Tax returns are an obligation that all taxpayers must fulfil. You can attract penalties for failing to or for lodging wrong returns. Most people find tax returns to be a daunting task and prefer to avoid them altogether. Sometimes, it is complex, requiring a deep understanding of tax laws. It becomes more challenging when tax laws are constantly changing and you have to keep up with the changes, lest you flout them inadvertently.
One common question that most taxpayers ask is, “Can I do my tax return?” The decision to engage an accountant or do your tax return should be based on your specific circumstances. The level of complexity of your returns, your level of comprehension of tax laws, and the cost of hiring a tax agent would influence your decision. It is thus important to understand the pros and cons of the two alternatives before settling on one.
Can I Lodge My Tax Return Myself?
It is possible to lodge your tax return. However, you need to have a good understanding of what it entails. Mostly, you can lodge your tax returns if your income streams are simple, making your taxes simple enough for you to navigate.
For individual taxpayers wishing to do their tax returns on their own, ATO has a safe and secure online portal that you can use. All you need is to access myTax via your myGov account.
What a Tax Agent or Accountant Will Do for Your Tax Return
A tax agent ensures that your tax return is correct and accurate. They would ensure all the information required is included to avoid unnecessary penalties. They would also ensure you include all your allowable tax claims to maximize the claims. A tax agent would also advise on appropriate record-keeping for tax purposes. Ultimately, the tax agent must ensure that your return is error-free. They would therefore be keen on detail, keeping abreast with tax law changes as they occur.
What is the Cost of Hiring a Tax Agent or Accountant to File Your Tax Return?
The complexity of the tax return is the biggest determinant of the cost. The more complex your return is, the more you are likely to pay for a tax agent. Some tax agents may charge $20 for a completely online service and up to $400 for a personal return or up to $1,000 for a company tax return. TaxReturn.com.au has an efficient tax return package that costs as little as $79.
Benefits of Doing Your Tax Return Yourself
Doing your tax return is not all doom. It has its upsides, which one should consider. The biggest benefit is that it will not cost you. If you understand your tax return, lodging it will not cost you as it would when you are using a tax agent. Thus, it will save you money.
Another possible benefit is that you get to understand and control your tax situation. Lodging your tax return helps you to grow your tax knowledge, which makes it easy for you to manage your financial records better.
Benefits of Hiring a Tax Agent or Accountant to Do Your Tax Return for You
Hiring a tax agent has several advantages. Here is a list of some common advantages.
- Extension of the lodgement date (From October 31 to May 15)
- Liaison with the ATO for taxation matters on your behalf
- Informed advice on what to include in your tax return
- Ensuring you maximize your tax claims
- Handling of complex tax returns
- Up-to-date with tax law changes
- Advice on record keeping in compliance with tax laws
When Should I Consider Doing My Tax Return
It is advisable to do your tax return only if your tax return is simple or you understand all the tax requirements about your tax situation. The following are some of the instances where doing your tax returns would be viable.
- If You Are an Employee with Standard Deductions
Ordinarily, an employee with standard deductions would have a simple tax return. That makes it easy to use myTax to claim for deductions. You can use your receipts to claim simple deductions such as work-related purchases and expenses or charitable donations you made during the tax year.
- If Your Income is from a Single Employer
Income from a single employer has a simple tax return. It is easy to understand every detail of the tax return in such a scenario. Often, ATO prefills most of the data into your tax return form, making the return straightforward. However, you may need to double-check the information to ensure it is accurate.
When to Consider Hiring a Tax Agent or Accountant to File Your Tax Return for You
Mostly, a tax agent or accountant is necessary for taxpayers with complex transactions or income streams. In most cases, that would include those running businesses, those with multiple income streams, those with multiple investments, those that work for multiple employers, and those that have just had a big income change. You may also need the services of a tax agent if you are running out of time.
Running a business may involve complex transactions that lead to complex tax situations. It may not be easy to remember all the compliance rules while running your business. Thus, it is advisable to hire a registered tax agent to help you maintain all relevant financial records for your tax return. The tax agent would also be more likely to be up-to-date with changes in tax law compared to you.
Working for Multiple Employers
An individual working for different employers would be more likely to have complex tax situations. For people such as contractors and freelancers, a tax agent is necessary to help handle the complexity that results from the nature of their transactions. A tax agent would know how to categorize and handle each type of transaction, thus helping you comply with tax law.
If You Have Investments
Income from investments such as shares and real estate usually involves different tax calculations. The difference in treatment for such income can be complicated for most people, which may result in errors when lodging tax returns. Tax on income from investments requires someone that understands the requirements under each category. That calls for a tax agent, as they have the requisite knowledge to handle each type of asset as per law.
If You Are Claiming More Complex Deductions
There are instances when a taxpayer has complex tax deductions. One may have work-related expenses or household bills when working from home. You may also want to make deductions for the use of your vehicle for work. There are other instances where an individual incurs professional development costs and training fees. Claiming for such deductions may not be straightforward. That necessitates hiring a tax agent.
If You Had a Big Life Change in the Last Year
Life changes can affect your tax obligations. Changes such as marriage, divorce, or the death of a spouse are likely to make your tax return complex. For instance, some incentives and reliefs are available for married couples. Such incentives cease upon divorce or death of a spouse, making your return complex. Similarly, if you sell an asset such as your house, the transaction would make your tax return more complex. You may therefore need a professional to guide you through your tax return to capture the effect of the changes on your tax return.
When Running Out of Time
This might appear as one of the least probable reasons for using a tax agent to do your tax return. However, it is a possibility that many people encounter. Sometimes, it is not possible to file returns within the set deadline. You may be too engaged elsewhere that you do not get the time to do your returns on time. Hiring a tax agent may save you the headache of deadlines. A tax agent can lodge your tax return even after your deadline has lapsed. For instance, while an individual’s lodgement deadline is October 31, an agent may have even up to May 15 of the following year to lodge your return.
There are other special instances where you may need a tax agent to lodge your tax return. A tax agent would be necessary when lodging tax returns for prior years. A tax agent may also be necessary when you are lodging tax returns for the first time. That will ensure you do it right. You may also need to use a tax agent to maximize your allowable deductions. Sometimes, when doing your tax returns, you may overlook some deductions that the tax agent would likely note.
Risks You Need To Consider When Doing Your Tax Return
Although filing your tax returns through myTax may be simple, you still need to watch out for errors in your returns. Some of the common mistakes people are likely to make include:
- Missing or under-utilizing allowable deductions
- Claiming nondeductible expenses
- Incorrect apportionment of deductions
- Omitting assessable income
- Claiming items that should have been depreciated over years
- Including income or expenses in the wrong section of the return
Ultimately, the choice of whether to do your tax return yourself or hire a professional to do it for you is dependent on your circumstances. It may be a matter of convenience, understanding of tax laws, or ability to afford professional services.
For most people with relatively straightforward transactions and earnings, doing your returns is possible. However, as your transactions become more complex, you may need the help of a professional that understands the finer details of the tax laws on each type of transaction.
*General Advice Warning – “Any financial advice provided by TaxReturn.com.au is general in nature and is not personal financial advice. It does not take into account your objectives, financial situation, or needs. Before acting on any information, you should consider the appropriateness of it regarding your own objectives, financial situation and needs.”