I’ve spent the last few days (on and off) gathering together everything needed by our accountant to complete our tax returns. This year’s tax return is more involved than normal because we have the purchase of our first investment property to consider and my wife’s life insurance—part of which may be tax deductible.
We’ve had an accountant prepare our tax returns for many years now—initially because it all seemed a little complicated and now because it is a little complicated.
Back then we had income from one or two employers, bank interest, HECS debts, and deductions like professional memberships and insurances, training, mobile phones, internet, stationary, uniforms, and depreciation of office equipment and furniture. I wasn’t sure how my income and tax returns related to my wife’s and vice versa.
These days, we’ve got more of the same plus private health insurance, life insurance, the investment property establishment costs (any IP is an interesting mess in its own right when it comes to taxation), dependent children, and the occasional minor offset to me as a non-earning stay-at-home parent. And of course the tax laws are always changing in many of these areas, making it hard to keep on top of what we can and cannot do, legally. Next year we’ll have the IP income or loss, interest and running costs to deduct, building and fittings depreciation, and so on.
The first accountant we worked with claimed he would be able to to cover his costs and we always found that to be the case… in other words, he was able to include valid deductions that we probably wouldn’t have considered (plus he didn’t charge us much).
That first year our intention was to use his return as a template for subsequent years but it seemed just as easy to go back to him and so we did.
Although I wouldn’t recommend using your accountant as your financial adviser, our first accountant was the only financial professional we relied on at that point in time and he was able to offer some useful tips. For example, he highlighted the benefits of having private health insurance instead of paying roughly the same amount for the Medicare Levy (of course our insurance premiums increased as we started planning a family and it seems like the Medicare Levy doubled at some point along the way too…).
Now days our accountant is a key member of our broader financial team and we’ve “upgraded” to an accounting firm that deals regularly with clients who own investment properties (WSC Group—I’ve written about them before in the context of financial advice and insurance). WSC were recommended to us by Open Wealth and they’ve offered an outstanding service thus far—note they’re not directly affiliated with Open Wealth.
We pay for the expertise of an accountant but did you know accounting costs can be deducted the following year? Our first accountant also claimed he’d never had the ATO question a return he submitted (I assume tax return audits are fairly random but having a professional submit your return can’t hurt). While I probably could do our taxes, I’d prefer to know the return is correct and, more importantly, that I’ve claimed all of the deductions I can to reduce our taxable income.
If you’re considering the purchase of an investment property, or hold an investment property today, do you know how your quantity surveyor’s report relates to the depreciation of your building and fittings—and therefore you tax return? I’m estimating those two deductions alone will be worth nearly $10,000 in the first year. Don’t know what a quantity surveyor’s report is? Ask your accountant!
I forwarded 7MBs of PDFs to our accountant this morning so that’s my job done for now, hopefully.
I suppose a disclaimer is also worth posting: I'm just a guy, I'm not an accountant, lawyer, solicitor, tax agent, mortgage broker, banker, financial adviser, insurance agent, land developer, builder, government agent, or anything else so I disclaim your application of anything I write here is to be applied at your own risk. What I write may be incorrect and you are best to seek your own professional advice (tax, legal, financial, and otherwise) before entering into contracts or spending your money. Your situation is unique to you and what I write here reflects my experience only. This content is not professional advice and is not tailored to your situation. I'm learning too and expect to make many, many mistakes along the way.