Getting the Best Result at Tax Time
It's already July. Whether you're working as an employee or run your own business, you probably know what this means: it's the beginning of the financial year so it's time to start looking at preparing your income tax. Yes, October is still a few months away, but if this isn't the first time you're lodging taxes, then you should already know better than to ready it at the last minute.
You have two choices: lodge your tax electronically through the government's e-tax filing software or hire an accountant to help you prepare your tax return.
Interestingly, only one in five Australians are said to have lodged their tax returns electronically during the previous financial year. This statistic isn't really surprising, considering that lodging taxes can be excruciatingly difficult and/or confusing for many people.
Hiring an accountant
Stephanie Caredes of tax professionals group The Tax Institute believes that hiring an accountant can really help significantly.
"For an individual relying on e-tax certainly it's efficient for filling out your return, but you miss out on getting the good advice that you could get from a registered tax agent," said Caredes. "There probably will continue to be a trend towards e-tax, but it will still be useful for taxpayers to seek out the assistance of a tax agent even if they don't want to lodge their return with them."
Besides, hiring the services of an accountant can actually be deducted from your taxes. But if your tax return is simple enough (e.g. you're an employee and you have only one or two straightforward deductions), preparing it yourself might be simple enough, and more worthwhile.
However, did you know that hiring an accountant to work on your taxes can actually leave you with even more money when everything is said and done? Depending on your circumstances, your deductibles can pay for the accountant's services and put some cash in your pocket.
Toby Winten, a financial adviser at wealth management firm Hillross Financial Services, says that if there are complexities in your tax return, like trusts for instance, hiring an accountant is "going to add value", and that "time saving is going to add value".
Pros and cons
To sum it up, here are the pros and cons when preparing your own tax returns:
- You won't have to pay for an accountant.
- It can actually be much quicker if you use e-tax to prepare your own tax return.
- You can get your refund in 12 business days when you use e-tax.
- You might miss out or overlook some deductibles.
- Unless you're an accountant, you probably don't know what you're doing, making tax returns difficult and time-consuming.
- You don't get professional tips, which you can use in future tax returns.
On the other hand, here are the pros and cons of hiring an accountant:
- Accountant fees are tax deductible.
- Accountants can find every deduction applicable to your situation, which may have been previously missed by accounting software.
- Audit assistance in case of an ATO audit.
- Avoid tax return mistakes.
- Hiring an accountant costs money.
- Risk of getting an incompetent accountant.
- It's difficult to hire an accountant during tax season.