Do tax returns confuse you?
Everyone’s situation is different, which means there’s no right answer on whether it’s better to lodge your tax return yourself or have someone else do it for you. We’ve collaborated with Chartered Accountant and Registered Tax Agent, Brenda Morrice, from Yallaroy Business Solutions to bring you the facts.
Get to know your options better, with this simple Oiyo guide!
When tax returns can get difficult
Lodging tax returns can certainly get difficult for people with: small businesses, several incomes, or investment properties. However, it’s not uncommon for people with one income and what would be a relatively simple tax return, to hire the services of an accountant.
According to Brenda, it’s always useful to assess your needs every year. Doing so can help you determine whether the help of an accountant is necessary or not. Regardless of your income, some years, tax returns may look simple. Whereas others, they may not. It’s a matter of whether you feel confident enough to lodge it yourself or have it done professionally.
Doing your tax return for the first time
Are you about to do your tax return for the first time? Although it may seem complex, it can be pretty simple. As a first-timer, lodging your tax return should be quick and easy. You’ll most likely have to lodge your tax through myTax, which is accessed through MyGov. Although often portrayed as a challenging and scary task, lodging your tax return through the Australian Taxation Office (ATO) is fairly straightforward, especially as a first-timer.
Programs like myTax are easy to navigate and are filled with useful information regarding tax returns. If you’re hesitant and uneasy about the process, an accountant can be a great option. However, lodging your own tax returns can help you learn about the entire process. Understanding the process and the relevant information is a useful skill to have for future endeavours!
How complex is your income?
A more complex income could mean a trickier tax return process. For this reason, a tax agent or an accountant may be more suitable for individuals with complex incomes. As mentioned above, lodging a return is more difficult for individuals with small businesses, investment properties, etc. Getting an accountant can also depend on your personality. A tax agent can certainly help relieve some pressure, especially if you get stressed easily.
There are several other benefits to acquiring the services of an accountant. For example, if you run your own business, they can aid with organising all your present and future finances. So, there is less risk of you failing to keep any necessary financial records required by law.
However, if you’re taking home one income and minimal items to claim, myTax can do the job! Data regarding your finances will be prefilled by the ATO. This will include information about your wage, tax withheld, etc. All you’ll really need to do is review that information to ensure it’s accurate.
Brenda's two cents
For someone with a simple return, for example, a single source of income and a few work-related deductions, I would encourage them to look at lodging their tax return themselves through myTax. However, some types of income, like capital gains, have complex rules for calculating the amount you need to put in the tax return, so you definitely need an Accountant or Registered Tax Agent to help with these.
What can you claim in your tax return?
If you have a pile of receipts at home, how do you know which ones you can claim? Typically, deductions one can claim will come under work-related expenses. However, there are a range of other expenses that you can claim a deduction for. We’ve listed this below:
To claim a work-related deduction you must have spent the money yourself, it must directly relate to earning your income and you must have a record to prove it. Here are some examples of some work-related expenses you can claim a tax deduction for:
- Vehicle and travel expenses;
- Clothing, laundry and dry-cleaning expenses (must be uniform or occupation specific);
- Home office expenses (for employees working from home as a result of COVID-19);
- Self-education expenses;
- Tools, equipment and other assets;
- Other work-related expenses;
You may also claim a deduction for expenses such as:
- ATO interest – calculating and reporting;
- Cost of managing tax affairs;
- Gifts and donations;
- Interest charged by the ATOInterest, dividend and other investment income deductions;
- Personal super contributions;
- Undetected purchase of a foreign pension or annuity.
Visit the ATO website for more information on income and deductions.
If it’s your first time lodging a tax return with deductions, it’s important to understand all the definitions beforehand. Therefore, It’s okay not to feel too confident, especially as a beginner! When handling claims, an accountant can be useful for ensuring you’re staying within the law. They can also help you find ways to maximise your claims.
How an accountant can be helpful
Mistakes happen all the time, and that’s okay. When it comes to mistakes on a tax return, you can request an amendment yourself through the ATO.
An amendment is another reason why an accountant can be helpful. For instance, you might be unsure about whether an amendment is necessary. If that’s the case, an accountant can help you understand the process and what the outcome might be. Plus, an accountant is useful when you’re lodging your tax return late. The due date for an accounts return is 15 May the next year, while your due date is October 31. However, those dates can vary depending on your tax agent.
Brenda's two cents
Another issue that arises with lodging your own return is the fact that the ATO tweaks the return every year, making changes to label items and additional information required. Using a Registered Tax Agent will help minimise the risk of being an audit target by making sure that you report all your income correctly, that your deduction claims are legitimate and can be substantiated (in the event of an audit!).
Does an accountant fit in your budget?
You will certainly save money when lodging your own tax return accurately. Accountants can charge high fees for handling your financing and lodging your tax return, especially for individuals with a simple income. For instance, agents tend to charge around $90 for a service that’s pre-filled by the ATO. This is why accountants are better suited to individuals with more complex incomes.
Keep in mind that individuals with rental properties, or capital gain will most likely have to pay a higher price. You can expect to pay higher fees if your tax affairs are more complex. As a result, it’s recommended that you get a quote before committing to anything. This should tell you if your accountant’s fees can fit within your budget. Hear from the experts!
Doing it yourself vs. Paying an agent: Pros and Cons
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Contributions from Brenda Morrice
This article features contributions from Brenda Morrice, Chartered Accountant and Registered Tax Agent from Yallaroy Business Solutions. Brenda holds a wealth of experience from her many years working as both a commercial accountant and in public practice accounting.