A record number of Australian women will lodge tax returns over the coming months but many run the risk of making tax mistakes and chasing refunds that they’re not entitled to.
There are now over 3.14 million Australian women working full-time, and 2.7 million working part-time. That’s over 100,000 more than last financial year and whole lot more tax returns.
While some women will pay a registered tax agent do their returns for them, others will try to save a bit of money by doing it themselves electronically or calling on a friend as a favour to assist.
The cost for paying a tax agent is a deductible expense and it varies depending on how complex your tax affairs are. It can range from $100 up to $500 when business and investment affairs are excluded.
Just recently I met a woman, let’s call her Jenny for privacy reasons, who baulked at paying $250 for engaging a tax agent to lodge her return.
The same woman also complained to me that this tax agent only managed to get her a tax refund of $1000, which was significantly short of the $5000 tax refund that her sister-in-law managed to get her in the financial year before.
For many Australians, a tax refund is a significant financial boost. In the 2015-16 income year, 13.5 million individuals lodged an income tax return, and of these 10.4 million received a refund worth an average of $2,574.
Jenny’s experience is not unique. In fact new research by NGS Super shows that women are more likely to seek the advice of a trusted friend over an experienced financial expert.
Without knowing the full details of Jenny’s work claims over the past financial years, it’s possible that something has changed in what she’s able to claim.
It’s also very possible that her sister in-law was claiming things that perhaps she shouldn’t have been in order to generate a refund.
The Australian Tax Office (ATO) says it wants everyone to claim what they are entitled to, but it draws the line where a person intentionally tries to bend the rules and over claim.
If a claim raises a red flag, the ATO will investigate further and if the claim is incorrect, you’ll be asked to correct it, even if it happened some years ago.
“If you‘ve been overpaid, you’ll obviously need to pay it back, plus interest and maybe a penalty,” says ATO Assistant Commissioner Kath Anderson.
Ms Anderson told Women’s Agenda that the role of a registered tax agents is to help people lodge a correct return and not simply to deliver refunds that you may not be entitled to
“You should be very wary of anyone who promises you a refund that sounds too good to be true, especially unregistered preparers.
“Whether you lodge your own return or you use an agent, you are responsible for making sure your deductions are accurate.”
The penalties vary depending on the mistake and whether it was an accident or intentional. In a small number of cases taxpayers have been found to have deliberately done the wrong thing and the worst-case scenario has been a jail sentence.
According to ATO audits and reviews, there are five main areas where taxpayers are most likely to get it wrong. This includes things like:
- leaving out some of their income, maybe forgetting interest, a temp job or money earned from the sharing economy.
- claiming deductions for personal expenses such as home to work travel, normal clothes or personal phone calls.
- claiming for something they never paid for – often people think everyone is entitled to a ‘standard deduction’, like $150 for laundry or $50 for phone
- claiming personal expenses associated with rental properties – either claiming deductions for times when they are using their property themselves or claiming interest on loans used to buy personal assets like a car or boat.
- Not keeping receipts or records of their expenses. If you put in claim, you need a record to prove it!
The main message to women who are either new to or familiar with lodging a tax return this year, or who are looking at ways to cut upfront costs, is if you are claiming a deduction for work then you must have paid for it yourself and not been reimbursed; it must be directly related to earning your income, not of a private nature; and you must have a record to demonstrate how you calculated your claim.