The end of the financial year is looming and, for some, that means a scramble to get organised before the deadline hits. As a financial advisor (and former accountant) David Posterino of Wealth Arena has witnessed many of the common mistakes that people tend to make at this time of year. Here, he shares five common pitfalls, as well as solutions to avoid them – so that you can navigate tax time with ease.
5 financial mistakes to avoid as we approach eofy
ARTICLE
19 June 2019
3 mins read
3 mins read
Tax time isn’t too far away, so here’s how to get organised and set yourself some financial goals.
Mistake: Forgetting to keep your receipts
If you’re planning on making deductions this financial year, you’ll want to hang on to your receipts from the previous 12 months. According to David, it’s time to ditch the shoebox full of paper and upgrade to the 21st century. “The best way to store receipts these days is electronically. Take a photo and use an app to keep your receipts in the cloud.” This is especially true if you’re running a small business: “Keeping records of transactions is one of the great pains, especially for small business. Holding onto physical receipts and invoices only adds to the trouble,” David says.
Once you’ve filed your return, don’t delete your files. “Generally, you must keep your written evidence for five years from the date you lodge your tax return.”
Mistake: Leaving things to the last minute
When it comes to EOFY, a little preparation throughout the year can save you a whole lot of grief around tax time. If you know you’re the type to leave things until the last minute, it pays (sometimes literally) to make an effort to be proactive when it comes to your finances.
David’s suggestion? “Create a soft copy folder on your computer and, as you receive tax information during the year, save it on the go. It will make your work a hell of a lot easier come end of year.”
Mistake: Making estimates on figures
When it comes to filing tax returns, accuracy is critical. This is especially true if you’ve earned additional income from which you haven’t withheld tax (for example, income derived from freelance work).
Fortunately, the ATO have a pre-fill option that’s a great tool to help you ensure accuracy in reporting. “With today’s technology, once a TFN is recorded absolutely everything is sent through to the ATO,” David says. “This is very useful, as sometimes it is hard to follow up on income you might have no idea you received – for example through banking or other means.”
If you’re unsure about a particular figure, don’t take a guess. Instead, contact the ATO and talk through your concerns.
Mistake: Forgetting to claim work-related expenses
It’s easy to overlook deductions that you may be entitled to. According to David, there are several that people often miss – including union fees, expenses associated with a home office, internet and phone expenses, laundry expenses, and costs associated with managing your tax affairs.
Remember, if you do plan on claiming some of these work-related deductions, you’re only entitled to the percentage of the expense related to your job. For example, if you use your personal phone for business calls – you can only claim the cost of the work-related time spent on the phone. To avoid confusion, David recommends keeping an ongoing logbook of calls to ensure accurate reporting come tax time.
Mistake: Not using eofy as a chance to sort your goals
A lot of your financial activity around June and July will no doubt be focused on getting your tax affairs in order, but what should you do once your tax return actually hits your account? While it might be tempting to splurge on a holiday or some new clothes, David recommends using the money as a seed of new investment. “Usually, your tax return means funds that you never realised you had – so it’s a great avenue to create a regular investment plan.”
If you’re new to investing, speak with an IFA who can help you clarify your financial goals and craft a plan to make them a reality. If you can make it a habit to build that investment with each year’s return, you might be surprised by how quickly your balance grows.
Staff Writer
Staff writers come from a range of backgrounds including health, wellbeing, music, tech, culture and the arts. They spend their time researching the latest data and trends in the health market to deliver up-to-date information, helping everyday Australians live healthier lives. This is general information only and is not intended as medical, health, nutritional or other advice. You should obtain professional advice from a medical or health practitioner in relation to your own personal circumstances. The information in this article is general information only and is not intended as medical, health, nutritional or other advice. You should obtain professional advice from a medical or health practitioner in relation to your own personal circumstance
Disclaimer:
The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.
Share
This inspirational content is brought to you by AIA Vitality
AIA Vitality is a science-backed program that helps you learn more about your health,
offers ways to improve it and motivates you with rewards along the way.
offers ways to improve it and motivates you with rewards along the way.
