The Perils of Lodging Too Early
Every July, many Australians are eager to lodge their tax returns as soon as possible. In some cases, that makes perfect sense. If your income is simple, all your information is finalised, and your records are complete, an early lodgement may be straightforward. However, for a significant number of taxpayers, lodging too early in July can lead to avoidable problems and unexpected costs.
Understanding the ATO Prefill Data
The core issue isn’t the month of July itself, but rather whether the information available to you, your accountant, and the Australian Taxation Office (ATO) is complete. The ATO receives a vast amount of data from various sources, including:
- Employers
- Banks
- Private health insurers
- Share registries
- Managed funds
- Government agencies
- Investment platforms
This information is progressively added to ATO pre-fill reports throughout July and August. If you lodge your return before all relevant information has been reported and made available, your tax return may be missing crucial income, offsets, private health insurance details, investment income, or other vital information that directly impacts your final tax result.
This is a primary reason why early lodgements can often lead to amendments, additional tax payable, interest charges, or significant delays. While the return might appear correct at the time of lodgement, subsequent ATO data matching can reveal missing information, leading to an unwelcome surprise down the line.
Common Information Delays
Information that is frequently not ready for lodgement early in July includes:
- Bank interest statements
- Dividend statements
- Managed fund tax statements
- Private health insurance details
- Government payments information
- Share sale information
- Some employer finalisation data
For investors, retirees, rental property owners, and individuals with multiple income sources, waiting a little longer to gather all necessary documentation can produce a far more accurate and beneficial tax outcome.
Accuracy Over Speed
It is crucial to remember that speed is not the same as accuracy. A tax refund received quickly is of little benefit if the return later needs to be amended, requiring you to repay part of that refund. The better approach is to prepare early but lodge when all records are complete and verified.
Preparing for a Complete Lodgement
You can use the early part of July to your advantage by starting to gather receipts, checking your work-related deduction records, reviewing rental property expenses, confirming all income sources, and verifying whether your employer has finalised your income statement. Once the key information is complete and accurate, your tax return can be reviewed properly and lodged with much greater confidence.
Fiscal Artisans’ Approach to Tax Time
At Fiscal Artisans, our primary focus is on lodging your tax return correctly rather than simply lodging it quickly. A careful review of your financial situation in July or August can significantly help in identifying missing information, reducing the risk of amendments, and ensuring that all legitimate deductions are properly claimed. This meticulous approach saves you potential headaches and financial penalties in the long run.
Key Questions to Ask Yourself Before Lodging (or preparing information to be lodged)
Before you submit your tax return, consider these important questions:
- Has your employer marked your income statement as ‘tax ready’ in the ATO portal?
- Have you received all necessary bank interest and dividend information?
- Are your private health insurance details finalised and available?
- Have managed fund or investment statements been issued for the relevant period?
- Are your rental property expenses complete and accounted for?
- Do you have all receipts and records for the deductions you intend to claim?
If the answer to any of these questions is ‘no’, it is likely in your best interest to wait until you have gathered all the necessary information.
The Best Outcome: Accuracy and Defensibility
Tax time should not be a race. The most beneficial outcome is not always the earliest lodgement; it is the tax return that is accurate, complete, and fully defensible should the ATO request further information or clarification. By ensuring all details are in order, you protect yourself from potential future issues.
So, what do you need to do?
If you are unsure whether your tax information is complete or if you have any questions about lodging your tax return, please contact Fiscal Artisans before lodging. We are here to review your records, identify any missing information, and help ensure your tax return is prepared accurately and efficiently the first time.
To book an appointment, Call us on +613 7034 4363 or email to: info@fiscalartisans.com.au