5 common items people forget to include in their tax return
Income can be a confusing topic when it comes to tax returns as there are some items that people can forget to include in their tax returns, or not even realise that they need to be included.
It’s important to correctly declare the amount of income that you and your business earn in order to work out the amount of tax that is due.
Remember to include these in your tax return
1. Micro investing
This kind of micro-investing is usually done via managed share investment platform apps like RAIZ. Because the amounts are small it can be all too easy to forget to include any relevant income in your tax return.
Any dividends, interest or capital gains all need to be included in your tax return. These kinds of share investment platforms will usually provide a tax statement at the end of the year that contains all of the details you need about income earned via their platform.
2. Crypto currencies
Investing in crypto currencies has increased in the last few years. When you buy and sell crypto currencies directly you need to include any related income in your tax return. If you’re investing via a managed platform that invests in crypto currencies on your behalf there could be capital gains, as well as interest, that need to be declared.
The details can get complicated depending on what you're doing, so it’s best to advise your accountant on how, and where, you have invested so they can ask for the right information.
3. Overseas income
As an Australian resident overseas income needs to be declared, even if you have paid tax in the overseas countries.
Types of income could include interest earned from bank accounts in different countries, rental income from an overseas property, and investment income from foreign shares.
If you have a pension or annuity in a foreign country this may also need to be declared, depending on the type of income.
If you have any kind of overseas income, be sure to disclose it to your accountant as this can be a complicated area. You may be liable to pay tax in the foreign country, consider if there are any double tax agreements, and then offset any amounts paid in your Australian tax return. What you can do, and need to do, will take careful analysis from your trusted advisor.
4. Wages
If you're based in Australia, but your employer is based in a foreign country, you will need to pay income tax on the wages you earn so include it in your Australian tax return.
5. Business income
If you're a sole trader and have overseas clients you need to declare that income in your tax return. It is not only the income you earn from your Australian-based clients that you need to declare.
Companies have different sets of rules, so always discuss with your accountant what you are required to declare.
It doesn't matter if you think of your business as a hobby, the tax office considers it to be a business for their purposes. The people who are most likely to fall into this category are the online sellers e.g., regular sellers on Facebook marketplace or Ebay. If you have any income of this kind then do discuss it with your accountant each year as the legal definition of "in business" is quite grey. You don't want to be on the wrong side of interpreting that definition as there might be late fines and interest to be paid.
There has been a significant increase in data matching between large selling platforms and government departments to pick up people who are not declaring the income they need to.
Any income that is paid in cash also needs to be recorded and declared.
As you can see, it’s not always a straightforward task to know which income needs to be declared in your tax return. Not only is properly declaring your income important for meeting your tax obligations, it is also important to have correctly recorded income if you want to sell your business in the future or apply for a mortgage based on your business income.
If you have questions about the income you need to declare book a 20-minute call with me to discuss how I can provide the support you need.