Five tax time FAQs answered

Tax law is lengthy, confusing, and the penalties for getting it wrong can be stiff. Yet according to CPA Australia's tax expert, Elinor Kasapidis, "For some groups of taxpayers over 90% of returns are wrong."

To help you get a handle on tax time, we answer five common FAQs. If in doubt, head to a registered tax agent for information relating to your situation.

As Kasapidis warns, this year will see the Australian Taxation Office (ATO) "getting out its red pen and scrutinising claims carefully".

1. Can I use digitised receipts instead of paper?

Yes. The ATO says you're not required to keep your original paper receipts as long as you've kept electronic copies that are a true and clear reproduction of the original.

You can take photos of receipts and save them onto your mobile device. Photos must show the:

• name of the supplier
• amount of the expense in the currency it was incurred
• nature of the goods/services
• day you incur the expense
• date of the receipt.

If you decide to go digital, regularly back up your records and keep a copy of the photos so you can substantiate claims if necessary.

2. What if I make a mistake in my tax return? How do I fix it?

If you need to amend a tax return because, for example, you left out income or didn't claim an expense, the ATO advises to wait until you receive notice that your original tax return has been processed.

From there, you generally have two years to submit an amendment.

Regardless of how you lodged your original tax return, you can request an amendment through the ATO's online services through your myGov account or the ATO app.

3. What happens if I haven't lodged a tax return for a few years?

If you haven't earned above the tax-free threshold of $18,200 technically speaking you don't need to lodge a tax return though you need to send ATO a "non-lodgement advice" to the ATO.  The form for this is available through ATO online services via the myGov portal.

If you've earned over $18,200 each year, old returns dating from 2016 can be completed online using the ATO's myTax service.

It may be possible to complete simple tax returns from 2014 and 2015 this way though eligibility requirements apply.

If you decide to use a registered tax agent (who can put in a good word for you with the ATO) you need to be on their books by October 31.

The bigger issue is whether you'll cop 'failure to lodge' (FTL) penalties.

These can be as high as $275 for every 28 days your tax return is overdue, up to a maximum of $1375.

If you are owed a refund, come out square with your tax, or you've only missed one tax return, FLT penalties aren't usually applied.

If you owe a tax debt, you can apply to have FTL penalties wiped or reduced. Requests need to be in writing and you'll need a decent excuse.

Don't fall into the trap of not lodging a tax return because you can't afford to pay a tax bill. You can request a payment plan.

The main thing is to get overdue returns to the ATO.

Dragging the chain could make you the target of a tax audit, or worst case, attract charges of tax evasion.

4. Is an 'instant refund' a good idea?

Most refunds are processed by the ATO within two weeks.

If you need the money sooner, there are tax agents who offer instant tax refunds, which can see a refund land in your bank account in as little as one hour.

But there's a catch.

Tax refunds are paid by the ATO. So-called instant refunds are really a short-term loan from a tax agent, and they can be expensive.

As a guide, mytaxrefundtoday.com.au charges $99 for an instant tax refund of $300 to $500.

Etax Accountants estimates you can lose 20% of your refund in fees and charges for an instant refund service.

The upshot is that you're likely to pocket a lot more if you wait a fortnight.

5. Should I pay my tax agent upfront or have the fee deducted from my refund?

Some tax agents won't lodge your tax return until you've paid their fee (which is normally tax deductible the following financial year).

Others offer a 'fee from refund' option. You pay nothing upfront, but the tax agent's fee is deducted from the refund you receive.

It's a service that comes at a cost - either a fixed dollar fee, often around $30. Or you may be charged a percentage of your refund.

Either way, paying upfront will work out cheaper, and leave you with 100% of your refund.

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