Whether you should head to an accountant come tax time tends to be a discussion that dominates dinner parties this time of year. Some people swear black and blue by their accountant, positive that they save money and their refund is down to their particular genius.
Others love doing it themselves (yes, we exist. Come tax time, I beg people to let me do their tax for them. Three cheers for eTax) and are unwilling to fork out for the accountant.
Like most personal finance issues, what works best for you is dependent on your particular financial situation.
Is the hundred dollars you pay the accountant a waste of money, or a wise investment?
Here we discuss ways to save money on tax by looking at the pro’s and con’s of doing your own tax VS paying for an accountant. As a note, even at Savings Guide headquarters we are divided on this topic!
Advantages of doing your own tax return
You can do you tax return at your own pace
Doing your tax yourself allows you to do it at your own pace. You can leave it and come back to it when you’ve got more time, or once you’ve cleared up a question not sitting in the office of an accountant who likely charges by the hour.
There are no fees for DIY tax returns
Doing your tax yourself means you avoid paying an accountant to lodge the information with the Australian Tax Office. That extra money you save might be an extra debt repayment or a little bit extra on the saving schedule.
Straightforward lodgement for people doing their own return
One reason I’m a big fan of doing my own tax is that eTax is an easy to use system, with pre-fill options and useful help section. Anytime you get stuck, the phone lines at ATO are well-staffed and incredibly helpful.
Because you can do it at your own pace, you’ve allowed yourself to take the time and check you’ve covered all your deductions and donations and income information (assuming you are interested enough to hunt down the relevant deductions etc).
Tax accountants: the advantages of paying someone to do your tax
Greater tax return
There is a potential that a tax accountant, someone who spends all their time studying and dealing with tax law, might have some suggestions as to improving your tax return. Maybe they’re aware of deductions you are eligible for, which you might otherwise have missed. This isn’t cut and dried, you might be well aware of your deduction eligibility. If you’re not certain, however, you might feel more comfortable using an accountant.
Competency of accountants
Ensure you’re using a certified accountant, and you can be almost certain that your tax will be completed effectively and without errors. This can be especially important if your tax is more complex than one income and deductions. Save money by eliminating the possibility of mistakes.
Complexity of tax return and ‘opportunity cost’
Tax accountants are qualified to deal with capital gains, negative gearing and complex deductions, areas which might be overwhelming for DIY.
The concept of ‘opportunity cost’ is also vital as you could potentially better use your own personal time to make money rather than doing a tax return.
So when should I do my own tax return and not use an accountant?
If your tax is relatively simple (see the below criteria), you might consider doing your own tax and save money on an accountant.
One or two group certificates, easily added into eTax without the complexities of a business partnership.
You Can Use Pre-fill:
As long as you’re with major institutions, such as the major banks, much of the nitty gritty of a tax return can be pre-filled for you. Therefore, issues such as how much interest you earned throughout the past financial are immediately added into your eTax, as long as you have a Notice Of Assessment from a previous year.
You Kept Good Records:
If you’ve kept meticulous records of all your deductions (and kept the receipts), then tax is a simple matter of adding all the deductions and storing the receipts somewhere safe if you need them.
When should you use an accountant?
Consider using an accountant if any of the following applies to you, or if you’re unsure about doing your own tax. After all, mistakes on a tax return can leave to problems with the ATO, including fines, so it’s better to safe than sorry if you feel more comfortable getting help with your tax. You might save money if you have any of the following:
If you sold shares in the previous year, it might be worthwhile consulting with an accountant.
Capital Gains Tax:
I once spent a frustrating and fruitless afternoon trying to understand capital gains tax (the tax on your gains from an asset) and my finances. If you feel similarly to me, then you might want professional advice.
Similarly, if you’re unsure about the tax implications of losses you incurred on an asset, a professional might offer guidance about how best to negative gear your tax.
If you’re hazy on what deductions you may be eligible for, an accountant has experience in all the deductions that you could receive. Many people just enter the $300 that requires no receipts, and leave it at that, not realising that they may have receipts for far more. You can save a lot of money by claiming all deductions relevant to your work.
You can also view a previous post we did on the benefits of having a tax accountant here.
Where do you stand on the topic – DIY tax return or paying an accountant?
Drop us a comment below and tell us why you choose to DIY or pay an accountant.