It’s that time of the year again: time to submit your Australian tax return! At the same time, it’s crucial to keep in mind a few precautionary tips that will undoubtedly come in handy in maximising the potential tax returns.
This year’s Australian Taxation Office (ATO) will focus on getting all facts correct and all compliance met, so prepare yourself accordingly.
The blog provides all the essential do’s and don’ts to help you see through the 2025 tax seasons without getting stressed and messed up.
The Essential Do's For A Smooth Tax Season
1. Be Thorough In Your Documentation
Keeping almost all records is not only good practice; it’s a must. The ATO requires that you declare every source of income, big and small—take it from them: If you miss anything out, they might audit you. Don’t forget to keep store purchase receipts and accurately maintain a logbook of work activities and any potential deductions.
Professional tax advice fees are deductible, so consider it an investment for your future! Keep in mind that, above all, maintaining a record is your only protection from ATO inquiries, and it makes sure you are claiming every piece of deduction you are entitled to.
2. Claim Appropriate Work-Related Expenses
You can claim deductions for work-related expenses that you have paid for and have not been reimbursed.
These include:
- Uniforms and protective gear.
- Work-related phone and internet expenses.
- Union fees and subscriptions.
- Travel between worksites or client locations (not including commuting from home to work).
Always ensure your claims are reasonable and supported by evidence, such as receipts or invoices.
3. Handle Vehicle Expenses Correctly
Vehicle expense claims require meticulous attention to detail. The ATO provides two methods for claiming these expenses, but regardless of your chosen method, accuracy is paramount.
You must clearly distinguish between business and private use, maintaining detailed logbooks or diaries to support your claims. Only the business portion is deductible, and you need to justify the percentage claimed with proper documentation.
4. Time Your Purchases Strategically
Strategic timing of work-related purchases before the financial year’s end on June 30 can significantly impact your tax return. Items costing £300 or less can be claimed as immediate deductions, provided your employer hasn’t reimbursed you. The ATO’s myDeductions app offers a practical solution for tracking these purchases throughout the year.
5. Seek Professional Guidance
Tax legislation is complex and constantly evolving. Professional income tax accountants possess the expertise to guide through these complexities, ensuring compliance while maximising legitimate deductions.
They can interpret tax rules in practical terms and help you understand what is and isn’t deductible in your specific situation.
The Critical Don'ts For A Smooth Tax Season
1. Don’t Rush To Lodge Early
Despite the temptation to file early, especially given current cost-of-living pressures, rushing your tax return can lead to costly mistakes. The ATO’s pre-filling system takes several weeks to update with complete information.
Early lodgement often results in amendments later, creating unnecessary complications and potential scrutiny. Waiting for all pre-filled information ensures accuracy and reduces the likelihood of future amendments or ATO inquiries.
2. Never Exaggerate Claims
The ATO employs sophisticated data analysis to create occupation-specific profiles, enabling them to identify suspicious claims. Claims disproportionate to your employment category or financial investments will trigger additional scrutiny. Maintaining honest and accurate claims prevents unwanted attention and potential penalties.
3. Handle Rental Property Claims Carefully
Rental property claims are under intense ATO scrutiny, particularly regarding renovations versus repairs. Understanding the distinction between deductible repairs and capital improvements is crucial. Repairs addressing wear and tear are immediately deductible, while improvements must be claimed through depreciation.
Mortgage interest claims and rental income declarations require particular attention to avoid compliance issues. Special care must be taken when claiming mortgage interest where loans have been used for both property and private purposes, as only the portion related to the rental property is deductible.
4. Disregard Unreliable Tax Advice
Social media platforms are flooded with tax advice of varying quality. Despite high follower counts, many content creators lack proper tax expertise. Their attention-grabbing claims about maximising returns often lack substance and can lead to compliance issues.
Rely on qualified income tax accountants rather than social media influencers for tax advice. The ATO regularly identifies and addresses misleading tax advice circulating on social media platforms, particularly on YouTube and TikTok.
5. Guard Against Tax Scams
Tax season attracts numerous scammers attempting to exploit taxpayers. These fraudsters often impersonate the ATO through phishing scams, using urgent messages about supposed financial gains or penalties to prompt hasty actions.
Maintaining vigilance against these schemes is essential to protect your financial information and assets. Scammers frequently adapt their tactics, combining traditional methods with new techniques to target unsuspecting taxpayers. They often create a false sense of urgency to encourage quick, poorly considered responses to their fraudulent communications.
Simplify Your Tax Season With Expert Help
Ready to make tax season stress-free? At KPG Taxation, our expert team ensures your tax return is accurate, compliant, and maximised for deductions. Whether you need help with complex claims or avoiding common pitfalls, we’ve got you covered. Let us simplify the process and save you time—book your consultation today!
