Lodging tax return? … It is the tax season again. Your mind is wondering how you should lodge your tax return this year. So you’re asking yourself if you’re going to lodge tax return by yourself or going to a registered tax agent for lodging your tax return. The simple answer to this is it depends on your situation. Because everybody is unique and your tax situation is no different.
Basically, the following situation will give you some guidance whether DIY or using a tax agent for lodging your return:
Are you in business or wage earner?
If you’re in business, most likely you would engage a registered tax agent/accountant to help you lodge your tax return. The tax law surrounding the business situation is complex and it changes rapidly. Hence, it requires a deeper knowledge and understanding of taxation issues. Don’t rely on the advice you have from a friend or a bit of research you have on the internet information. They will certainly not take any responsibility if something goes wrong.
You probably could lodge tax return by yourself if it is only a simple wage earner without many claimable deductions. Furthermore, you are confident enough about your knowledge surrounding simple personal tax returns. The easiest way to do this is through MyGov. It is free and the only online channel the Tax Office approved for lodging your personal tax return.
USING A REGISTERED TAX AGENT TO LODGE TAX RETURN?
Australian Taxation Office (ATO) has issued a warning that they have identified some registered and unregistered tax agents lodging tax returns through the MyGov channel. Therefore, it is a breach of ATO Online terms for registered tax agents to use MyGov for lodgement.
To check if you engage with a registered tax agent, please see Tax Practitioners Board – TPB’s website. There are many dodgy preparers out there. So for your safety, you should only deal with a registered tax agent listed on TPB’s website.
On top of that, many accountants belong to a professional body
(i.e.: CPA Australia, ICAA, IPA, NTAA, etc.) and offer their service directly to the public. These are public accountants. The professional body is the governing body for them. The professional body will grant the public licence to its members only after fulfilling stringent requirements from the professional body. So only accountants with public practice licence can offer their services to the public. Therefore having a tax agent with this background will give you a minimum standard service expectation from the professional body.
What situations you had during the financial year?
The next question is to see what sort of transactions or deductions you probably had during the past financial year. If so, do you have the following situation?
WORK-RELATED EXPENSES (WRE) CLAIMS.
ATO provides clear guidance for claiming the deductions when you lodge tax return:
- you must have spent the money yourself and weren’t reimbursed
- it must directly relate to earning your income
- You must have a record to prove it.
For further information about types of deductions you can claim can be found on ATO’s website.
Caution on this: as the ATO’s data matching program is getting sophisticated, you should be able to substantiate your claims in your tax return. The inquiry may come from specific occupations target for this year, benchmark data matching, data matching program or random audit.
Another situation that may happen to you in this financial year is if you have:
- any capital gain event,
- rental property income,
- profit distribution,
- estate assets disposal,
- unusual tax situations, or
- perhaps just want more clarification/certainty.
This may need deeper tax knowledge than the standard tax return lodgement that you can handle. Therefore in this situation, it is better to use a registered tax agent on your behalf.
ADVANTAGES OF USING A TAX AGENT TO LODGE TAX RETURN
There are several benefits using a qualified tax agent to prepare your tax return:
- You can claim the cost you incurred for engaging a registered tax agent. When a registered agent lodges tax return on your behalf, the fee is certainly claimable the following year.
- A good registered tax agent will guide you through his/her checklist ensuring all deductions that you entitle to are claimable. You also need to demonstrate that you can substantiate your claims if there is an inquiry from ATO. For example: maintaining receipts, logbook, diary, or other supporting documents. Therefore you need to keep your record for this purpose.
- Sometimes when you come to visit your accountant/tax agent, it happens after 30 June. So, there is very little that your accountant can do to improve your tax condition for the past year. A good registered tax agent would generally highlight the areas you need to focus on for the following year. So your next year situation will be in better shape. Always ask your accountant/tax agent what you probably need to do/prepare to improve your situation for the coming year.
- It helps you free your valuable time and stress. To some people tax return preparation is very time consuming and stressful. Not to mention that you may forget some of your claims unless your accountant/tax agent highlights them. Therefore asking a registered tax agent for this is a better option.
- A good registered tax agent has to maintain a minimum qualification and continuous professional development. Tax agents/accountants spend enormous time and resources on this. This is one part of the compliance requirements from the government regulatory bodies and their professional bodies. Consequently, this will improve your comfort and peace of mind of their knowledge and expertise.
- A good registered tax agent would make sure that your claims stay within the legal boundaries when preparing your return. In contrast, you do not want ATO knocking on your door to inquire about your past lodgement. ATO may impose a penalty and interest for misleading lodgement.
- A good registered tax agent/accountant will be a good companion. You may need the advice from your tax agent/accountant in the future as your situation changes. For example, you may have an intention to start/buy a business, buying/selling property, accountant’s letter for your home loan, etc. So maintaining a good relationship with your accountant is important.
- Instant extension time for lodging your return. Engaging with a registered tax agent will give you an instant extension time. However, it is subject to no outstanding returns from previous year. Your tax agent would also need to add you to their portal before 31 October. The standard tax return lodgement due date is 31 October. Once your agent has uploaded your details, your lodgement time will follow the tax agent’s lodgement time. It is usually by 15 May the following year.
Finally, after reviewing the above topics you can decide how to progress from here. Considering how complex your situation rather than the cost alone. In contrast, you also should consider carefully your own knowledge/skills you have. If you decide to use a tax agent service, please make sure you use a registered tax agent for this.
As mentioned before, the tax agent fee is fully deductible for the following year. However, if you engage with an unregistered tax agent not only the fee is not deductible, you’re also putting yourself at risk for wrong information from the unregistered provider.
Should you require any help to lodge your tax return, please do not hesitate to contact us. We are a CPA firm located in South Eastern suburb of Melbourne.