Should you do your tax return yourself or pay an accountant to do it?
While the ATO has made it relatively easy for many people to file their tax return by pre-populating most people’s data — everyone’s work and life situation is different.
We spoke to three tax experts who offered their guidance on how to know if an accountant was right for you when filing your tax return.
Is doing your own tax return really that challenging?
According to all three experts, people with very simple returns typically don’t need an accountant.
To assess if your return is a simple one, there are a few things to consider.
“If you’re computer savvy and had only one job during the year and [only] a few work-related expenses to claim as deductions, it’s not that challenging to do on your own,” Tony Martins, principal tax clinic supervisor at the UNSW, said.
So, if you’re a person who earns an income from a single employer, usually the income statement the employer provides at the end of the financial year is enough for you to complete your own tax return.
And you can do this via the ATO’s online tool myTax, which Mr Martins says is relatively easy to use.
“By late July, most information from employers, banks, health funds and government agencies will be pre-populated.”
But he warns you should always make sure the pre-filled information is correct before you lodge the return.
Remember though, that your deductions — for example, stationary and other eligible work expenses — won’t be automatically populated.
You have to enter these yourself.
And you’ll need to have the necessary receipts to prove when you bought these items and how much you spent.
At what point should you engage a tax agent?
That depends.
The more complex your income, the more reason to see a registered accountant.
A person with a more complex tax return might be someone who:
- Works multiple jobs
- Works as a contractor of freelancer (side hustle)
- Operates independently as a sole trader or holds an Australian business number (ABN)
- Manages a business or possesses an ABN for business-related purposes
- Owns investment assets in shares (for example, cryptocurrency) or real estate
- Earns income from sources outside of Australia
If you fit into one of the above categories, account firm H&R Block’s director of tax communications Mark Chapman recommends seeing an accountant to ensure what you’re reporting is accurate.
“The risks of lodging yourself and making one or more mistakes are simply too great,” Mr Chapman told the ABC.
“Get your tax return wrong and the comeback is on you, either with a lower refund or ATO penalties.”
CPA Australia spokesperson Gavin Ord agrees tax time can be overwhelming for individuals and businesses.
“Seeking professional advice can help take the pressure off and reduce the stress of navigating your tax returns,” Mr Ord said.
According to the latest ATO statistics, 63 per cent of Australia’s 15 million-plus individual taxpayers used a tax agent to prepare and lodge their return.
How to choose an accountant
The first thing you’ll want to do is check that your accountant is registered with a professional accounting organisation.
There are three main professional bodies in Australia:
- The Institute of Public Accountants (IPA)
- Certified Practising Accountant (CPA)
- Chartered Accountants (CA) Australia & New Zealand
They also need to be a registered tax agent with the Tax Practitioners Board.
From there, Mr Chapman says a personal recommendation can be a good start.
“If a friend or family member has used a certain tax agent and was satisfied with their services, you could do worse than going to see that agent,” he said.
If you don’t have any personal recommendations, a quick online search can do the trick.
But just be sure to do your research properly.
Another thing to consider is whether any tax agents offer free initial consultations.
Mr Ord says the consultation will likely include:
- An overview of the services the agent provides
- The terms of engagement, including cost estimates
- An assessment of whether an accountant is the best person to support them with their circumstances
“But keep in mind that different accountants will take different approaches to charging for an initial meet-up, so be sure to confirm in advance,” he said.
How much does an accountant cost?
You can expect to pay between $100 and $300 for a typical tax return.
This cost, however, does vary depending on the agent and the complexity of your circumstances.
The fee you pay to a tax agent to complete your return is tax deductible — but you won’t be able to claim it until the following financial year.
What are the biggest tax mistakes people make?
Mr Ord says tax errors are a common occurrence for Australians.
“Getting it wrong can lead to delays in receiving your refund, extra work to get it right, unnecessary stress and potentially even penalties.”
To avoid making any mistakes (if you decide to do your own tax return), here’s what our three tax experts recommend watching out for:
Excluding taxable income from the return
You must fully disclose all sources of income whether they come from employment, investments, rental properties, or freelance work/side hustles.
Embellishing deductions
Only claim what you’ve spent.
So don’t inflate deductions to try to get a bigger refund.
“Self-lodgers using the ATO’s myTax program are monitored as they prepare their return by the ATO’s computer systems to ensure they’re not over-claiming,” Mr Chapman said.
“The ATO’s computer systems compare your claims to those of others like you and if your claim rings alarm bells, myTax will give you a stern warning inviting you to rethink that deduction.
“Ignore that message, and you could be headed for an audit.”
If the ATO does an audit and finds your deduction claims are incorrect, you will be required to repay the tax avoided, plus pay interest.
“And if the ATO believes that you have acted carelessly, a penalty between 25 per cent and 95 per cent of the tax avoided may also be charged,” Mr Chapman said.
Relying on the ATO’s pre-filled data
Don’t assume that the income data pre-filled from the ATO’s system is correct or complete, particularly if you’re lodging early (in July and early August).
Mr Chapman says if you omit income and get questioned by the ATO, “the legal burden will be on you” even though you’ve taken the information straight from the pre-filled data.
Basic housekeeping
Confirm that your name, address, and bank account details are all correct.
What can I claim on tax?
There are strict rules about this on the ATO’s income and deductions page.
But essentially, it’s anything that’s directly related to your work or another income-generating activity.
Here are just a few things you may be able to claim as deductions.
Work-related clothing
If you bought occupation-specific clothing, protective clothing or work uniforms specifically related to your job, you might be able to claim these costs.
You can also claim the cost of laundering and dry-cleaning.
Vehicle and travel expenses
You usually can’t claim the cost of the daily commute to and from work.
However, you may be able to claim the cost of travelling between multiple workplaces or locations. This includes public transport and taxi costs.
If you plan to use your own car for work purposes, you can claim either a set rate of 85 cents per kilometre for all your work journeys, or claim the actual expenses incurred (receipts and logbook needed).
You can find out more about vehicle and travel expenses you can claim on the ATO website.
Working from home
If you spend time working from home, you can claim a proportion of home-running costs.
You can do this based on actual costs (in which case you’ll need receipts), or a standard rate of 67 cents per hour.
The 67 cents rate covers:
- Home and mobile internet or data expenses
- Mobile and home phone usage expenses
- Electricity and gas (energy expenses) for heating, cooling and lighting
- Stationery and computer consumables, such as printer ink and paper
Self-education
You can claim a deduction for self-education expenses if the education relates to your employment activities.
This may include a course provided by a professional or industry organisation, or a work-related conference or seminar.
The golden rules of claiming expenses for work
There are three “golden rules” that apply when it comes to claiming expenses for work, Mr Chapman says.
- The expense must be related to your work (or other income-earning activity)
- You mustn’t have been reimbursed by your employer
- You must be able to prove that you spent the money — that means keeping receipts, invoices or statements
When are tax returns due?
October 31 — that’s if you’re lodging your tax return yourself.
But if you have an accountant, you’re eligible to extend your tax return deadline.
The extended date varies depending on individual circumstances, but in most instances it can be as late as May 15.
If you do decide to go through an accountant you must, however, book your appointment by October 31.
This article contains general information only. You should obtain specific, independent professional advice in relation to your particular circumstances and issues.