ATO warning for easily forgotten tax claims

With tax time well and truly upon us many Australians are feeling the pressure of getting their paperwork organised to avoid hefty fines from the Australian Taxation Office (ATO). You may think you've dodged a bullet if you haven't worked this financial year, but an expert says that you might still not be in the clear.

You typically don’t need to file a tax return unless your income exceeds the $18,200 tax-free threshold. But before you toss your paperwork into the recycling bin, consider these situations where you may still need to file despite a big income drop.

Do I need to file a tax return if I've lost my job?

If you’ve lost your job because of a redundancy or retrenchment, tax accountant Susan Ngan from Tax Store Australia told Yahoo Finance that you need check the size of any payouts.

Also in case of claims on income protection insurance.

“Anything like payouts, sickness, accident insurance… that’s also taxed," Ngan said.

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Do I need to file a tax return if I've started a new business?

More Australians looking to supplement their income in the cost-of-living crisis are taking up side hustles. They must remember that this is taxable income.

“Some people may have side hustles or something like Airtasker, Uber… they may be doing some work from home building a side business,” Ngan said.

“If they’ve registered an ABN… even if they earn under $18,200, it’s mandatory for them to put in a tax return."

Ngan also said a tax return may also be important for getting funding.

”If you’re starting a business and you need to borrow money, then a tax return is likely to be asked for," she added.

Do I need to file a tax return if I need help with living expenses?

If your income has dropped but your expenses unfortunately haven’t, you may need to apply for a bank loan.

Ngan told Yahoo Finance that any lending company may ask for your return before handing over the cash.

“Especially if you’re getting an unsecured loan, they would definitely ask for your tax return…[or] if you’re having to refinance a mortgage," she said.

Similarly, if your income is down because you’re taking unpaid parental leave for a baby, and hoping for childcare subsidies.

"For day care, you probably need to put in a tax return because [Centrelink] will look at your income… for both partners," Ngan said.

Make sure to check all the rules so you don't end up copping a fine from the ATO. (Source: Getty)

Do I need to file a tax return for interest or dividends?

While you are unlikely to have earned $18,200 or more in interest from your savings account, it’s important to include any interest you've received in your total income, as well as dividends or rental income.

You may, for example, have earned $15,000 in other ways and assume you’re under the tax-free threshold.

But if you’ve got a savings account with say, $70,000 earning five per cent interest per year, the interest earned may tip your total income over the tax-free threshold.

'Strict' ATO issues fresh warning

Ngan recommended using the tool on the ATO website to help decide if you need to lodge a tax return.

An ATO spokesperson told Yahoo Finance a return may also be required under the following scenarios:

• If you’ve made a loss (such as on a sale of shares or property)

• If you’re a “special professional covered by income averaging provisions” including

• An author of fiction

• Performing artist

• Production associate

• Active sportsperson

As for how strict the ATO is and how many people have been fined for non-lodgement in recent years, the tax office declined to provide Yahoo Finance with that data.

“If you’re in a refund situation and you have a tax agent, [the ATO] are less likely to punish you,” Ngan said.

"But if your tax return is overdue and you owe money… they can probably charge you the full penalty.”

Currently, the penalty for small entities for not lodging a tax return is $313 per day, up to a maximum of five days’ worth of $1565.

The ATO states it will contact you if you don’t lodge on time.

You can contact them and fess up “so we can work together to reduce the risk of a penalty”.

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