Despite public opinions that taxpayers are overclaiming their car deductions, recent research has uncovered that Aussies are largely underclaiming their car deductions simply because they find it hard to keep the required records.
Here’s the proof.
Excluding commuting and personal trips, aussie cars drive 31 billion km for work purposes every year. Aussie utes do a similar amount. That’s all claimable. Assuming the standard ATO deduction of $0.72 per km the actual claim should total $23 billion a year.
But ATO records indicate that only $7.1 billion km was reimbursed to taxpayers – that’s a gap of almost $16 billion left unclaimed.
It seems that most of us are frightened of ATO crackdowns, are too busy or just simply can’t deal with the paperwork. So, they miss out.
If you travel a lot of kilometres for work, it’s likely you’ll get a bigger deduction if you keep a logbook. You can still claim 5000 kms without a logbook but the maximum claim is $3,400, and, according to the ATO one in five car claims were exactly $3,400.
But the research suggests many aussies can claim more if they can diligently fill in a logbook. Its easy money any way you look at it. But do we do it? For most of us the answer is no.
GoFar is an Aussie device that just plugs into your car or ute (even one’s as old as 2007) and magically records all those mileage details for you. It is a game changer for anyone wanting to avoid logbook torture – and it can keep thousands in your bank account.
GoFar makes your ATO logbook dead simple!
And the best news?
Our friends at GoFar are offering our clients and associates $30 off the cost of an Unlimited subscription.
Click here and insert the Discount Code ADUNLIMITED to get $30 off
Need more expert advice on how to set up a logbook and keep the ATO happy? For just $49 (limited offer) we can get you all set up and explain the rules and pro’s and con’s.
Click here to make an appointment or see your local Accountants Direct representative.
Here’s what people are saying about GoFar.
 Some is made up of cars/utes being corporately owned but this gets smaller every year as corporate fleets shrink. Some is made up by employees claiming miles not from the tax office but from their employer but that’s estimated at $3-5bn a year so however you look at it there’s a big underclaim because people think it’s hard to keep the right records
Another reputable study into the effectiveness of using DIY tax tools such as eTax has found that a large percentage of users fell well short of the tax refund owed to them due to their poor knowledge of what and how much to claim.
On the flipside, over 20% of users over claimed, and have put themselves at significant risk of audit, and repayment of up to twice the amount of the overstated claims with those surveyed owing the ATO over $800 on average.
While over 95% of DIY lodgers believe they got their tax return right, the true state of affairs is very different as almost two-thirds of all lodgements contained serious errors and illegal claims which needed to be rectified and also delayed refunds.
‘It blows my mind that Aussies on decent incomes, and paying a medium to high rates of tax who fully admit they fall well short in claiming all legal deductions and still take a crack at it to save the modest fees of a tax pro’ said Stephen Burns, CEO of Accountants Direct. ‘It’s even more surprising since Accountants fees themselves are fully tax-deductible’ he said.
‘Everything is data-matched by the ATO these days. If you earn income you need to declare it or you will be caught with 100% certainty’ said Burns. ‘This year we have had hundreds of DIY tax lodgers come back to us for help after totally screwing up their tax affairs – a figure that will only increase heading into the new year’ he said.
Why are people risking it?
The Aussie DIY mentality is well entrenched. And for some tasks it makes financial sense to do it yourself. But sometimes the numbers just don’t add up, or, it’s just too risky.
Our advice to Aussie taxpayers is clear – you will generally be better of leaving your tax to the experts come tax time. If you want to be sure that your tax return is maximised and low risk, use a registered tax agent.
Considering doing your tax yourself? You may have even tried it.
You can save money using MyGOV or using cheap and fast online software like Etax, but will you be better off?
Before deciding – question yourself if you have the time, patience and knowhow to prepare and lodge for the best refund.
Maybe you have paid a lot of tax thru the year – do you know enough to get the most back as legally possible.
If the answer is no, then it’s likely worth the cost of hiring a pro.
Taxes are a big deal.
Optimising your tax can be the single most effective way of keeping more money in your pocket long term, and, increasingly Aussies are asking themselves if they should do their own taxes or hire a professional. Tax legislation changes yearly, the nature of work changes yearly – so whether to do your own tax or not could also be a question worth asking every year.
The infographic below may help you make a quick decision, but for more info read on.
Should I lodge my own tax?
Australians have two main options when it comes to lodging income tax returns.
Do It Yourself (DIY):
Do It Yourself with the recently introduced and free ATO service called myTax. DIY tax can work if you are a low-income wage earner and conversely, have paid little or no tax, and you have a decent working knowledge of the tax process. You should also be familiar with online or mobile phone software. Though it’s low cost or even free, this option is generally accepted to delivery the worst result, depending on your circumstances.
Most self-employed Aussies or will find this option challenging and not the right solution if growth is your objective. This option is not recommended if you are operating a growing business or hold complex investments such as property or shares. There is also generally a higher risk of a tax audit, especially if higher claims are made that cannot be substantiated.
(*Quasi ‘paid’ DIY options such as eTax are also available but not covered here as we believe they also offer a poor solution)
Use a Pro:
Hire a Tax Professional to prepare and lodge your tax. There are several types of Tax Pros with different experience, specialisations and fees.
The only professionals qualified to help you and lodge your tax in Australian are called Registered Tax Agents – and are generally also qualified Lawyers or Accountants. You can search for appropriately credentialed Tax Agents on the Tax Practitioner Register. Tax preparers can also work under the direct supervision of a Registered Tax Agent.
