You may have commenced preparing your tax return ahead of tax season which began on July 1. The best case scenario is that you are due a refund from the Australian Tax Office (ATO) and the worst case scenario is making a costly mistake on your return.

Depending on the type of transgression or misunderstanding, you could face penalties and/or interest calculated in accordance with the tax you have avoided. If you make a false or misleading statement, the ATO can apply penalty interest that is calculated by the percentage shortfall between the correct tax due and the amount you paid.

Avoiding these common tax mistakes can go some way to helping you avoid incurring penalties.

Rushing to submit your return

This mistake is often made by freelancers and contractors who have not kept track of all the jobs they have done. If you file your return before the ATO loads its pre-filled information and have omitted to include some work you did, you could find yourself paying penalties. Use myTax or a registered tax agent to check that the information the ATO has is complete and correct. If you find a mistake, contact the relevant organisation to rectify it.

Confusing work and personal expenses

Anything you claim as a work-related expense must be directly connected to how you earn a living. If you use your personal computer for work, you can claim a deduction for its use for the portion that is work-related.  A 100% deduction is not possible if you are using the computer to watch Netflix, browse the web and send personal emails for half the day.  The same applies to your internet and phone expenses.

Insufficient documentation

When claiming for deductions, ensure you can support your claim with legitimate documentation. File and retain all relevant documents for five years after your tax return has been lodged as the ATO can ask for records to evidence your claim even after your return has been processed.

Incorrect rental claims

You can only claim expenses relating to your rental property for the period your property was rented or available for rent, for example, advertised for rent.  If only part of your property is used to earn rent you can claim expenses relating to only that part of the property and apportionment is calculated on a reasonable basis or by calculating your business use percentage on completing a log book in order to determine your claim.

Claiming for travel to work

You can claim for work-related travel of up to 5000km at 66c per km but be claiming a deduction for your travel directly to and from work is generally not claimable (exceptions apply).

For relevant tax advice that will save you time and money, get in touch with Stones Sharp on 03 9853 0641. It’s never too early to start planning for next tax season.

Shane Borg

Shane Borg


Shane is a Fellow of the Australian Society of Certified Practicing Accountants and a Chartered Accountant.

Shane’s passion is to consider the clients, the client’s business and taxation affairs with a holistic approach whilst providing business mentoring, business strategies, systems development, taxation advice and taxation planning in order to assist his clients and their business achieve their goals.

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