failing to take advantage of the rule change as a result.
He said there was a “degree of urgency” in ensuring the funds arrive in your super account by the end of the month, and recommended taking action by June 20 at the latest.
Mr Johnston said ten million workers were set to receive a “generous” tax offset in their tax returns worth up to $1080 a year provided the Coalition’s proposed tax package gets the green light by the end of June.
WHAT YOU MUST DO NOW
If you haven’t already, now is also the time to get all your documents and tax-related expenses together in one place.
It’s also the time to book an appointment with your accountant if you plan on using one, make last-minute purchases you hope to claim, such as charitable donations or work-related items, and top up your super.
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The Morrison government’s tax cuts are now in limbo with One Nation signalling its opposition to the plan.
Senator Pauline Hanson has listed a series of demands, upon declaring she won’t support the full tax relief package at this time, calling on a coal fired power station to be built with the money instead.
With the Coalition like to have 35 senators in the senate, it will need at least four of the six crossbenchers to pass the plan in full, with Cory Bernardi likely to back the package, while Jacqui Lambie and the Centre Alliance yet to decide.
Image: News Corp Australia
Originally published as Big tax mistake Aussies are making