Common Mistakes Not To Make On Your Tax Returns
Mistakes can mean that you will pay too much tax or get less of a tax refund when you submit your tax return this year.
Here are a list of mistakes to avoid
Omitting income - this year the Tax Office will data-match over half a billion transactions and expect to contact 400,000 taxpayers with discrepancies on their interest, dividend, trust and managed fund income. This process is quite lucrative and the tax office will raise in excess of $330 million in tax revenue. So make sure you declare all income including overseas income and capital gains.
Car log books - if you are intending to make a claim for motor vehicles expenses under the log book method then you must have a log book prepared. The secret to maximising your deductions is to keep a log of your busiest - continuous 12 week period of the year. So when presenting your log book to your accountant, show the busiest period - don’t average your 52 week log out. It will cost you money.
Note that if you have changed your car or your job duties since you did your log book then you must prepare a new one.
Not lodging on time - If you have been slack and haven’t lodged previous years tax returns on time, get them in as you could be costing yourself thousands in unclaimed refunds. Alternatively if you are in a tax payable position, you could be hit with penalty interest charges that can cost you thousands – as general interest charges are backdated and calculated daily.
In addition to this, the Tax Office will most likely give you failure to lodge your tax return on time fine of up to $550 for each late year.
Tax Tips for property Investors
So far this year we have come across dozens of scenarios where property investors have taken out new loans or refinanced existing loans throughout the year who are making common mistakes which could have cost them thousands of dollars in tax deductions.
Particularly those who have paid mortgage insurance, break costs from old loans and establishment costs from new loans.
Let’s start from scratch.
If you established a loan, all loan establishment costs including:
- Loan establishment fees
- Title search fees
- Mortgage broker fees
- Valuation fees
- Lenders mortgage insurance fees
Are tax-deductible over a 5 year period. So if your set up costs were $8,000 (including mortgage insurance), you could claim approximately $1,600 per year in tax deductions over 5 years
If you refinanced a loan, any break costs plus amounts you didn’t claim from your initial loan establishment costs, you could claim the entire amount as a one off tax deduction. For example in the above example if your initial set up costs were $8,000 and you only claimed 2 years worth of tax-deductions (i.e. $3,200), the remaining amount $4,800 plus break costs can be claimed as a one off tax deduction.
In addition to this, any set up costs of your new loan, will be treated in exactly the same way as the first example.
Travel to inspect property
Did you know that if you travelled to your property to inspect or do repairs or maintenance, that the cost of travel is tax deductible?
Here’s an example:
A client of ours owns a property in Melbourne. He drove his car down to inspect his property and to do some repairs. His total travel kilometres – trip there and back came to an estimated 2,000km.
He has a car with a 2.6 litre engine.
This means that he can use the cents per kilometre method of calculating his travel. Identical to the method used in claiming work related travel.
That is he can claim 2000km multiplied by 75 cents per km. That is a $1,500 travel deduction on his tax return.
So if you are a property investor, be careful when claiming your property related expenses.
Information courtesy of Tax Effective Accountants