Some common mistakes made on income tax returns

The Australian Taxation Office reports that about 11.8 million individuals lodge tax returns a year; however, some make common errors.

Examples of these are:

• Where a taxpayer uses a car in the course of earning income, they may be entitled to claim deductions for some of the costs. If a logbook is maintained check for the following:

  • A logbook must be kept for a continuous 12-week period and must be retained for five years.
  • Each business journey must be entered to show the day the journey began and ended. The log book must record the car’s odometer readings at the start and end of the journey, how many kilometres the car travelled and why the journey was made.
    
  • Each record must be made at the end of the journey, or as soon as possible afterwards.

• Common mistakes made with car claims include:

  • A lack of evidence to support the claims,
    
  • Errors in calculating the business percentage
    
  • Deductions being incorrectly claimed for the costs of travel between home and work.

• Expenditure on clothing and its maintenance is generally considered a private expenditure and therefore not deductible under the Tax Act.
  
  In some cases, expenditure on certain types of clothing may be deductible and can apply to the cost of buying or replacing clothing, uniforms and footwear.

  A deduction may be available if:

  • It is protective clothing, or
  • It is a uniform and it is compulsory for work, or
  • It is a non-compulsory uniform that has been entered on the Register of Approved Occupational Clothing.

• Tax deductions for the costs of washing, drying or ironing clothes are only available for clothing that falls into one or more of the above categories.

  Common mistakes include:

  • A lack of clear documentation to support the claim, particularly dry cleaning,
  • Making claims for clothing expenses that do not meet any of the criteria to qualify for a deduction
  • Lack of demonstration of how the clothing relates to earning income.

• Tax deductions are available for the costs of self-education.

• Small & General Business Break

• Education Tax Refund

There are complexities involved in completing an Australian income tax return, so it is recommended that taxpayers engage the services of an ARW Chartered Accountant.