With tax lodgment due dates approaching, you might be wondering whether you should use a tax agent to prepare your return, or attempt doing it yourself. Whether you have simple or complicated tax matters, it’s well worth considering a tax agent – the one-off cost of having a professional prepare your return is most likely to be far less than the extra deductions your agent could identify for you.
Here, we look at when you should use a tax agent, and how to find the right one for your purposes.
Doing your own tax returns
Some people prepare their own tax returns and feel comfortable doing so because they have straightforward income and tax affairs, and don’t have investment properties, dividend income, and other investments or assets.
The threshold at which you should employ a tax agent to prepare your tax return for you will depend on your individual situation. Generally speaking, if you feel uncomfortable with or overwhelmed by the paperwork, and/or if you are feeling like it’s taking up too much of your time, you should probably consult a tax agent.
Even the simplest tax returns will require at least a few hours, as you’ll need to collate your receipts and payslips before lodging. As tax accountants often charge according to time required or complexity, having a simple tax return prepared could be much cheaper than you think – and give you peace of mind in knowing that you have lodged an accurate tax return in full compliance with the Australian Tax Office’s rules.
Keep in mind that it’s possible you could be missing out on lucrative tax breaks, even if you have just one source of income or believe you have very simple tax affairs. This is because you cannot take advantage of certain tax breaks if you don’t know they are available to you.
Complicated tax matters
Using a tax agent gives you peace of mind, especially if your tax return is a bit more complicated than usual, or if you’re undergoing changing life circumstances. These are some of the situations in which you should probably consider getting expert tax advice:
- When you’re self-employed – If you are self-employed, run your own business, or operate a small business in addition to your regular employment, it’s a good idea to have your taxes prepared by a professional. Small business tax issues can quickly become overwhelming, especially if you operate your business through different structures, such as a sole trader, partnership, or company. In addition, businesses tend to have much more complicated tax breaks that you might not be aware of, or do not know how to claim accurately.
- You’re a high earner – If you are in the higher income brackets, you would do well to see a tax agent when lodging your return. Consider your tax advice an investment for the extra tax savings your agent is likely to be able to help you take advantage of.
- You’ve received extra income or windfall – If you have received a windfall or seen a hike in your income in the past financial year, your tax affairs will be more complex than usual, so consider having an agent prepare your return. The extra income could have implications for your other investments, or mean you have other tax obligations you need to address. Your tax agent will be able to lodge your extra income correctly while making sure you have fulfilled all necessary obligations.
- You have multiple income streams – If you have investments that generate additional streams of income, your tax affairs are likely to be considerably complicated. A tax agent can help you avoid costly errors and ensure that your return is lodged properly and is accurate.
- Your life situation has changed – It’s a good idea to see a tax agent if you have recently sold property, bought or sold shares, or experienced a change in your life situation that could impact your finances. Big changes usually come with complex tax implications, so one way to be sure your return is accurate is to consult your tax accountant.
- You need to strategise your tax – The advice of a tax accountant or agent can be invaluable if you’re strategising your taxes for the long term. For example, an experienced tax agent can give you advice on investments, structures, and other financial management issues to help reduce your tax burden for the coming year and beyond. You might also be able to get some advice on the best way to keep records for an easier tax lodgement next year.
Note: the cost of engaging your tax agent for this year is tax deductible for the next financial year!
Finding the right tax agent
Any accountant who is aregistered tax agent can help you prepare your tax return, but as with any professional service provider, you should take the time to find the right accountant for your purposes. Do some research and find a tax expert with the right experience and a solid reputation. The following credentials are also essential:
Specialisation
You might want to review their specialisation if they have a particular field that they practice in. For example, is your accountant experienced in providing tax advice to private individuals like yourself? If you are a business, make sure your tax accountant has a strong background in business tax matters. Many accountants can provide expert advice on both areas. If you have particular tax concerns – such as self-managed super funds, negative gearing, or investment property income – check that your tax accountant is experienced in dealing with these types of tax matters.
Communication
You will want to work with a tax agent with whom you feel comfortable. A tax agent who can communicate complex concepts in plain language will make it easier for you to understand the advice that you are receiving, and help build a deeper sense of trust while the two of you do business.
Fees
Find out everything you can about the prospective tax accountant’s fees beforehand. Tax accountants will generally be happy to provide you with a detailed fee schedule or an itemised quote for their services before you engage their services.
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