Expert urges caution to overconfident Aussies heading into tax time

A study from H&R Block found 71% of Aussies do not consider themselves to be confused about their tax return compared to previous years, despite the changes caused by COVID-19. 

But the tax services company said the pandemic had seen many people plough into new financial pastures like purchasing a new home or an investment property, investing in shares and cryptocurrencies, launching a new business, or being forced into early retirement. 

“When facing these new milestones, many don’t have the resources for making the jump nor are they equipped for the tax changes and associated costs and benefits, and could risk being audited by the ATO,” at H&R Block director of tax communications Mark Chapman said. 

“Australians who have done well on the share market, with property or even with Bitcoin during the past year face being audited if they get their returns wrong.

"Australians can face a 25% penalty for carelessly miscalculating how much they earned from shares, investment properties, and now cryptocurrency.”

See also: Property vs Shares - which is the better investment?

Need somewhere to store cash and earn interest? The table below features savings accounts with some of the highest interest rates on the market.

The study found 32% of Australians believed the Australian Tax Office (ATO) would be scrutinising their tax return more closely this year and cracking down on refunds. 

Come July 1, a quarter said they would consider switching to a professional tax agent for this year's return rather than the myTax portal due to COVID. 

"Bumper tax return" for many

Just over half of survey respondents said they didn't think they would get a bigger refund this year compared to last year, but Mr Chapman this was unlikely to be the case. 

“Australians will get a bumper tax return this year due to the Low-and Middle-Income Tax Offset and also the change in tax thresholds from 1 July 2020," he said. 

"For all those Aussies who expect to pay tax this year, this could come as a pleasant surprise as the impact of both measures could mean they are actually due a refund, or at the least a decrease in their tax liability.”

Although the pandemic had complicated many people's Aussies tax returns, 66% of Aussies said they felt more confident when completing their tax return this year. 

Mr Chapman said individuals needed to realise there was no one-size fits all approach to completing tax returns. 

“Every tax return is different, with varying deductions and offsets," he said. 

In the last year, temporary full expensing has been introduced, tax thresholds have been changed and offsets have been extended.

"Working from home has been common, with the resulting tax dilemma (which of the three methods to use?) causing confusion," Mr Chapman said. 

A third of Aussies thought the implications associated with the pandemic would make completing their tax return even harder. 

Almost half (44%) said they would be putting their tax refund back into their savings account, with a further 25% looking to pay off debt. 

^{Photo by Romain Dancre on Unsplash}