6 things to know before lodging your tax return

Tax time is an opportunity to make sure you're claiming everything you're entitled to - but it's also a time when simple mistakes can lead to delays, amendments or even unwanted attention from the Australian Taxation Office (ATO). 

Whether you're a salary earner, an investor or both, a little preparation can make the process much smoother. Here are six key things to keep in mind before lodging your 2025-26 tax return. 

1. Don't be too quick to lodge 

It can be tempting to lodge your tax return as soon as the calendar ticks over to 1 July, particularly if you're expecting a refund. But if you're preparing your own return, patience can pay off. 

Many taxpayers lodge before all their information has been reported to the ATO. Employers, banks, private health insurers, share registries and government agencies all need time to provide their data, and while much of this information is automatically pre-filled into your return, it often isn't complete until late July or even August. 

Lodging too early increases the risk of missing income or other information, meaning you may need to amend your return later. Waiting until your income statement is marked "Tax Ready" and your pre-filled information is complete can save time and reduce the likelihood of ATO queries. 

2. The ATO is watching more than ever 

The days of hoping the ATO won't notice missing income or inflated deductions are well and truly over. The ATO now receives data from a wide range of sources, including employers, banks, investment platforms, cryptocurrency exchanges, government agencies and online marketplaces. 

This tax time, particular attention will be paid to work-related expense claims, work-from-home deductions, rental property expenses and undeclared income from side hustles or investments. 

Before lodging, make sure you've declared all your income - not just your salary. Interest, dividends, capital gains, rental income and gig economy earnings all need to be included. If the ATO's data doesn't match your return, you're far more likely to face a review or need to amend your return.

3. Understand what you can and can't claim 

Many taxpayers miss legitimate deductions, while others claim expenses they're simply not entitled to. The key is understanding the three golden rules for claiming a deduction. 

First, you must have spent the money yourself and not been reimbursed. Second, the expense must relate directly to earning your assessable income. Third, you need records to substantiate your claim. 

For employees, common deductible expenses may include professional memberships, self-education costs, protective clothing, tools and equipment, and some home office expenses. However, everyday clothing, commuting to and from work, or private expenses generally aren't deductible simply because you use them at work. 

Good record-keeping throughout the year is the best defence if the ATO ever asks questions. 

4. ETF investors need to look beyond the cash distributions 

Exchange-traded funds (ETFs) continue to grow in popularity, but they can create unexpected tax issues for first-time investors. 

One common misconception is that you're only taxed on the cash distributions you receive. In reality, ETF tax statements often include several different components, including capital gains, foreign income, franking credits and tax-deferred amounts. These amounts may need to be reported separately in your tax return. 

Many ETF providers don't issue their annual tax statements until several weeks after the end of the financial year, so investors should avoid lodging too early. Relying solely on your cash distributions or brokerage statements could result in an incorrect return. 

If you invest in ETFs, wait until you've received your annual tax statement before completing your return. 

5. Keep good records - your future self will thank you 

Good record keeping isn't just about satisfying the ATO - it's about making tax time significantly easier. 

Digital receipts, bank statements, invoices and expense-tracking apps all make it easier to substantiate claims if the ATO asks questions. Investors should also keep records of purchase prices, brokerage costs, reinvested distributions and any expenses associated with managing their investments. 

These records become particularly important when calculating capital gains tax after selling shares or ETFs, sometimes many years after the original purchase. 

The ATO generally requires tax records to be retained for at least five years, but records relating to investments should often be kept for much longer, particularly where assets are held for extended periods. 

6. Remember that tax isn't just about getting a refund 

Many Australians judge the success of their tax return by the size of their refund, but that's not necessarily the right measure. 

A large refund often means you've paid too much tax during the year. The real objective is to lodge an accurate return that includes all your assessable income and every deduction you're legally entitled to claim - no more and no less. 

For investors, tax time is also a valuable opportunity to review your portfolio, ensure your records are up to date and think about tax planning for the year ahead rather than waiting until next June. 

With a little preparation and attention to detail, tax time doesn't need to be stressful. Taking the time to lodge accurately the first time can help avoid costly mistakes and ensure you receive every tax benefit you're entitled to.