Should I do my own taxes, or use a pro?

 

• 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