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Tax returns: Why using an accountant might save you thousands of dollars

·Yahoo Finance Editor In Chief Australia
·4-min read
A composite image of Australian currency and a person calculating their tax return.
Using an accountant could save you thousands of dollars when doing your taxes. (Source: Getty)

The cutoff date for filing a tax return this year is October 31 and millions of Australians have already logged online to start the process.

While the system is easy to use and free, for some the DIY approach means they might be missing out on money. So when should you switch to getting professional advice on your tax?

Tim Garth and Dan Osborne from CATS accountants - and the hosts of the podcast Two Drunk Accountants - said that, while many people saw paying an accountant as unnecessary, for some it could be a false economy.

Garth said the Australian taxation system was complicated, and not understanding the system could lead to missing out on vital deductions.

“Even as professionals, we've got to continuously study just to keep up with the changes,” he said.

Osborne said the same applied to many small business owners who also may choose to try to battle the system themselves to save a few bucks.

“Seeing us might only cost $300 or $400 bucks for an hour or so but can save you a lot of money in the long run,” he said.

“Also, those fees that you pay your accountant are a tax deduction too.”

When you should use a tax accountant:

When you are earning more than $80,000 per year

Garth said if you were earning more than $80k a year, there was a good chance you would have some deductions.

“If you're not really confident doing your own tax, it's definitely going to be worthwhile.”

He added that a session with an accountant provided opportunities to ask questions and get more information around earnings and also deductions.

You are turning 30 soon and considering health insurance

Osborne said around the age of 30 was a good time to engage a tax accountant.

Not only is this a common age many people are earning more money but there are also some changes around private health insurance and tax.

“You’ll need to decide whether you want to lock in private hospital cover before the age of 31 to avoid the lifetime loading,” Osborne said.

Lifetime Health Cover (LHC) was designed to encourage people to take out hospital cover earlier in life and maintain it.

If you don’t take advantage of this, you will pay 2 per cent loading on top of your hospital premium for every year over 30.

You buy a home, have a child or hit those other big life stages

Garth said a number of life stages were key triggers to consider using an accountant.

“From having a spouse or having children, to setting yourself up for retirement, there are many life stages that should involve a conversation to find out what the tax implications or benefits are” he said.

“Even things like insurance, salary-sacrificing a car or buying an investment property can mean understanding what you’re up for.

“If you can build a relationship with your accountant, you can work with someone who understands your situation and is someone you can bounce ideas and questions off too.”

The price of DIY can be steep

Osborne said while some people choosing to DIY their tax return might only result in missing out on a few hundred dollars, for others, the errors in this approach could be extreme.

“I had a client who was lodging their tax, had sold an investment property and had mistakenly thought they had to pay about $60,000 in tax,” he said.

“When he came to me, we went back to check and it turned out he had made a mistake and didn’t have to pay at all.”

Other tips:

  • Ensure you have a copy of your accountant fees so you can use them as a tax deduction for the next financial year

  • If you have any complexity in your finances - such as a side hustle or property - it may be time to engage an accountant to do your taxes

  • Check the costs - a good accountant can give you an estimate upfront

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