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Greed, arrogance and other deadly tax sins to avoid

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For many of us, preparing a tax return is as painful as having teeth pulled but the rewards can be great. To ease the ordeal, there are five common mistakes to avoid when doing your tax this year.

Mathematical errors (stupidity)

Small errors could result in big mistakes. A wrong number here or a bad calculation there may cost you thousands. So if you do your return yourself then make sure you "measure twice" and avoid any unnecessary headaches.

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Car logbooks (carelessness)

It is the biggest claim made in tax returns but often done incorrectly. If you make a claim for motor vehicle expenses under the logbook method, then make sure you actually have a logbook prepared in the correct format.

It must be for a continuous 12-week period and have been prepared in the past five years.

If you have changed your car or your job duties since you did your logbook, you must prepare a new one.

Rental properties (greed)

The ATO always sees a number of cases of individuals over-claiming expenses including initial repairs, interest on loans that include a private component when the property is used as a holiday home, borrowing costs and depreciation without a quantity surveyor's report.

Conversely, I have also seen a number of returns where the taxpayer simply didn't realise everything that they could claim, particularly land tax and strata levies.

If you have a real estate agent managing your property, then ask them for a summary of income and expenses to make the process easier.

Doing it yourself (arrogance)

Just as most people can change a tyre, most of us have the ability to do our tax ourselves but it usually pays to get an expert to look at it for you.

The last thing you need is a knock on the door from the taxman because you claimed too much.

A registered tax agent knows where the boundaries are in terms of what you can and, more importantly, can't claim. And their fee is tax deductible too!

Omitted income (dishonesty)

This year the tax office will data-match over 650 million transactions and it expects to contact 500,000 taxpayers with discrepancies on their interest, dividend, trust and managed fund income.

This process is quite lucrative as $1.1 billion in tax revenue was generated last year due to audit investigation by the ATO.

Overseas income as well as income from the cash and sharing economies (for example, Airbnb, Uber, Airtasker, Camplify and Car Next Door) are particular areas of focus this year.

You can run from the taxman but you can't hide.

RELATED: Don't hand over details and cash to tax scammers, warns ATO

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Associate Professor Adrian Raftery is the director of Professional and Executive Execution (Domestic) at the Deakin Business School. He is co-chair of the Financial Planning Academics Forum and chairperson of the AIOFP. Previously, Adrian ran an award-winning accounting and financial planning practice in Sydney for more than a decade and also worked at Deloitte and Pannell Kerr Forster. He is a Fellow of the Institute of Chartered Accountants, a Certified Financial Planner, a CPA and a Chartered Tax Adviser. Known as Mr Taxman, Adrian is the best-selling author of 101 Ways to Save Money on Your Tax - Legally!
Comments
Mike
June 22, 2017 1.44pm

Given recent events in the news concerning themselves, the Tax Office are the last people who should be lecturing people on their behaviour and being honest/ethical!

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