ATO busts tax time myths for business owners

ATO

Tax returns can be a nebulous business, and there are no shortage of get-rich-quick schemes out there trying to get in the ears of business owners at the end of the financial year.

Last year almost 500,000 individual tax returns had to be amended because many people got tripped up by what the Australian Taxation Office is calling “tax time myths”, as assistant commissioner Karen Foat explains.

“Every year we see people tripped up by tax time myths. Unfortunately, this often results in slowing their return down when either they or we realise their mistake as the return is processed,” Foat said in a statement.

“Where it doesn’t delay the initial return, it can result in a surprise tax bill later on.”

Here’s what not to do when filing your 2019-20 tax return:

Early lodgement doesn’t mean early refunds

Contrary to some of the tax advice shopped around by Treasurer Josh Frydenberg last year, early birds don’t necessarily get the tax time worm.

As the ATO explains, pre-fill forms that simplify the process often are not completed until the end of July.

“Since leaving out income can slow your return down, if you are lodging before we have automatically included this information for you, it’s really important that you ensure you include all of the information,” the ATO says.

You cant claim home-to-work travel

Unless you’re required to transport bulky tools or equipment to work because it’s not safe to store those items at your workplace, you cannot claim the home-to-work commute on your tax return.

Even if you’re only heading to the office periodically during COVID-19 and working from home the remainder of the time, you cannot claim your commutes as an expense.

Double dipping is actually illegal

No, we aren’t talking about your mid-winter share plates; this is about your tax expenses, but the same logic applies.

Many people are working from home this year due to the COVID-19 pandemic, and the ATO has brought in a short-cut method to assist taxpayers, which allows an 80-cent flat deduction for each hour worked remotely.

But if you claim under the short-cut method, you can’t double dip by trying to make separate claims for items related to your work from home expenses, such as laptops.

Work related expenses must be … work related

This one is pretty self explanatory: only expenses directly related to earning income are considered to be ‘work related’.

Thankfully, this includes personal protective equipment and hand sanitiser for taxpayers required to be in physical contact with customers.

You can’t pull your deductions out of thin air

While there is a provision that allows taxpayers to claim expenses up to $300 without receipts, that isn’t a free pass to simply claim $300 without having any expenses whatsoever.

The way to get the fastest, stress-free tax return processed is to substantiate expense claims with evidence.

NOW READ: ATO throws lifeline to landlords, confirming it will accept expense claims for empty Airbnbs

NOW READ: Tax-time reminder: Sole traders receiving JobKeeper and JobSeeker must declare payments as assessable income

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