How to be financially prepared for your tax payments

Lodging your own tax return doesn't have to be a scary experience, but you need to ensure you do it right, and on time, to avoid penalties.

  6 minutes

The knock at the door from a tax collector is something we all dread, even though most of us have a clear financial history and aren’t doing anything untoward. It’s not a nice feeling having someone going through your bank statements just to try and catch you out in case you missed a tax payment here or there, but it is a possibility – particularly if you file your own tax returns.

If there does ever come a time when you are being audited by the Australian Taxation Office (ATO), you will want to be confident that you have handled your taxes correctly your whole life. So what do you need to do when filing your own taxes, or sorting out your finances before the end of this financial year? Let's take a look.

When do you need to organise everything?

The tax year runs from 1 July 1 to 30 June the following year, so you should aim to have all of your taxes sorted out by at least the end of June. Missing that deadline isn’t the end of the world, but it means that you might have to wait longer to claim a tax payment, for example, which isn’t ideal.

If you do miss the deadline and you have an outstanding tax bill, you should contact the ATO and assure them that your payments are incoming. They can work with your financial situation to come up with a payment plan that’s going to work for everyone. It’s much better to owe the ATO money and have them working with you to repay it over time than for them to have to reach out to you and ask for a reason you’re late with your payments.

The latest you should ever lodge a tax return is 31 October, as after this date you will start incurring penalties. If you’re too busy to organise everything by yourself before this date, you should contact a registered tax agent and authorise them to sort it out on your behalf.

The tax year runs from 1 July to 30 June the following year, so you should aim to have all of your taxes sorted out by the end of June.

What do you need to lodge your own tax return?

If you are lodging your own tax return, you need to have some information handy. This includes your tax file number, any earnings you have made through the year, evidence of purchases you are claiming as deductions, and a statement from your bank about any interest you have accrued over the financial year.

With all this information, you can put together a complete tax return. If you miss any details within a tax year, you might not be paying the correct amount of tax, and that could become a problem down the track. In the event of an audit, when the taxation agent comes across this discrepancy, they will ask you to pay what you owe, and it might incur a penalty fee as well.

On the other hand, if you don’t claim all that you can, you might miss out on a deduction. This could be based on your taxable income or perhaps charitable payments you have made over the year.

After you have lodged your return, ideally between 1 July 1 and 31 October, you will be sent a Notice of Assessment by the ATO containing either an amount due, or a amount to be refunded to you. In the event you owe money, the receipt will give you information about how to pay and when you need to pay by. In the event you’re owed money, it will detail how much, and it should automatically be deposited into your account.

For more information about sorting out your finances, make sure you talk to your accountant or financial advisor before 31 October.