Common Mistakes on Individual Tax Return

You have surely heard that Always:


Prevention Is Better Than Cure


Australian Taxation Office (ATO) can easily detect the mistakes because of the high frequency of errors that Australian taxpayers are making in their tax returns.


Therefore, we inform you the common mistakes or errors in your tax returns that ATO staff are fed up with them and the ways to prevent them.


  1. Inaccuracy of Amounts Declared:


Taxpayers are occasionally filling up their individual tax returns solely on the basis of their Estimations rather than the precise ones.


This common error occurs when you do not pay sufficient attention to your PAYG withholding summary which must be provided to you by your employer. Consequently, big differences incidents are inevitable and it takes some time to convince ATO whether the error is intentional or not.




  • Request your employer to supply you with the comprehensive PAYG withholding report summarizing all relevant information including tax withheld, salary paid, superannuation amounts and so on.

  • Consult with a registered tax agent to check your work.


  1. Misconception of Excluding Foreign Source Income:


Dear taxpayers, if you are an Australian resident in terms of tax purposes but you have worked overseas or had income from your foreign investments, you still need to disclose them in your tax return.


That’s the rule: Australian tax residents are subject to income tax for their global and worldwide incomes.




You may say that “I have paid my income tax in those countries”, and you are right. The amount of tax that you have paid on the income earned in foreign countries will be taken into account.


So, do not worry to inform ATO or your tax agent on these amounts.


  1. Deducting All Expenses of Your Rental or Holiday Letting Property:


Income earned from the property investment brings about its own risks. Although you pay expenses on the running costs or the improvement elements of your rental or holiday letting, bear in mind that not all of them reduce your taxable income.


It is wrong to claim the costs which are for the period of times when your property was used for private purposes, like entertaining your friends or having parties, and also when you were not successful to win any tenant or customer for some time slots during the year.

The case becomes worse when these rental and holiday properties are jointly owned by spouses and partners, both claiming full amounts of the costs in their individual tax returns.



Always distinguish the amounts that are paid for repair and maintenance from the ones that improved the functionality of the property. Additionally, be rational on the meaning of the costs and match them with the income you are disclosing when you have rented your property.


ATO auditors will have a wakeup call when the reasonableness of the figures you claimed for these types of expenses are not strong enough.


  1. He who pays the piper calls the tune


Yes, it is true for your tax returns as well. If you wish your expenses being deductible and reduce your taxable income, you are in charge of them to prove their validity and reliability.


Documents… How ATO is going to understand if you are honest and the costs really incurred?


When you do not have enough supporting documents, especially for the costs above $300, your expenses are not tax deductible.



Easy…. Just train yourself to keep records of your expenses like tax invoices, receipts, online bank transfers, and any other pieces of evidence proving that you have actually paid for the costs claimed.


You have heard of Seeing is Believing and this is one of your major golden keys to materially reduce your tax obligations and pay less.


  1. Assuming It Is Never Late To File Your Return:

Looks strange, right? But still many Australian taxpayers miss the tax return due dates causing late filing penalty payments.



Add deadlines on your phone or web calendar so as not to miss them at all.


However, do you know that your deadlines are extended and ATO discharges you from the deadlines when a tax agent is appointed to lodge your return? It is called safe harbor.


Mistakes/ Errors Consequences:

Intention matters here. The interest charges and penalties vary depending on the reasons of the wrong tax filing, subsequent measures taken or not taken by the taxpayer to rectify the errors, and the lag time between due dates and the actual lodgment time.


Furthermore, the tax that was supposed to be paid if the return was lodged correctly becomes payable upon detecting your error or mistake.


Interest cost imposed on the difference of the actual tax paid and the amount of the correct amount ranges from just above 9% to 95% based on the extent of negligence or concealment involved.


But, if these errors are informed by the taxpayer to ATO, the penalties and interests will be highly reduced, sometimes up to 75% of the total.



Overall, as the tax system and tax return seem to be quite complex for some people and the possibility of making errors, even the ones not mentioned above, is high, we strongly recommend to engage a tax agent to relieve yourself from all the concerns and headaches.