Preparing and lodging a tax return would not be amongst the favourite pastimes of most Australians. Nevertheless, it is a duty most citizens must undertake. So why not reduce the stress and cost by being well-informed and organised.
Who knows? By following these tips, you might achieve a bigger tax refund (or at least minimise your tax payable):
Tip 1: Do it on time. Your tax return must be lodged no later than October 31. You can do it yourself for free through the myGov portal. If you don’t get an extension of time through a registered tax agent (RTA) and you lodge your return after that date, you are likely to receive a penalty for late lodgement.
Tip 2: Don’t wait to get caught. If you had an obligation to lodge a tax return last year and you failed to do so, or even if you haven’t lodged one for many years, it’s strongly recommended that you lodge the outstanding return/s voluntarily, rather than getting caught by the Tax Office. That way, penalties will generally be lower and arrangements may be made to pay off the outstanding tax in a manageable way. In fact, in many cases, refunds will be due, so lodging outstanding returns can even be a financially positive experience.
Tip 3: Consider using a registered tax agent (RTA). If you’re not confident about preparing your own return, or you need specialist tax advice, or you’d like an extension of time to lodge your return, you can use the services of a registered tax agent.
Tip 4: Consider using a qualified accountant for more complex work. If your tax affairs are complex, a qualified accountant may be helpful, but the main thing is to make sure that the person or organisation you choose is a RTA. You may wish to use the register provided by the Tax Practitioner’s Board to find a suitable RTA. If you do not have an accountant you may be able to locate a suitable one through a professional body including CPA Australia or the Chartered Accountants Australia New Zealand. Both of these bodies have high minimum levels of experience and qualifications. We also suggest members should speak to their colleagues or family to find out if they have a tax agent or accountant they are willing to recommend.
Tip 5: Be organised. RTAs/accountants generally charge for the preparation of your tax return by reference to the time they spend on it. Therefore, it’s important for you to be well-organised when you meet your RTA/accountant. Taxpayers who accumulate random bits of paper in the proverbial “shoe box” to justify their claims, or who have insufficient evidence of the claims they wish to make, will end up paying far more in professional fees than they should, will pay more tax than they need to or will receive a tax refund which is lower than it should be.
Tip 6: Understand fees and charges. There are hundreds of options available when choosing a RTA/accountant. Some of these service providers advertise in the Defence newspapers. When choosing a provider, make sure they are familiar with the tax deductions available to ADF members and make sure you understand their fee structure (which should be a flat fee, not a percentage of any tax refund to which you’re entitled).
Tip 7: Watch out for investment spruikers. Some RTAs/accountants are also licensed financial advisers, mortgage brokers and real estate promoters. Some will even offer to do your tax return for free, or at a heavily discounted rate, in return for your agreeing to a “financial health check” or the purchase of investment products from which they will earn a commission or other sales incentive payment. You need to be aware of the motives of such advisers before you engage them to prepare your tax return. They may not be acting in your best interests.
Tip 8: Use the ATO’s special ADF Tax Guide. The Australian Taxation Office (ATO) provides a special section in its website for ADF members. This section details all the work-related tax-deductible claims that may be made by ADF members against their salary income. These include car/travel, clothing, mess fees, self-education, physical training/fitness and telephone/home office.
Tip 9: Consider a home office claim. This year during the Covid-19 pandemic, be aware of the more liberal arrangements for claiming tax deductions arising from working at home. Our previous newsletter has a detailed article about this.
Tip 10: Keep your receipts. You should only make claims that are genuine and that you can prove to be so by providing documentary evidence (e.g., invoices, log books). Our tax system is based on the concept of ‘self-assessment’. That is, it’s an honour system, so you won’t necessarily be asked to provide evidence of your claims. However, many taxpayers are selected at random every year for audit and taxpayers who make larger claims are often flagged for closer scrutiny. Therefore, keeping your evidence of claims is very important. Making false or undocumented claims can lead to substantial fines and regular audits of your tax affairs in following years.
Tip 11: Pay attention to the detail. Generally speaking, your income from interest, dividends and salary (including tax deducted by your employer), will be known to the ATO before you lodge your return. This is called “pre-filled”. However, you should check that the “pre-filled” information is correct and up-date it as necessary. You should also ensure that any rental income, or capital gains that you have made from, for example, the sale of an investment property or shares, are properly disclosed. This process can be quite technical, especially when it comes to claiming deductions against rental income, so you may need to seek advice from a RTA/accountant before completing your return.
Tip 12: Watch the ADF Tax video. If you’d like to know more about tax, go to our website at which you’ll find educational material on taxation, including our short video Pay Your Taxes (4 minutes). These are designed to help ADF members to better understand the tax system, including their rights and obligations.
Tip 13: Be sensible and sleep well at night. As with all things in life, honesty and moderation are the key issues when it comes to your tax affairs. Sleeping at night, knowing that your tax affairs are in order, is more beneficial than a few extra dollars in your pocket from a dubious claim or undisclosed income.