How Seeing an Accountant Could Benefit You at Tax Time

Accountant Tax Return

Tax time can be stressful for anyone, especially for those of whom have never lodged a return before.

It’s even harder if you have a small business, multiple incomes, an investment property or just a pile of receipts you’d rather not deal with.

But even if your tax seems relatively simple, the question of whether to get an accountant to help might have crossed you mind. It is a good idea to assess your needs for an accountant each and every year.

Some years your tax situation may be straightforward, and you feel confident to do it yourself. Other years you may need the help of a professional.

So how do you decide which course of action will give you the best result?

First Time Return

If you are doing your tax for the first time, it’s likely to be pretty simple (provided it’s your first time paying tax because it’s your first time earning taxable income, not because you’ve avoided it for 20 years).

Doing your taxes is often portrayed as a very challenging — and potentially scary — thing, so it is understandable that a young person may feel overwhelmed. However, If you only have one income, minimal items to claims and good record keeping, lodging a tax return through MyTax is relatively straightforward.

The ATO has a lot of data it prefills into your return. It will have information like your employer salary, tax withheld and accrued interest. It will just be a matter of checking it’s right, because it is still your responsibility. Deductions, however, won’t show. So you’ll need to keep track during the year and keep necessary receipts too.

If you are feeling nervous or overwhelmed, going through an accountant might help alleviate some of this worry. Just be sure to ask lots of questions to ensure you’re learning about the process, which could help you to feel more confident in doing your own returns in the future.

How Do You Earn Your Income?

Do you have multiple jobs and “side hustles” or do you have a regular Mon-Fri, 9-5? Depending on how complex your income stream is, you could benefit from using an accountant to ensure your compliance and maximise your tax refund. Taxation can become more complicated if you’re working for yourself or employed as an independent contractor. The claims you can make on your return also differ by industry.

Small business, rental properties, capital gains can all be difficult to get right when lodging a return. If you own or run a business, an accountant can help you keep the necessary financial records required by law.

 Do You Know What You’re Entitled to Claim?

You’ve kept your receipts, but do you know what you can rightfully claim?

Common deductions include work-related expenses, self-education expenses, charitable donations and the cost of managing your tax affairs (including paying an accountant).

You can find out more about deductions in our resources on claimable deductions by profession.

If you’re not feeling confident, seeing an accountant can ensure you stay within the law, and help maximise your claims.

Amendments and Late Returns

If you’ve made a mistake on a past tax return, you can request an amendment through myTax yourself.

But if you’re unsure about whether you should be making an amendment or what impact it might have, an accountant would be a good idea.

Furthermore, if you’re running out of time to lodge, using an accountant can buy you a little extra time, as accountants have longer to lodge your return that you do.

The standard due date for individual returns is 31 October, but if you use a tax agent, it could be as late as 15 May of the following year.

Monetary Benefit

If you go the route of using an accountant or tax agent, be wary of too good to be true prices. Cheap options such as the $99 shopping centre tax returns often just use the prefilled information from the ATO to complete your return, meaning that you’d be better off doing it yourself. However, if you believe you have significant claims to submit in your return, seeking a good tax agent can end up saving you money by way of a bigger tax return. When finding an accountant or tax agent, don’t be afraid to shop around to find someone you like, especially if you’re looking for a long term accountant. Also, make sure that whoever you choose is a licensed agent (registered TPB tax agent) and check their reviews!

Accessing Super During Tough Times

Accessing Superannuation

Can I Access my Super Early?

Although superannuation is designed to be preserved until retirement, there are some very specific circumstances where you can legally access your superannuation savings early.

Compassionate Grounds

The Australian Taxation Office (ATO) is responsible for the administration of early release of superannuation on compassionate grounds. Compassionate grounds include expenses resulting from:

  • Medical treatment
  • Medical transport
  • Mortgage assistance
  • Modifications to your home and/or motor vehicle needed due to a severe disability
  • Funeral assistance
  • Care for terminal medical condition

For more information on the above circumstances, visit the ATO website.

If you’re thinking about making an application, make sure you check with your super fund or Retirement Savings Account (RSA) provider first to make sure they will actually be able to take action on any release approval issued by the DHS. Even though you may meet a condition of release determined by the DHS, the release of your super savings continues to be subject to the governing rules of the fund you’re in.

Financial Hardship

Early release of superannuation on the grounds of severe financial hardship is administered by your super fund or RSA. You may be eligible if you’ve been receiving a Commonwealth income support payment from Centrelink, and can prove you are unable to meet reasonable and immediate family living expenses. Different criteria apply to those aged over 55 and 39 weeks. The maximum amount that can be released to you in any 12 month period is $10,000. For more information, contact your super fund.

