What Does “Balancing Account” Mean When Submitting an ATO Tax Return?

Are You Eligible for a Free Consultation?

Simply enter your details to see if you qualify for a free consultation today.

  • This field is for validation purposes and should be left unchanged.

Tax season can be a stressful time for many Australians. One of the most common questions individuals and businesses face when filing a tax return with the Australian Taxation Office (ATO) is figuring out what a balancing account is.

Balancing accounts serve as a way for the ATO to keep track of a taxpayer’s income and expenses. They are used to ensure that the taxpayer’s income and expenses are correctly reported and that the taxpayer has paid the correct amount of tax.


Understanding the Balancing Account

The balancing account is the difference between the taxpayer’s total income and total expenses. It is calculated by subtracting the total expenses from the total income. If the result of this calculation is a positive number, it will be added to the taxpayer’s income, meaning that the taxpayer will pay more tax. If the result of the calculation is a negative number, it will be deducted from the taxpayer’s income, meaning that the taxpayer will pay less tax.

When the ATO receives a tax return, it will check the balancing account to ensure that the taxpayer’s income and expenses have been correctly reported. If the ATO finds any discrepancies, the taxpayer will be asked to provide more information or amend their return.


Reporting Income and Expenses

In order for the balancing account to be calculated correctly, it is important that the taxpayer accurately reports their income and expenses.

Income should be reported in full, including any income from investments, wages, pensions, or other sources. It is important to note that income should be reported before deductions or tax credits are applied.

Expenses should also be reported in full, including any deductions or tax credits. Expenses should be reported after deductions or tax credits have been applied.


Claiming Deductions and Credits

In addition to reporting income and expenses, taxpayers are also able to claim deductions and credits. These deductions and credits can be used to reduce the amount of tax a taxpayer has to pay.

When claiming deductions, make sure to keep any receipts and documents that prove the deduction is valid. This could include receipts for medical expenses, travel expenses, childcare expenses, etc.

Tax credits are also available for certain expenses. For example, there are tax credits for education expenses, home office expenses, and childcare expenses.


If you need clarity or assistance with any tax-related matters, Perth Tax People is here to help. We have a team of experienced and qualified tax advisors who can help you understand the ATO’s requirements and ensure that your tax return is accurate and up to date.  Contact us today to get started.

Related posts:

Nilesh Vasoya

Nilesh Vasoya

Nilesh Vasoya is a CPA and experienced business advisor with 15+ years’ experience in accounting and tax, and certifications from NTAA, ICAI (India). He is also a Registered Tax and ASIC Agent. Nilesh specialises in financial reports, cash flow, taxation advice, internal audit, account reconciliation, and advice for small businesses on maximising XERO, MYOB, and QUICKBOOKS. He is experienced in developing strategies for growth within small-medium scale companies.

Contact Perth Tax People

Got questions? Chasing a quote? We are more than happy to help.