By: Drew Streitberg
The media has lately been covering the seemingly shocking outrage many young Australians are facing this tax season when completing their own tax returns. A lot of this would appear to stem from a lack of awareness of the Government’s “lamington” (LMITO) ending last year, effectively slashing many individuals’ expected refunds, but also an unfortunate lack of education regarding personal taxes in general.
In part, this is the fault of successive Governments, who have tried to increasingly tell the general populace that their taxes are easy, lodging the forms are easy, the ATO knows all, it even prepopulates your return for you, easy right? I learnt a long time ago to be very wary of anyone who tells me their taxes are “easy” because most often they are not but instead it is a general naivety that has clouded the individual’s thoughts and perceptions.
This would seem to be the issue with the latest generation of taxpayers. A general expectation that not only that their taxes are easy but they are automatically entitled to significant refunds.
Even software companies like Xero imply that accounting is easy to the masses whilst spruiking their latest wares, so you can understand why many DIY taxpayers are becoming aggravated when they find out it isn’t the case. By the way, Xero, whilst great, isn’t accounting, it’s bookkeeping. Accounting requires the consideration and application of tax law and this is exactly where DIY taxpayers are generally doing themselves a disservice because they simply aren’t Accountants, they don’t understand the legislation and stumbling around in the dark to find a light switch is a great way of bumping into something.
There is a quote that floats around that relates to lawyers: “A man who represents himself has a fool for a client” and I’m sorry to say, in many instances this is true in relation to accounting and taxation as well. There is a reason our profession exists, the laws are complicated and you need someone to help you navigate through them to ensure you both comply with the law and pay the correct level of tax, no more, no less.
Ultimately, the best outcome for an individual when they lodge their return is that they have NIL payable or refundable because this actually demonstrates that the correct amount of tax has been accounted for over the course of the year.
A refund is simply an individual overpaying their tax during the course of the year. It means you were out of pocket earlier and this is essentially a “course correction”.
Now, how much tax you should pay is determined by many factors and individual circumstances and this is why it’s essential to have the proper accounting and tax representation to ensure you achieve the best outcome but also improve your general awareness of taxation issues which, together with a tax professional, you can use to plan ahead for a better future. Less shock, more awe.
We get it, no one enjoys paying tax, not you, not me nor the guy down the street. On top of this perceived insult, the idea of paying someone to help you pay tax feels like an additional slap in the face but consider this: Employing a professional to ensure you comply with the law whilst maximising your individual tax deductions will not only grant you peace of mind but potentially achieve a better outcome than you could have achieved yourself.