Tax pro’s fees generally start at around $100 and vary depending on how much your earn, what you own and how complicated your taxes are, and accountants might very well charge at least twice that and more.
According to the National Tax and Accountants Association, the average charge for preparing and lodging a tax return in Australia is $265 with all charges being fully tax-deductible in the following year.
Should you prepare taxes yourself or hire someone to help? Getting a pro to do it will, in most cases, ally any fears you have about DIY tax.
For most people, it’s not just about the cost. Ultimately, it comes down to what you’re most comfortable with.
Do your own tax when:
You have the time and patience to deal with it. Doing your tax isn’t best done when distracted. You need to focus and can often spend all day doing individual tax preparation if you don’t have access to professional software. You can also waste a lot of time gathering info relating to deductions that may not even exist.
You have a straightforward tax situation, low income, no investments, and no significant assets or charitable contributions, and you are comfortable with software. It’s also essential that the idea of having to fix any errors the ATO comes back with doesn’t terrify you, and, you are not too fussed about getting the maximum back.
If you are self-employed or own a small business, expect to spend much longer – especially if you don’t have a bookkeeper or have excellent knowledge of accounting and tax. Business income adds another layer to preparing and lodging a tax return. We’d advise against it in most cases.
Hire a pro when:
You don’t have the time and patience to deal with it. If you feel that the significant time you’d need to devote to doing your taxes would be better spent elsewhere, you might want to use a pro. It’s probably more sensible than rushing through and making a mistake.
You earn a wage over say $35,000 per annum, have a more complicated tax situation with investments, or assets or charitable contributions, or you own a business – especially if that business is growing, or you want it to grow.
Nearly every financial transaction comes with some kind of tax consequence, and the more transactions you have, the more things you need to take into consideration. People who own businesses, freelance, or are self-employed in particular might want the help of a professional to iron out their tax situations — deductions for home offices, business meals and travel, and vehicles in 2020 have become major audit red flags.
You’ve had a life-change in the last year like changing or losing jobs, buying a house or investment, even a family change. These all impact your tax lodgements, and, at least the first time you document them on your taxes, you might want someone to show you how best to do it. COVID-19, of course, is a life-changing event and will have significant ramifications in our lives.
You don’t trust yourself to cover all of your bases. If the idea of entering numbers and talking about deductions makes you break out in a cold sweat, you might want to leave the preparation to a professional.
Need your tax done? We can help – call us on 1300 TAX SHOP or check out our website
Consult an expect – book here for the best refund.
The Australian Tax Office’s website has struggled in the last few days proving that more people than ever are desperate to receive their refund.Thanks to increased financial pressure from COVID-19, many taxpayers are sweating on using their refund for daily costs.But rushing through your return – or relying on age-old myths your neighbour’s brother’s tax agent said 10 years ago – leads many to filling out their return incorrectly.At best, this will slow down your tax return, and at worst you could face financial penalties for attempting tax fraud.Here’s six common myths and traps the ATO believes will catch out some taxpayers this return season:
It’s true that most taxpayers who lodge their return online will have their refund (if they are entitled to one) sitting on their account for ages. But lodging your tax today – particularly if you are relying on your employer to provide your income to the tax office – could actually slow your return down.”Each year the ATO automatically includes information from employers, banks, private health insurers (and this year JobKeeper for employees and JobSeeker amounts) in people’s returns,” the ATO advises.”For most people this information is ready by the end of July.”
Claiming work from home costs? Beware of ‘double dipping’
Thousands of Australians will be claiming working from home costs – such as cooling, electricity and internet – for the first time due to COVID-19.For many, that will involve using the ATO’s special “shortcut method” of 80 cents per hour you worked from home. But the ATO has warned that the 80 cent covers everything – including home office equipment – so some taxpayers might find themselves ‘double dipping’.”We are concerned that some taxpayers may either accidentally or deliberately double dip by claiming their working from home expenses using the all-inclusive shortcut method while also claiming for specific items such as laptops or desks,” Assistant Commissioner Karen Foat said.”It’s important to remember that if you’re claiming under the shortcut method, you cannot claim a separate additional deduction for any expenses you incur as a result of working from home.
The Accountants Direct tax service differs from the ATO’s “myTax” system in 5 important ways:
Accountants Direct is a professional 1 on 1 tax agent service – do your tax return from anywhere in Australia with degree qualified, experienced Tax Accountants and Agents who review your return before it is lodged with the tax office.
Accountants Direct will, in most cases, get you a much larger refund. Different studies have shown that, over time, people who self-prepare their taxes using myTax pay thousands more in tax than those who use Registered Tax Agents like us. We know tax law and how to legally claim all deductions possible. With myTax you rely on your own knowledge of tax law – which is generally very limited.
Accountants Direct is an independent tax agent service – we are not the ATO. We go to bat for you when dealing with the ATO. Our accountants will talk to the ATO for you and help resolve issues such as debts and audits. myTax is the government who want you to claim only the bare minimum and generally have little patience for the average taxpayer. Remember, their job is to collect tax – ours is to get you as much back as possible.
Accountants Direct helps you all the way, personally. Using ATO myTax, you’re on your own – there is no help. If you mess things up (it happens a lot) you are completely on your own.
Accountants Direct does the heavy lifting for you. We save you time and proactively offer you more ways to pay less tax. You don’t have to read thru pages of instructions and information only to find it does not apply to you!
Smart Aussies (in fact 75% of all taxpayers) use a Registered Tax Agent because they know they will be ahead come tax refund time. Accountants Direct will likely improve your refund significantly, save you time and stress and help you steer clear of ATO trouble.