Tax could not be more confusing for a vast majority of us. Even when we think we have a handle on things and can lodge our own returns through MyTax, along comes a scenario that makes us wonder if we actually know anything at all. To prevent you sweating the small stuff, we asked taxation experts - Mark Chapman, Director of Tax Communications at H&R Block and [Melissa Browne] CEO of accounting firm A&TA - our silliest tax questions so that you didn't have to. You're welcome.
1. What is the latest date I can lodge my tax return?
If you do your own tax you have until October 31 that year, any later than this and you may cop a fine. However if you use an accountant (who's a registered tax agent) they can lodge on your behalf often as late as May 15 the following year - that's right, almost an entire year after June 30. This comes in handy if you know you'll be expecting a sizable tax bill and will need months to save up for it, or you need more time to get your receipts in order (if you're really that unorganised... no judgement!).
2. What happens if I don't lodge a tax return?
No the police won't start banging down your door, which will no doubt give you a false sense of security that you're in the clear, but the ATO will eventually catch up with you (may even be years later) and has the power to force you to lodge or issue you a Failure To Lodge (FTL) fine for not doing so.
"Failure to Lodge penalties amount to $210 for every 28-day period that the return is late, up to a maximum of $1,050 (plus interest on any unpaid tax)," explains Mark.
If you're a repeat offender the ATO can issue you a default or estimated Notice of Assessment, based on the information they already have about you.
"As a default assessment won't include any deductions, the numbers the ATO comes up with are highly unlikely to be favourable to you," he adds. "If all that fails, they can actually prosecute you!"
3. I earnt less than the $18,200 tax-free threshold, do I still need to lodge a return?
"Not necessarily, but if you've had any tax deducted from income you've earned you'll definitely want to," says Melissa. This way you can get back the tax which had been taken out as a precaution in case you went over the threshold. Cha-ching! Think of it as a forced savings account that just paid dividends.
Mark adds: "If you run a small business as a sole trader, you need to lodge even if the business earned less than $18,200. There are quite a few other situations where you may need to lodge, which are outlined by the ATO in more detail."
4. I got a big tax bill and can't pay by the due date, now what?
If you ended up owing the ATO money and you were not prepared for it do not stress, the ATO is pretty flexible when it comes to recouping its owed money. As long as you have solid tax compliance history you can set up a payment plan and pay back the bill via installments which you can afford. You don't even need to call the ATO and wait in a cue listening to easy-listening music because it's all online now.
If you don't already have an account sign up to MyGov then link your account with the ATO (this is very self-explanatory once you're in), then follow the steps to set up a plan. You input how much you want to pay, and what installment you'd like to pay in - so weekly, fortnightly or monthly.
If you're old-school though, you can set up a payment plan over the ATO's automated phone service, just call 13 28 65 and follow the prompts.
5. I lived overseas this financial year so I don't have to lodge a return, right?
Not exactly. Even if you lived overseas for most or all of the financial year, and therefore didn't make any Aussie dollars, you still can't get away with not lodging a return. Instead, you will need to submit a non-lodgement advice form. What this does is alert the ATO to the reason why you don't need to lodge a tax return that particular financial year and is important to do, especially if you been regularly lodging returns prior to this. The ATO will check this is correct, before giving you the all clear.
If you're still confused about whether or not you need to lodge a return, try the ATO's 'Do I Need to Lodge a Tax Return' tool.
6. Can I still claim a deduction if I lost the receipt?
Many of us think we can fudge our way through deductions especially as the ATO doesn't require upfront proof for items totalling under $300 (that being you can claim that amount without showing them receipts for those items). However, should the ATO conduct an audit on you, you will need the proof to back up those claims and that means having receipts. But what happens if one goes missing - and not just the one for ball-point pens, the one for the new printer.
"It depends what you're trying to claim. If it's an internet or phone claim your provider has all the records you need," says Melissa.
Mark echoes these thoughts: "You may still be able to make a claim if you can prove the money was spent on a deductible item by some other means, such as a bank or credit card statement."
In other words, if it's on your statement you're good to claim, however if you paid by cash you're usually fresh out of luck.
7. I made a genuine mistake on my return, and the ATO has flagged it. Now what?
"The ATO will usually levy a penalty where you get your return wrong and the ATO highlights the error," explains Mark. "If the error is a result of a mistake, they may remit the penalty down to the lowest level (25 per cent of the unpaid tax, if any) or – if you make a compelling case and have a good previous compliance history – they may even remit the penalty altogether. This is an area where a tax agent will generally be able to help get you the best - least expensive! - outcome."
8. I remember a deduction I want to claim on my return, but I have already lodged. Can I still claim it?
"You have two years to go back and amend a previous year's tax return either through your tax agent or by MyTax," says Melissa. "So if you forgot a claim from last year you can amend that year but you'll miss out if it was five years ago."