Don't commit these tax errors in June to avoid financial burden

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A shop assistant uses an eftpos system at a Specialty Fashion Group owned Katies store in Sydney December 11, 2012. Reuters/Tim Wimborne

June is coming in two days, and money errors committed next month can cost Aussies plenty at tax time, specifically around the timing of tax-deductible payments and selling assets. Adrian Raftery, associate professor at Deakin University Business School, enumerated these mistakes to avoid.

Speaking to news.com.au, Raftery cited delaying tax-deductible expenses and failure to keep records in a safe place as two common mistakes. Raftery does not recommend going out and buying items only for a tax deduction.

For instance, he suggested not buying a new printer if it was not really needed. He explained that a tax deduction does not give the entire expense back, just the marginal tax rate.

“Individuals buying items for work or investment properties should also be aware than anything costing more than $300 could not be claimed instantly and would have to be written off over time,” he added. As for business owners, they receive a more generous $20,000 limit for every item for instant tax write-offs.

An attempt to ruse the Australian Taxation Office with crooked purchases and deductions is also not an advisable thing to do. Peter Bembrick, a tax partner at HLB Mann Judd Sydney, warned that the ATO had advanced its ability to identify patterns in deductions and find those trying to cheat the system.

Another common financial error investors commit is selling poorly-performing shares in June for the purpose of locking in capital losses then re-purchasing the same shares promptly. This strategy is called wash sale and is not allowed.

Meanwhile, The Australian reports that the tax office has given workers and employers caught up in the Plutus Payroll scandal some certainty by providing detailed advice on its website or through hotline 1800 060 062. Plutus is currently at the centre of one of the country’s biggest suspected white-collar crimes.

In a statement, the office assured that workers would not be penalised when the amount reported, as being withheld was not paid to the ATO. By tax time, the amounts withheld from their pay would be applied following an assessment of their income tax liability.

Independent Contractors Australia said the alleged fraud involving Plutus Payroll has been talked about for some time. There were claims it was not paying PAYG withholding tax to the tax office. ICA's Ken Phillips said Plutus looked too good to be true and appeared to be providing no-cost services to contractors.

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