As an economics and finance commentator, I make a good living telling other people what to do with their money. But when it comes to my own tax affairs, I’m as disorganised as the rest. I’m like the psychologist who cries into their pillow every night, or the recently divorced marriage counsellor.

Common occurrence around tax time in houses across the country. Picture: iStockphoto

Just like you, the prospect of having to give up one of these increasingly glorious and sunny weekends to wrestle with the tax pack and oh about a gazillion receipts leaves me cold. But the tax man waits for no one, and the October 31 deadline for submitting returns is fast approaching.

The good news is that most people who file a tax return end up with a tax refund, rather than a tax bill. In which case, hurry up and remember the “time value of money”. You want that money in your bank earning you interest, or paying off your debts, as soon as you can.

Only those expecting a tax bill - because you did extra work on which tax was not withheld, for example - can sensibly put off doing their tax return until the last minute. If you owe tax it’s better to keep the money in your bank account for as long as you can, potentially earning interest or using it to paying off other debts, until the taxman takes it away.

A tax return enthusiast I may not be, but I do, however, take it as something of a badge of honour that I continue to fill out my own tax return.

About three in four taxpayers will hire a tax agent this year to do theirs, either because it’s just too much of a hassle or because a later deadline is available for people who file through an agent. But a trip to the tax agent still costs time and money.

More than a million Australians will simply fail to lodge a return at all. Some of these will be rich, tax-dodging cheats. But they will be the minority. Most of these “non-lodgers” will be students or people on low incomes who would have little tax to pay, in fact, they might even get a refund if they did file, but who just find the process too overwhelming.

These people represent only a tiny proportion of tax collections but will get to go around feeling like criminals for no good reason for the rest of the year just because the tax return process is so onerous.

It has been estimated that the total cost of taxpayer compliance with the tax system is as high as 2.1 per cent of our annual economic production.

As a report for the Ken Henry tax review put it: “The time and resources individuals devote to complying with the requirements of the law could be allocated to more productive or satisfying activities and therefore represent a significant cost to the economy.”

Geeze, you’d think that someone in government really ought to do something about it, right?

Well, they did. And then, they didn’t.

In May 2010, delivering his budget night speech in parliament, Treasurer Wayne Swan promised to liberate families from the hassle of keeping show boxes full of receipts by introducing a standard deduction for expenses.

Instead of laboriously going through receipts to claim expenses, millions of families could just “tick and flick” a standard deduction of $500 rising to $1000.

Swan said it best: “The families I speak to right around the country don’t just want more financial security; they also want more time with each other…This [standard deduction] means less time with the Tax Pack, more time with loved ones, and for 6.4 million Australians it also means a bigger tax refunds.”

The measure was supposed to apply from 1 July this year. But in the May 2011 budget, the measure was delayed to save money.

Come this year’s budget, the proposal was scrapped entirely, a casualty of the Gillard Government’s dogged pursuit of a budget surplus this financial year.

The government tried to defend its backflip by pointing out that, under its carbon tax household assistance package, the tax free threshold will increase in the coming year from $6000 to $18200. This will reduce the number of people who pay tax. But even if your income is below the new threshold, if your payment summary from your employer shows tax has been withheld, you still have to fill out a tax return.

So think of that precious budget surplus as you’re filling out your tax return, because your right to a fast and efficient tax return was sacrificed to achieve it. Given the cost to the economy of tax compliance, the decision seems a false economy. Any incoming government would do well to consider reinstating it.

And while we’re at it, let’s mark the death of another Ken Henry tax reform measure: a 50 per cent deduction on tax payable on interest earned on bank deposits. This measure, also announced in the May 2010 budget, would have given a boost to savers and low income pensioners with money in interest-earning deposits. But it too was sacrificed in this year’s budget to save the government’s surplus.

Some days it seems all we have left to show from the Ken Henry tax review’s more than 100 recommendations for tax reform is the shriveled and mutated tax on mineral resources. Otherwise, progress towards delivering Australians a more efficient tax system has stalled.

Annoyed at having to give up a weekend to rifle through shoe boxes of dusty receipts? You should be.

Email: Twitter: @Jess_Irvine

Comments on this post will close at 8pm AEST.