Terminal Illness or Permanent Incapacity

Early release of superannuation on the grounds of terminal illness or permanent incapacity is administered by your super fund or RSA. If you meet certain conditions and are able to provide proof of your condition, you may be able to have your super released prior to retirement. Contact your super fund for more information or to make an application.

Leaving Australia

You may also be eligible to access your super before retirement if you are leaving Australia permanently. If you are an overseas resident working temporarily in Australia, you may be paid your superannuation money once you have left Australia through what is known as a departing Australia superannuation payment (DASP). For more information or to apply, visit the ATO website.

Choosing an Investment Option

Investment Options

As part of your retirement savings plan, it is important you understand how your superannuation money is invested by your super fund.

No two people’s financial situation and investment requirements are the same. To cater for these different needs, most superannuation funds offer you a choice about how your superannuation money is invested. Funds offer a range of different investment portfolios you can choose from. You can also choose to spread your super money over multiple investment portfolios.

One advantage of investment earnings in super is they are taxed differently to your other income.
The maximum tax rate on superannuation investment earnings is currently 15 per cent, compared to the marginal tax rate applied to your investment earnings and income outside superannuation, which could be up to 45 per cent.

The Different Investment Options

Most superannuation funds will offer a range of investment options for you to choose from. These will vary in their level of risk and the kinds of assets held within them.

You may see terms such as Growth, Balanced, Conservative and Cash.

Other funds may refer to investment options like Australian Equities, International Equities, Sustainable Shares, Property, and Fixed Interest.

Further information about the options available, the assets held within them and the likely risks and returns should be available on your fund’s website.

Why Should I Care How My Super is Invested?

You’re probably thinking it’s not your job to worry about how your super is invested, but it pays to take an interest. Investment choice can have a big impact on your final retirement savings, due to the impact of compound interest. Over a working lifetime, the same amount of money invested in different investment options can produce different results. Therefore it’s important to take the time to understand the different options available to you and the potential impact it could have on your investment earning.

How Do I Choose?

When you join a fund you are asked if you would like to choose a specific investment option on the form. If you don’t choose an investment option you are placed in what is commonly called the default option.

If you didn’t choose a specific investment option when you joined the fund this doesn’t mean you can’t select one later.

When it comes to choosing which investment option is most suitable for your superannuation savings, there are a couple of basic questions you need to ask yourself before making a decision:

  • How much risk do I feel comfortable taking?
  • What type of return am I seeking for my money?
  • How long will I be investing for?

The answers to these questions will help guide you in choosing the right investment option or mix of options for your superannuation savings.

Your age is very important when it comes to making an investment choice. How long you expect your money to remain invested (or your investment timeframe), will have a significant impact on the investment mix that is most appropriate for you.

If you are young and have a long time until you will need to access your money, the short term ups and downs that can occur when investing in higher risk options such as shares may not be so important. History has shown that over the long term, short term fluctuations tend to be outweighed by the higher returns from these ‘riskier’ types of assets.

If you will need to access your money soon, it may be more appropriate to protect it by investing in assets that are considered lower risk, even though this may result in lower returns over the medium to long term. On the other hand people entering retirement may still have 20-30 years to plan for. Depending on your appetite for risk, it may still be appropriate to invest some or even most of your savings in ‘growth’ products for the longer term.

Accessing Your Super

Accessing Superannuation

You’ve spent a lifetime saving for it so how do you actually go about getting your super when you’re ready to retire?

It’s a good idea to start thinking about how you’d like to draw on your super a few years before you retire as there are a number of rules surrounding how you can withdraw your super savings. Seeking financial advice at this stage can also help you decide the best way for you to get your super.

When can I access my super?

In general terms, you can access your superannuation savings as soon as you:

  • reach what is know as your ‘preservation age’ and are permanently retired;
  • reach preservation age and are eligible for a transition to retirement pension; or
  • turn 65.

Your preservation age is the youngest you can be to start receiving your super, and it changes depending on when you were born:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

If you reach your preservation age and are yet to permanently retire, you can still access part of your super through a transition to retirement pension.

There are also some very specific circumstances under which you can legally access your superannuation savings early.

Most funds will require you to fill out a designated form and provide proof of identity to begin withdrawing your super. Contact your super fund for information on what they require.

What happens after I access it?

