6 Mistakes Under 30s Make At Tax Time (And How To Avoid Them)

Image: iStock

Tax time is a fun time of year as most of us lodge our returns and then wait patiently for our tax refunds to arrive from the ATO. But preparing and lodging a tax return can be intimidating for some; particularly younger taxpayers who are less familiar with the process. Here are six common tax mistakes that younger people often make -- and how to avoid them.

Recent studies have found younger people are more afraid of filing their taxes than any other generation. 80 per cent said they fear they will make a mistake on their return and end up out of pocket in the long run.

When looking for help, young taxpayers are more likely to turn to family and friends for advice as opposed to tax professionals. Although well-intentioned, family members are unlikely to be up-to-date on the latest tax regulations or have a full understanding of what can (and can’t) be claimed. This only serves to make the process even more confusing and can mean younger people miss out on the best possible refund.

These days, 74% of Australians use a registered tax agent to help prepare their tax return. This ensures a qualified professional checks the return for extra deductions and ensures it’s correct before lodgement to the ATO.

In addition to using the services of a tax agent, here are a few additional tips for under 30s to watch out for at tax time.

#1 Not declaring income from sharing economy

Uber, Airbnb and Airtasker are becoming increasingly mainstream as a flexible way to earn a side income. But even if you only use these platforms to earn a bit of extra cash on the side, it all must be declared on your tax return.

Be sure to track your income and be honest on your tax return. Keeping receipts and invoices also allows you to claim tax deductions against this income. Be warned: those who under-report their income may end up owing back taxes and be hit with fines, penalties and interest charges from the ATO.

#2 Failing to set aside enough money earned through contract jobs, online stores or freelancing

If you are a freelancer or work in contract jobs, your tax might not be withheld from your income. That means you’re in charge of making those payments to the ATO yourself. If you don’t set aside some of your earnings, it can be a nasty surprise at tax time. During your first year you should put aside at least 30, even 40 per cent of any “non-taxed“ income you earn to be safe.

#3 Falling for an instant refund scam

Ads spruiking a “same day tax refund” or “instant tax refund” might sound good, but it is usually a prime example of ‘too good to be true.’

Tax refunds can only be issued by the ATO, so a “same day refund” is just a short-term, high-cost, high-interest loan from a third-party. An instant refund may put money in your hand a bit sooner, but it also comes with costly fees and hidden late charges inside a legal contact. Plus, if the ATO doesn’t give you the refund you expected, then you owe your entire “instant refund” plus the fees and interest back to the company who provided it. It’s almost never worth it.

#4 Not claiming car expenses correctly

If you use your car for work, one of the challenges this tax season might be working out which method of claiming car expenses is best for you.

Recent changes mean the only two methods to claim work-related car expenses this year are the logbook method and the cents per kilometre method. The cents per kilometre rate has also changed to 66c per km regardless of the size of your car.

Depending on how you use your vehicle at work, one method might lead to a bigger deduction, and as a result, a larger return. So it’s important to understand which is better for you. If you’re unsure, it’s best to ask a professional. Keep in mind that car expenses can only be claimed for genuine work-related use, not including driving to and from work.

#5 Not being smart with their refund

Avoid thinking of your tax return as “bonus” cash. Instead of splurging your return on a shopping spree or impulse purchase on a depreciating asset like a car, clothes, or electronics, consider using the money in a financially smart way.

If you want to tackle a big payment, consider putting your return toward high-interest debt payments including credit cards, car loans or a mortgage.

#6 Forgetting to lodge a return

Forgetting or avoiding lodgement of a tax return is a big mistake! If you miss lodgement deadlines, you might be hit with a failure-to-lodge penalty, plus interest. One bonus with using a tax agent is that they can often request an extension on your behalf and even negotiate payment plans with the ATO when required. Just don’t bury your head in the sand otherwise you could find yourself on the receiving end of some serious ATO penalties down the track.

Simone Gielis is a senior tax agent and general manager at Etax.com.au


    unless you are running a business, have investments, etc then all under 30's should do their tax themselves. It's super easy online now and all the data is usually pre-filled. If you are making LOTS of reductions then you can use the ATO app to claim these and scan receipts ,etc.

    I really gotta give a +1 for the new ATO website (linked to mygov) i missed a tax return and the site kept emailing me to get my ass on it. When I finally did I owed a huge amount in fee's ,etc. The site allows you to make a payment plan (i did $20 a week)

    Seriously I've used a bunch of accountants some mainstrream like HnR block and some freelancers ,etc. There was very little difference in return. Just do it yourself, it takes an hour but also saves you 50-100 bucks.

      I've said the same thing so many times people are sick of hearing it, but the simple reason is that a lot of under 30's can have multiple jobs and end up not sure where they stand. Mostly with travel, uniforms, and a few other costs. If you're young, it CAN be overwhelming, and just easier to trust someone else to get it right.

      I tell them to have a go themselves before they go to an agent, then ask questions on why there are differences. If you do need to go to an accountant, most people should only need to go once, and thats only to know where you made any mistakes.

      Pre-fill does most of the heavy lifting these days as you say, and as we move forwards even more. We're quickly getting to the point that the ATO will have the information before you do, and start doing default assessments for 90% of salary and wage people.

      Accountants only cost you money the first year, you claim the previous year back every year after that.

        yeah i know, but no matter how you slice it, it's still an out of pocket cost at the time.

          I was audited three years in a row via etax. I only owed one year, but after that I'll let the accountant deal with it.

Join the discussion!

Trending Stories Right Now