Wednesday 26 December 2007

e-Tax adventures

I've finally started filing my 06/07 tax return using the e-Tax online filing software (it was due by 31 Oct, but I'm unlikely to be fined for late lodgement since they owe me a refund). The ATO has introduced an optional "pre-fill" feature where you can download the dividend, mutual fund, bank interest and other data they already have on file for your tax file number (TFN). Last year I decided against using this feature as I was sure it wouldn't be completely correct, and trying it out this year has certainly shown that "pre-filled" tax returns are unlikely to be 100% correct for any but the simplest tax return. The bank interest data was OK as far as it went, but there were a number of accounts missing from the ATO's download (for no apparent reason, as they all have my TFN on file), and our joint accounts were completely absent - it appears that the ATO system can only match data to TFNs where an account has one TFN associated with it.

The dividend data download was also incomplete, with several company's dividend payments missing from the data. The ATO data was also a pain to reconcile against my excel spreadsheet of dividend payments, as it had combined some dividends payments made at different times by the same company, but had also listed some other dividends from the same company as separate line items. The downloaded data also wasn't listed in alphabetic (or any other discernible) order, so each line item had to be found and highlighted on my spreadsheet in order to identify which dividend items were missing from the ATO's "pre-filled" data.

The worst problem with the ATO's dividend data appears to be an item included as an unfranked dividend recorded as paid by the Commonwealth Diversified Share Fund. Although this is a listed company that pays dividends, the dividends paid to me WERE fully franked (the ATO data listed the payments as unfranked, and lacked the franking credit information), and these payments were listed in the annual tax advice from CDF under different tax return items (relating to managed fund payments, which seems correct) to the normal stock dividend payment tax items. I think this data has been misreported to the ATO, so I've edited out these dividend payment items from the ATO downloaded data and will include only the tax advice amounts listed in the advice provided by CDF.

The mutual fund data downloaded from the ATO only included one fund (an Adelaide bank cash management account linked to my Leveraged Equities margin loan account). All the details for my other fund investments with Colonial First State, Vanguard and other funds were absent and will have to be manually added to the downloaded ATO data.

Overall, although it was interesting to find out exactly what transaction data was on file with the ATO, the errors and incomplete data makes it more trouble checking and correcting the "pre-filled" eTax return that it's worth. I'm sure some people (less honest than me) would use the downloaded information as a guide to what dividends they have to include on their tax return, and would assume that the ATO was unaware of any dividend payments that don't appear in the downloaded ATO file. Although the ATO does advise that the downloaded data should be checked before filing, you'd probably not be penalised if you used the ATO data to complete these tax items and an eventual tax audit showed that the data from the ATO was actually incomplete.

The "roll-over" feature that automatically incorporates data from the previous year's eTax return stored on my PC is more useful, mainly as a prompt for which tax items were included last year. However, even that feature has some glaring omissions. For example, even when the previous year's eTax data has been rolled-over, the eTax "interview" still asks whether or not I was using the "Simplified Tax System" for my business last year - surely this would have been easy to roll-over? I had to go to last year's hardcopy of my eTax return to check what I'd decided last year.

Anyhow, hopefully I can finish entering all the dividend and mutual fund details into eTax tonight, and tomorrow can finish off my capital gains tax calculations and get my tax return lodged. The capital gains tax calculations have been my reason for not filing my tax return earlier - some of the shares I sold last financial year had been bought in dribs and drabs over the past 20 years, including some off lots added via DRPs, and some had been partially sold off in previous years. All this meant that I have to trawl through my previous year's tax return files to find the relevant dividend statements showing how much the DRP additions had cost, and to look up which lots had been allocated to previous partial sales of my stock holdings.

Once my tax return is filed I will know the final figure for my 2006/7 taxable income and can then proceed to file DWs return. Her tax return is much simpler (no margin loans, mutual funds, dividends or capital gains tax calculations), but can't be completed until I've done mine as the eTax return asks for the spouse's taxable income, and this in turn affects the Family Tax Benefit calculation.

The fact the both mine and DW's eTax returns asks for the spouse's taxable income is a bit of a catch-22 situation. I have to complete my return using a guesstimate of DWs income, then (before I actually file my return) complete her return (using the figure for my taxable income) in order to determine the correct figure for her taxable income to update my return and file it! Luckily the spouse's income figure only appears to affect the Family Tax Benefit calculation and not the taxable income calculation, otherwise this would become an iterative process...

Copyright Enough Wealth 2007

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