MYOB, Xero, even the Australian Taxation office tell us that ‘you can prepare and lodge your own BAS/Tax Return …’
But should you? Why is it that tax agents take over 6 years of education to learn the ropes of tax legislation and application for people like yourself?
Here are some reasons:
- Back in 2016 a study of personally lodged tax returns showed that 60% contained errors – 2/3 of those errors resulted in the tax payer paying too much tax. Clearly it is in the best interest of the ATO to encourage self lodgment as more money ends up in their coffers. Reference
- If you use an accounting package you will need to ensure your data entry meets Australian Tax office standards. The expenses you claim have to be legally claimable and the data entered has to be reconciled to a bank statement. Book keepers can help with this as they are both experienced and trained in doing this kind of work.
- If you need an ABN you will need to apply for one on the abr website. You need to be careful how you
answer those questions. Get it wrong and you may find yourself being told you cannot have an ABN, or worse still you might find the wrong kinds of assumptions are made – eg: you find yo
urself set up as a not for profit instead of a small business.
- In certain circumstances you may need to register for GST. You need to be aware how to work out if you have met the $75,000 turnover rule (hint it may not include everything paid to you in some occasions) and also there are certain strategies where it is financially beneficial to be registered for GST even you don’t even earn $10,000 gross.
- If you are registered for GST then you need to know which expenses (of those you are allowed to claim) have GST on them and which do not. You also need to know which sales of your own should have GST applied and which ones should not. For instance a Doctor may or may not have GST on their income depending on the contract they have with their clients. A take away shop may have some drinks (like water) that are GST free and others that are not (like Coca Cola). Confused yet?
- You figure you need an employee. You need to work out not only what forms they need to have signed and filled out, but also how much to pay them, and how to pay them including working out how to do a payslip.
- If you have the incorrect tax structure (there are a few such as sole traders, trusts, partnerships and companies) then you may find yourself with both unnecessary work to do – but also way more tax being paid than is fair. You need to be aware of each structure and what environment and context suits which one. More to the point you need to know how to change from one to the other, meeting special tax law that covers this kind of transaction.
- Should you wish to get a bank loan or sell your business – you will need a ‘set of financial reports’ which have to be prepared by an accountant anyway – and may need to be over more than a single year.
- And even if you manage all of this on your own – a tax agent is great at looking over your business with an experienced eye and give you support that only comes with having seen it before: ‘you can’t afford that car right now, you are paying the staff incorrectly, your purchases are way too high for the sales they are attracting’