Filing Your Taxes Early? Here’s Why It Might Be Costly

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As the new financial year dawns, many Australians are eagerly awaiting some much-needed funds in the form of a tax return.

Almost half of Australia (47 per cent) is expecting a tax refund, according to a survey of 1,015 people from financial comparison site Finder.

Of those expecting a refund from the Australian Taxation Office (ATO), more than half (52 per cent) plan to put the extra cash straight into savings.

As the cost of living continues to bite, 19 per cent said they would use the extra funds to pay for household bills.

Only a small portion said they’d use it for discretionary spending like holidays (7 per cent) or shopping sprees (5 per cent), while 6 per cent plan to put it towards their mortgage.

Want to file your tax return now? Not so fast

While many Australians might be eager to get their refunds quickly, it might be better to wait, says H&R Block’s director of tax communications, Mark Chapman.

“There are really two reasons [to wait]. First, the ATO isn’t even going to process refunds until the second week of tax time,” Chapman told SBS News.

“Secondly, the pre-filled information which the ATO relies upon to pre-fill your tax return — provided by employers, banks, health funds — is often not available for the first couple of weeks of July.”

If you’re completing your tax return by yourself, you may be relying on the ATO’s pre-fill function, which automatically inputs things like your income, health insurance, and bank interest.

“But it takes time for all these different organisations to finalise all of their financial statements and report that information to the ATO,” said Sarah Megginson, personal finance expert at Finder.

“Your employer has until 14 July each year to finalise your payroll data and submit it with the ATO, and without this information, it’s really hard to complete your return.”

Jump the gun, and you’ll risk missing important income details.

“If you lodge in the first two weeks, you run a real chance of basically missing income from an employer or bank interest and then having to do an amendment later on,” Chapman said.

“It’s very easy to miss some form of income if you’ve got three or four bank accounts, all of which will pay interest.

“If you’ve only got one or two of them on the ATO’s pre-fill, it’s very easy to miss the other ones — so it’s potentially dangerous completing a tax return without that pre-filled information.”

So, when’s the best time to file your tax return?

Chapman recommends lodging your return in the third week of July, when pre-filled information is usually complete and the ATO has started processing refunds.

But if you’re expecting to owe tax, it could be worth holding off until the very last moment — 31 October if you self-lodge, or 15 May next year if you use a tax agent.

“Your tax liability isn’t crystallised until your tax return is processed. So the later it’s processed, the later your payment is due,” he said.

Tips for a smooth tax return

Don’t rely on pre-filled information. Always use your own records as the primary source, Chapman warned.

“Don’t assume the ATO pre-filled data is correct or complete, particularly if you’re lodging early,” he said.

He also advised double-checking the basics.

“Returns routinely get held up at the ATO because there’s some kind of data mismatch between what you’ve reported and what information the ATO has. I’m not talking about tax information — I mean your name or your address.”

If you’ve moved during the year, changed your name, or updated your bank details, make sure this is reflected with the ATO beforehand.

Otherwise, your return could fall into a “void” and be delayed, Chapman said.

And while it should perhaps go without saying, make sure your bank account details are correct if you want to actually receive your refund.