Tax return checklist

Reporter: Bryan Seymour
Broadcast Date: June 24, 2009

This year we can expect, on average, a tax return increase of more than $300. So, do you save the money, spend it or reduce your debt?

Ian Corfield, CEO of Bankwest says, this the $300 is a significant increase.

"It's gone up quite considerably, we reckon last year people got about two thousand dollars, so to be getting $2,300 as a return this year is obviously a big increase," Mr Corfield said.

The best new thing about tax time, this time, is the Education Tax Refund for families with kids in school.

Accountant and financial commentator Adrian 'Mr Taxman' Raftery: "The type of expenses you can claim include computers, internet, even repairs to computers."

"The stuff you can't claim though will be library books, you can claim for text books, can't claim for excursions, you can't claim for school fees or even the donations which you can claim for elsewhere in your return."

You can claim up to $375 for children in primary school and up to $750 for children in secondary school.

"It's only available for those who have received the Family Tax Benefit Part A, so it's one thing to be aware about and the person who actually receives the Family Tax Benefit Part A, they need to actually claim it," Raftery said.

This benefit applies to most parents earning less than $120,000 a year. It's those earning seven figure salaries that the tax office has set its sights on.

Top of the Australian Tax Office hit-list this year are executives, directors and wealthy Australians.

"Executives and Directors is pretty interesting; the ATO only just audited or surveyed 360 of them last year and they found that 64% of them actually had to make an adjustment to their tax return," said Raftery.

"In the past the ATO have only looked at wealthy Australians that had a net worth over $30m. This year, thanks to a bit of extra spending in the budget, the ATO are now able to go down to people with a net wealth of only $5m, so they're increasing the radar somewhat so hopefully it'll be a fairer tax system for everyone," he said.

So how are people planning on spending their tax returns?

A Tax Return Survey commissioned by Bankwest has found Generation X will be focusing on reducing debt.

Bankwest CEO Ian Corfield: "Generation X, the proportion of the population who are the most indebted, are actually planning to use this money to pay off debts."

"Typically generation Y are the people who you think are going to go out and spend today and worry about it tomorrow but actually what our survey shows is a big proportion of them, over a third, are intending to put that money into a savings account, which is obviously very sensible," Corfield said.

"Nearly 12 million of us will lodge a tax return, the tax office will then hand back nearly $20b. It sounds like a lot but with wages being frozen and unemployment set to rise, it might be a while before we have that much cash coming in again. So, what should you do with your tax return cheque? Spend it - if so, on what? Save it or reduce your debt?"

Adrian Raftery says one prudent course of action would be to reduce credit card debt.

"Secondly I would be putting money into super and getting the co-contribution if your eligible; I'd be looking at putting it against one-off expenses in your budget - it could be car rego or your insurance; I would also be looking for life insurance and income protection insurance and I guess finally you want to be looking at a savings plan so if you want to be looking to buy a house or you're looking for a wedding or a holiday in the future, put money aside for that but only after you've paid your credit card debt."

So what should you watch out for when tax time comes around?

The main pitfalls are - improperly stating income from rental properties; also from dividends, shares, interest and work related costs which shouldn't be claimed, like clothing. On the other hand, many workers don't realise they can claim their union fees.

"The ATP this week sent out 600,000 letters to mostly rental property owners because they got things wrong like borrowing costs, repairs and maintenance, interest on their mortgages and also in relation to capital works deductions as well," Raftery said.

When it comes to doing your tax return yourself or hiring a professional remember that accountants' fees are tax deductible. Also keep in mind that 98% of audited returns done by individuals need some kind of adjustment - almost always down.

"2.2 million people lodged their return themselves last year by e-tax and that number is increasing, however, I always feel that you're probably missing out by not using a great accountant," Raftery said.

Those most likely to be audited by the taxman will be truck drivers, sales and marketing executives and electricians.

Average Tax Refunds, state by state:
ACT $2,807
WA $2,444
NSW $2,373
VIC $2,287
QLD $2,151
SA $2,025

Most likely to save their Tax Return:
Generation Y - 34%
Generation X - 26%
Baby Boomers - 26%
Retirees - 17%