This is rather scary to admit, but I’m actually excited that it’s tax time again!

I really enjoy doing our tax returns.  There’s just something satisfying about getting all our papers organised, filling out the forms, and filing everything away for another year.  And of course, the anticipation of a nice little tax return heading my way in the next couple of weeks is the best bit.

But I know that this must officially make me an accounting nerd.  And that most people dread having to find all those receipts, all the relevant bits of paper, work out which boxes need to be filled in and how, and worrying whether everything is completed properly or not.

So I’m hoping this article might take some of the worry out of it.  But first, a quick disclaimer – I am NOT a registered tax agent, and only offer this article to help out those who are completely freaked out by the thought of filling out those forms.  If you need expert help, there are some tips at the end of the article.  You should NOT rely on this advice, and should follow the advice on the ATO website to ensure that you comply with all of their requirements.  Needless to say, the information provided here only relates to individual tax returns, and not companies or businesses.

Due Dates

Not everyone needs to lodge a tax return, but if you have had any tax taken out of any payments then you will need to get organised!  Tax returns are due by 31 October, and cover the period from 1 July last year to 30 June this year.  If you use a registered tax agent (see later), then they have the ability to lodge later than this, but you still need to contact them to arrange this before 31 October.

If for some reason you can’t lodge your tax return by 31 October, you can ask for an extension.  The tax office advises that you should not lodge a return that is incomplete.  We got an extension one year when we had not received all our financial records in time, and it wasn’t too difficult.  It is much better to seek an extension than risk a penalty.

E-tax and electronic lodgement

My first tip for completing your tax return is to download the e-tax program from the ATO’s website.  I particularly recommend this if your tax return is fairly straightforward.  It provides detailed instructions and information on each section of the tax return so that you can work out what you can and can’t do, what’s required and what documentation you need for each section.  Lodging your tax return this way also means that you are likely to get your tax refund with 12 business days.

To lodge your return online you will need to verify your identity.  To do this, you need a notice of assessment from the tax office issued to you after 1 May 2008 and before 25 May 2013 OR some official personal information or ‘shared secret’ that matches the tax office records (tax file number, name, birthdate and then financial information provided by such providers as your employer, bank, Centrelink etc).

One of the other great things about using e-tax is that it automatically downloads, or pre-fills, a whole lot of information for you – things like your payment summaries from your employer, interest received from banks, some deductions, medicare and health insurance information, HELP and SFSS information (you will know what these are if you need to!)  But you can’t rely on the pre-filling to complete all your information.  You are required to check it and make sure it is correct and complete.  But this saves so much time and is a really great feature.

The pre-filling function relies on the tax office receiving information from all the relevant institutions that provide them with the information.  So it can take quite a while for all of this to come in and be available for download.  There was a glitch in recent years, and it is yet to be seen if this has been addressed in the 2013 version -this was that if you pre-filled at a certain date early on in the tax season, it is likely that not all the information was available.  Going back at a later date to download further information resulted in ALL the information being downloaded again.  This meant that previously downloaded information was doubled-up, and required a manual process to delete them.

Paperwork and tax records

Once you have e-tax downloaded, the next step is to get all your paperwork together.  You will need all of the following:

• Any payment summaries showing your income from any employers or Centrelink;
• All your financial records and documents that are requested for each section that you fill out – such as bank statements, any other records of income such as dividend statements etc;
• Receipts for any deductions you are claiming; and
• Your tax file number.

It is important to keep all of these documents for a number of years, depending upon your circumstances.  These rules have changed in the last few years, and depend on the complexity of your tax return.  Check the ATO website for details, but if you are unsure then I would recommend keeping your records for a minimum of five years.

Income

Make sure that you include all sources of income – from Centrelink, employers, investments, rental properties, interest, pensions, capital gains, business income, partnership income, trust income, foreign income, compensation or insurance for lost income, etc.  More detail is provided on the ATO website and in the e-tax program.

Deductions

Next, you are entitled to claim expenses that you incur that are directly related to earning your income, in the same income year that you made the purchase.  These expenses must not be private, domestic or capital in nature.

If the tax office audits your tax return, the deductions you have claimed will come under scrutiny, so it’s important to make sure that you only claim deductions which are legitimate and that you can substantiate with receipts.  If you claim any more than $300 in work-related deductions, you need to keep all your financial records and receipts to substantiate these claims.

Some of the deductions you can claim include:

• vehicle and travel expenses directly connected with your work but excluding normal trips between work and home;
• clothing expenses including laundry and dry-cleaning but only where you have to wear something specific to your work, such as protective clothing or a specific uniform.  Everdyay clothes do not meet this criterion even if work issues specific clothing standards.
•  gifts and donations to charities that are specifically registered for tax purposes.  This does not include buying things from charities such as raffle tickets or fundraising chocolates.
• other expenses, such as some home office expenses, investment expenses, self-education expenses and other expenses.  This all starts to get a bit technical for this article and you should check more detailed tax advice for guidance.

Tax offsets

Okay, so now I’m starting to understand why people give up doing their tax altogether.  If you are still with me, we are nearly there.

The last step for simple tax returns is now to fill in the information regarding tax offsets.  These can result in a big difference in the amount of tax you have to pay, so it’s important to make sure you don’t miss these.  For instance, if you have private health insurance this can save you a lot on your tax, so it is important to keep the information your fund sends you and include it in your tax return.  Other offsets apply for  benefit recipients, taxpayers with dependents (spouse, parent, invalid relative, housekeeper), senior Australians, low income earners and people living in remote and isolated areas or who serve in the forces overseas.

There are also offsets relating to medical expenses over a certain threshold and contributions to certain superannuation funds. Again, more information is available on the ATO website on all of these offsets.

Tax refund (hopefully!)

Once you get to the end of all this (phew!) if you are using e-tax it will calculate whether you are eligible for a tax return or if you owe additional tax.  If you lodge electronically, and provide your bank account details for an electronic funds transfer, your tax return should arrive within about two and a half weeks.  If you owe additional tax, you will receive a tax assessment that will provide you with the amount owed and the due date.  This will be due no earlier than 21 November, regardless of when you lodge your tax return.

Help!

If this all sounds too daunting, you can use a registered tax agent to prepare and lodge a tax return.  Some of the well-known options include H&R Block and ITP (the Income Tax Professionals), but there are many other options available.  Even if you use a tax agent, you will still need to find all the documentation required for your tax return, and make sure that your records are kept for the required time.  Also, you are still responsible for signing off on the tax return and verifying that all of the information included is accurate and legal.

The Tax office is also available to answer questions.  Tax Help is a free service offered by a network of ATO-trained and accredited community volunteers.  If you rely on the advice from this service in preparing your tax return, it is important to keep a note of the advice you received and any details such as references, decisions, dates etc.  If you are audited it is important to be able to substantiate the advice you are relying upon.

Made a mistake?

Finally, if you think you have made a mistake, you can change your return by contacting the ATO.  We had to do this one year when my previous employer made a mistake on my payment summary.  It was a simple matter of letting the tax office know what had happened and fixing up the error.

Good Luck!

Well, I hope that this has in some small way helped.  And I hope you end up getting a nice little payment back from the tax office soon!