The Role of Record Keeping in Maximising Your Tax Refund

As the beginning of the tax year commences, many individuals will be in a race against the clock to assemble all of the documentation required to support the deductions they intend to claim when filing their taxes. If you have been organised and have managed to maintain everything you need in a tidy and well-organised file, you deserve praise. Alternatively, if you completely ignored your taxes for the first few months of the year, you may be having difficulty locating receipts and invoices for many of the items for which you could have claimed a tax deduction. In light of the Australian Taxation Office's (ATO's) requirement that substantiation be provided before a deduction is approved, maintaining accurate tax records is crucial.

Why you should keep accurate records for your taxation

For you to have a stress free tax lodgement, you need to have your records intact. Below are reasons you should always keep records for tax season.

1. Find out more deductions 

Maintaining accurate records can be of assistance in determining whether expenditures are eligible for tax write-offs. You must bear in mind that if you do not meticulously keep records, it can be difficult to establish when you might be eligible to itemise a deduction. 

Taking the effort to determine which of your deductions are itemised might be beneficial to taxpayers who are employees as well. If you file your taxes, you might be surprised to learn that certain medical and dental costs are tax deductible on your return, even if you paid for them. When you go to see your tax preparer, he can ask you, "Hey, where are your medical and dental expenses this year?" about the previous tax year. You must be able to provide it so you can get substantial refund.

2. ATO Audits

As was just discussed, the Australian taxation office can audit your tax returns for a specified period. If the ATO conducts an audit of your tax returns and you do not have the evidence to back up your tax claims, it can be very challenging to demonstrate that the agency committed an error.

Even if you don't have copies of your tax documents, it's possible that a tax attorney can still assist you in disputing false findings made by the ATO; however, the process will be much more challenging. Keeping your tax documents for at least the period of limitations period is necessary for this reason.

3. Ensure more accuracy in the preparation of tax returns.

Maintaining accurate and timely financial records is one of the best ways to prepare tax returns. When you go to the office of your tax preparer, you must have all of your paperwork in order and its proper place. You could be working with a tax preparer who is impatient or who does not have the time or resources necessary to guide you through your deductions.  

It is vital to arrive at the appointment with all of your books in order so that when they are completing your tax returns, everything will be inputted into the computer software in the way that it needs to be inputted, and nothing will be missed. This is not even to mention the possibility that you could find yourself in a situation in which you will need to file your tax returns in a very limited amount of time. If you need to go back and hunt for expenses, this could result in a late tax return, which would mean that you would be subject to fines and interest fees, which is something that none of us wants to pay.  

4. Future Reference

Keeping a copy of your tax returns can also make the next time you file your taxes easier. The majority of taxpayers see virtually little variation in both their income and their tax burden from one year to the next. In these circumstances, you can utilise previous years' tax returns as a model for the current return you need to file. Other times, you might have an unusual consideration on your tax return, and retaining that return as an example of how to manage the issue could be valuable if you have that same issue in future years.  

5. Determine taxable and non taxable income  

When you receive income from a range of sources, maintaining accurate records enables you to identify the sources of any money or property that you receive from those sources. You need to be aware of the types of income that are taxable to you as well as those that are not taxable to you. If you don't keep accurate records, you run the risk of missing out on significant sums of money that could be coming your way that is exempt from taxation.

How long do you have to keep your records? 

You are required to maintain your written evidence for five years beginning on the 31st of October following the end of the tax year or, if you lodge later, beginning on the day that you lodge your tax return, whichever is later. If, at the end of this period, you are in a disagreement with the ATO about a work expense, you are required to preserve the relevant documents until the dispute is resolved, even if the issue is settled before the end of this period.

You are required to keep records of depreciating assets for the entire time during which you claim deductions for the drop in value of such assets. After the expiration of your most recent claim, you are required to preserve your records for an additional five years. The five-year period begins on October 31 of the year that follows the conclusion of the tax year, or if you file your return later, it begins on the day that you file your return. If, after five years, you are engaged in a dispute with the ATO regarding a depreciating asset, then this term will be extended.

You may be required to preserve your records for a longer time if you use the information from your records in a subsequent tax return. If you choose to carry a tax loss forward, you are required to preserve the associated records until the conclusion of the period of review for the income tax return in which the loss is fully deducted.

Need Help With Your Record Keeping and Taxation?

Keeping up with your obligations in terms of record-keeping and taxation can be difficult and time-consuming. The Kalculators is here to assist you for your 2023 financial year tax returns. You may ensure that your financial records are correct, in accordance with the rules governing taxes, and organised in a way that makes them simple to reference if you seek the advice of a professional. Our team of knowledgeable tax experts and accountants has the experience necessary to negotiate the complexities of the tax rules and can assist you in making the most of the tax benefits available to you. Do not let the difficulties of lodging taxes get in the way of your success in the financial realm. Get in touch with us as soon as possible, and our specialists will walk you through the process. Contact us right away to get individualised assistance that is catered to your exact requirements.