Unless your income and family situation remains the same year after year, your tax situation is going to change over time. As the complexity of the return increases so too will the need for professional advice. The question, “will I lodge my own tax return or speak to a professional?” should be evaluated every year. If you decide to go it alone (which is perfectly fine for some people) you can lodge online through the ATO.
The ATO already knows, Trust me!
The ability of the ATO to match the information you lodge against data provided by other organisations is more sophisticated than ever before. They also benchmark your return against everyone else in Australia who works in the same occupation. So if you claim more deductions than others who work in the same industry as you it will stand out and increase the likelihood of an audit.
According to the Australian Taxation Office it is actually smaller, individual taxpayers, who represent the greatest risk of lodging incorrect tax returns and receiving refund cheques they are not entitled to. This is because:
• Individual taxpayers are far less likely to seek professional advice regarding income that should be reported and deductions that can be claimed;
• Individual taxpayers see tax time as an opportunity to earn additional income and the desire to increase their tax refund results in erroneous or fraudulent deductions being reported.
So, should you lodge your own tax return or get a professional to help?
You might consider lodging your own return if:
You’re a numbers person – some of us are!
If you enjoy keeping track of all the numbers and receipts, you’re on track to be able to lodge your own return. You understand your financial situation and can keep track of it all.
Your tax situation is simple
If you only have one job, no investments or other sources of income and have minimal work related expenses you are better placed to lodge your own return. Just keep in mind that your situation may not be as simple as you think it is. Are you aware of all the available deductions? You “don’t know what you don’t know” as they say.
You can understand tax laws well enough to research
If you are capable of browsing the ATO website, comprehend the tax jargon and stay up-to-date with the changes in tax laws then you are well place to prepare your own return.
It is Better to Hire a Professional if:
You have property or other investments
Investments immediately make your tax return more complex. Ensuring the income is properly reported on your investments, especially if you happen to sell an investment, is a job best left to a professional.
You run a business
Starting a business and reporting its income to the tax office requires expert knowledge. A good tax professional will help you identify a lot of deductions you may not have even thought of as well as helping you stay out of trouble.
Benefits to doing your own taxes:
– It’s less expensive, the ATO allows you to do it for free;
– You control when the work is done rather than fitting in with your accountant’s schedule; and
– You understand what has been lodged and why particular deductions were claimed.
Benefits to hiring someone:
– Continued professional development ensures your accountant is up-to-date on law changes which help identify available deductions;
– You get a professional to run their eyes over what is going to be lodged and ensure it’s accurate; and
– They can give you tax advice throughout the year.
The Bottom Line
Ultimately it’s completely up to you whether or not you lodge by yourself or use a professional tax agent. Most people who self-lodge do so to avoid paying for professional services. As a Tax Agent myself I’d like to think I add more value to the process than my advice costs. Even if that value is just the peace of mind I give my clients in knowing that their return has been lodged correctly.
Working with Panic Atax
Panic Atax is a Brisbane based Accounting and Business Advisory firm specialising in building strong relationships with clients and removing the stress and hassle many small business owners experience with financial reporting and tax. If you’re looking for an accountant to build a great, long term working relationship with we’d love to hear from you.