When withdrawing your superannuation, you can choose to receive it as a lump sum, a retirement income stream, or a mixture of both.

If you choose a lump sum, the entirety of your superannuation balance is transferred to your bank account. If you go for an income stream, you will receive a designated amount to your bank account every fortnight/month etc and the rest sits in your super fund and continues to earn investment returns.

Before deciding on how you will withdraw your super, you should note that taking your super out as a lump sum can have significant tax implications and impact on any Centrelink payments you may be entitled to.

By law, you don’t have to cash out your super just because you’ve reached your preservation age or turn 65 but be sure to check with your fund on their own rules.

Tax Tip: Income Averaging for Creatives

Tax Concession Creatives

If you’re making original, artistic content in your profession, you could be eligible for income averaging, saving you big bucks at tax time.

If you have an income that can vary from year to year, then you’ll know that your tax bill can fluctuate dramatically, too.

But depending on your job, you might be eligible for a little-known tax concession that averages out your income and the tax you owe. (And, depending on your situation, it could save you money — but more on that in a minute.)

The scheme is called ‘income averaging’ and it’s available for a category of people known as “special professionals”.

What’s a ‘special professional’ when it comes to income averaging?

According to the ATO, special professionals are inventors, performing artists, production associates or sportspeople, and authors of literary, dramatic, musical or artistic works.

You need to “compete in sporting activities where you primarily use physical prowess, physical strength or physical stamina” if you’d like to income average as a sportsperson. This means coaches and sports educators don’t cut it.

But it’s slightly trickier to work out which creative professionals can opt in.

Arts accountant Michael Fox says eligibility is primarily based on the work you do, not your job title.

“It’s more to do with people who make original content, rather than those who use technical skills,” he says.

For example, Mr Fox says a camera person who’s directed to point a camera at a guest wouldn’t qualify for income averaging because they’re not making the artistic decision.

“But if that camera person goes out with a film crew and says, ‘I think this shot will look great if we have trees in the background’ — or whatever else — they’re making the decision as to how it will be broadcast on TV, and that’s original content.”

Similarly, a fiction writer is viewed as eligible, but a journalist who’s filing articles to their editor or writing scripts for presenters isn’t. Their skills are viewed as technical, not original.

But creative control isn’t the only caveat.

In order to income average, you need to earn at least $2,500 from your creative or sporting endeavour over the financial year.

So, if you’re a budding actor who has only worked in unpaid films while earning an income from a bar, you’re ineligible. And remember, the ‘averaging’ only applies to your creative income, not your various side hustles, which are taxed as usual.

Who does income averaging benefit most?

The concession is designed for people who have “lumpy incomes” because of the nature of their industry.

For example, if you’re working on a major creative work, like a novel, you might write that for three years.

All your income comes in your third year, and then you don’t have income from the book during the other two.

By averaging out your income across a period of up to four years, it means you won’t be hit with a huge tax bill when that five- or six-figure book deal goes through.

On the flipside, you’ll probably need to pay a little more tax in the years you don’t earn much as a special professional.

The scheme is usually more beneficial to people starting out their careers because established artists are likelier to have a ‘name’ in the industry and, hence, a steadier income.

However, it’s wise to avoid income averaging if you’re only making a few thousand dollars a year from your creative pursuits.

When you commence income averaging, the very first year is essentially what one would describe as a ‘windfall gain’.

Your tax-free threshold, under the right set of circumstances, could be as high as $90,000.

Basically, the higher your income is when you start income averaging, the larger your tax return will be in ‘year one’.

From farms to fine arts

Interestingly, income averaging was originally created to help Australia’s agricultural producers — not artists.

Originally the scheme was designed for farmers who have years of drought, when their income is low, and years of “boom” when it’s great.

Farmers are actually automatically signed up for income averaging and must request to opt out. Special professionals, on the other hand, are required to opt-in.Bottom of Form

Getting financially savvy

Despite the potential benefits of using the scheme, there are only approximately 16,000 special professionals taking part each year; not a huge number in the scheme of 10 million individual tax payers.

So, why aren’t more people accessing income averaging? It’s largely because most tax agents don’t know it exists.

The whole area of tax in the art world is a bit of a mess, but [income averaging] is a very important concession that should be there. It’s not an easy industry to get a start in, so these kinds of concessions are a great helping hand for younger people chasing their big break.

While it’s possible to do tax by yourself and opt-in to income averaging, it’s recommended that you speak to a professional to ensure that a) you’re definitely eligible, and b) the scheme is in your best financial interests.