Should I lodge my tax return myself this year?

Completing and lodging a tax return doesn't have to cost a cent.

The ATO's myTax portal is pretty straightforward as long as your financial affairs are simple. Combine it with the ATO app and it can be even easier to complete a tax return.

ATO assistant commissioner Robert Thomson says the ATO app is a secure and free way for individuals and sole traders to manage their tax and super.

It includes helpful tools such as myDeductions, which captures and organises records such as work-related expenses, car trips and charitable donations throughout the year.

"Users can upload their records into their tax return via myTax or share them with their registered tax agent," says Thomson.

"Later this year, we'll be introducing real-time messaging in the ATO app to alert taxpayers to high-risk online transactions and allow them to lock their account."

The downside of lodging your tax return yourself

Melbourne-based Elizabeth Flick has been using the ATO app in tandem with myTax for several years.

She fits the bill perfectly, earning only PAYG income and an occasional distribution from exchange traded funds. Flick says myTax is relatively straightforward to use.

"It's good that it auto-fills data from my bank accounts and investments. The myDeductions app feature is also good to track and feed any tax deductions I've had into my tax return."

Despite the simplicity of myTax, only around one in three Australians uses the portal. There are several reasons why.

First, H&R Block's Mark Chapman says it pays to be wary of relying on the ATO's pre-filled data.

"Don't assume that income data is correct or complete. If you are lodging early, always use your own information as the key source data."

Chapman notes that because pre-filled data comes from the ATO, it's easy to assume it must be correct.

"That's a dangerous assumption, especially in July and early August," he cautions. "If you omit income and get questioned by the ATO, the legal burden will be on you, even though you've taken the information straight from the ATO's pre-filled data."

On the plus side, myTax can help DIY taxpayers avoid errors.

"Self-lodgers using the ATO's myTax program are monitored as they prepare their return by the ATO's computer systems to ensure they're not over-claiming deductions," says Chapman.

The ATO's computer systems compare your claims to those of others like you, and if your claim rings alarm bells, myTax will issue a stern warning inviting you to rethink that deduction. Ignore that message and you could be headed for an audit.

How to avoid penalties when lodging your tax return

As for the DIY approach, the catch is that it can be hard to know what you can and can't claim. This goes a long way to explaining why three in five Aussies rely on a tax agent for help with their return.

"Tax is complicated," says Chapman. "Get your return wrong and the comeback is on you, either with a lower refund or ATO penalties.

"Most people find it far less stressful to simply pass on all their information to a tax agent. An experienced agent will usually be good at sniffing out those obscure tax deductions you didn't know you could claim, so they can often pay for themselves several times over."

As a guide to the potential benefit of using an agent, Chapman says that in 2021-22 (the most recent data available), of the two-thirds of taxpayers who received a refund from the ATO, self-preparers received an average of $2576 while those who used an agent got $3550.

It's worth noting that average refunds are likely to be lower in the current tax year largely because of the scrapping of the low- and middle-income tax offset in 2022.

As a sweetener, a tax agent's fee is tax-deductible in the following year. For a simple return, expect to pay a tax agent between $99 and $169.

"The cost can go up from there if you have a rental property or a business," says Chapman. "But the cost is almost always worth it in terms of extra deductions and increased accuracy."

Jenny Wong, tax lead at CPA Australia, adds that using a registered agent gives you more time to submit a return - usually until May or June the next year (handy if you have a tax debt).

"If you need extra time to lodge this year, you need to get on an agent's books by October 31."

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