While the temptation to get your hands on much-needed cash might be huge, accounting professionals are warning against rushing to file your tax returns from 1 July.
“Don’t jump in too early with this year’s tax returns” – that’s the advice coming from the Institute of Public Accountants (IPA) ahead of 1 July, given the many variables such as COVID-19-related payments, which need to be considered.
According to the IPA, this tax time, many taxpayers will benefit from claiming working-from-home expenses, which could be worth up to $1,500; the low and middle income tax offset (LMITO) worth up to $1,080 per individual; and up to four months of backdated stage 2 tax cuts, which could be worth up to $800 for some.
“We understand that some individuals have been adversely impacted by COVID-19 through loss of employment or reduced earnings, and they will want to get their hands on their refund as quickly as possible,” said IPA CEO Andrew Conway.
The big danger in moving too quickly, however, is the limited pre-fill information which progressively appears well after the end of the financial year.
Mr Conway explained that the ATO receives a plethora of data post 1 July, including from other government agencies, from third-party providers such as financial institutions and from e-commerce platform providers such as eBay, Airbnb, Uber and cryptocurrency exchanges.
“It is no longer just interest, dividends and trust distributions that the ATO will be looking for,” Mr Conway cautioned.
“Gains on property and cryptocurrency transactions, side hustles on e-commerce platforms, contractor services performed in sectors which have been previously found to be non-compliant, derivative trading etc are among the information that the ATO will compare with what has been lodged.
“If someone has any income from these varied sources, then it is even more important not to lodge early until this data has had time to hit the pre-fill records.”
Another reason to hold fire, Mr Conway explained, is that employers will have until 14 July 2021 to finalise single touch payroll data and the ATO will not start processing returns until after 7 July.
“The ATO will also be continuing to look closely at work-related deductions. It has a lot more granular data on what people are claiming, so it is reminding everyone of the three golden rules: you must have spent the money and not been reimbursed; it must relate directly to earning your income; and you must have a record to prove it.
“Our strong message is to wait for the information to become available before you lodge; otherwise, you may end up with an unexpected tax bill and angst down the track. The ATO already amends quite a number of returns post-lodgment. Discrepancies will create reverse workflow and expose taxpayers to interest and/or penalties.
“We recommend not to rush in too early and seek advice from your public accountant if in doubt,” said Mr Conway.