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    • TimB says:

      05:20am | 17/10/12

      Always done my own tax return. Was even easier after I’d done my tax law course. If you use the online lodgement software the ATO offers, it’s pretty straightforward. You only really need a tax agent if your situation is stupidly complex.

      ...of course some people may still find the whole process to resemble this:

    • MarkS says:

      08:35am | 17/10/12

      The online lodgement takes a lot of work out of it. The ATO knows more about my affairs then I do, all my investment earnings are reported to them already. Just auto fill & then there are only a couple of details to complete.

    • Tator says:

      08:47am | 17/10/12

      I use ETax as well, it is simple and straight forward and even with an investment property, I can do it myself without having to pay an accountant.  All it takes is a little organisation and knowing how to read the rulings on what you can and can’t claim.  I got about $8k back from the taxman out from the $20 odd thousand tax I did pay.

    • Rebecca says:

      10:06am | 17/10/12

      I do my own on E-tax as well, but being a low income earner I’ll be getting about $60 back this year. Hardly worth the effort, not to mention the numerous phone calls to Centrelink and time trawling its website to try and find info on getting my tax payment summary for an income that I didn’t even pay tax on for a few months between uni and getting a grad job. 

      Complete waste of time :|

    • acotrel says:

      05:33am | 17/10/12

      One of the great things about being retired with no earned income, is that you don’t have to submit a tax return.  If we were all content to merely exist as distinct from actually living, we might be much happier ?

    • Modern Primitive says:

      06:23am | 17/10/12

      Put the manifesto down, komrade.

    • craig2 says:

      07:09am | 17/10/12

      Aco, you really should stay away from politics, you sound quite normal away from that topic.

    • Modern Primitive says:

      07:32am | 17/10/12

      Sorry acotroll, I’m not content with merely existing. I subscribe to the cult of the individual.

    • acotrel says:

      07:34am | 17/10/12

      That statement is not my true sentiment.  I really believe in balanced growth and technological development, and a very picturesque future for Australia where we all do the good things we love so much, instead of getting off our faces and depressed at every opportunity.

    • acotrel says:

      07:56am | 17/10/12

      @Modern Primitive
      I spent my whole working life as a professional scientist, mainly for pure interest and altruism.  I’ve often been of two minds about ‘the cult of the individual’.  I look back on my life and I am happy with what I have achieved in a family sense and professionally.  But that doesn’t help me road race my Mk3 Seeley Norton Commando 850 historic motorcycle while my superannuation is rapidly running out. Now I am seriously thinking about earning more money to pursue a frivolous and potentially hazardous, but beautiful past time. Life is for living, and you have to grab it with both hands.

    • Stephen T says:

      08:24am | 17/10/12

      @acotrel:  Now you have me reminiscing, if memory serves correctly yours would be the first of the electric start’s, my very first bike was a Norton 16H the second was a Norton 650 SS.  Many years ago now, all the very best with it I hope that you enjoy it for many years to come.

    • nihonin says:

      10:20am | 17/10/12

      ‘But that doesn’t help me road race my Mk3 Seeley Norton Commando 850 historic motorcycle while my superannuation is rapidly running out.’

      ICB on the superannuation statement in the above sentence acotrel, you have stated a number of times on this site, you are collecting the pension.  Or are you a weathervane depending on how you would like to project yourself and your ‘history’, you keep rewriting it..

    • Modern Primitive says:

      01:01pm | 17/10/12

      Spare me, acotroll, just because you go all centrist when called out doesn’t take back months (years ?) Of you yourself demonstrating you are anything but. You’re unwavering devotion to tearing down Abbott merely reinforces this.

      Your jedi mind tricks do not work on me.

    • Jane Goodluck says:

      06:00am | 17/10/12

      I use the ATO’s downloadable e-Tax form. It takes well under 30 minutes to download and set up on my PC. 

      The “shoeboxes with gazillions of receipts” thingo is a bit of nonsense in my opinion. My income and tax affairs are pretty straightforward, even in retirement.  I keep the dozen or so relevant statements etc in a single folder.

      I set up e-Tax so that it pre-fills my personal details from my last return (on my PC).

      I also set it to pre-fill on-line, for those items increasingly made available to ATO by various businesses/agencies.

      And to direct credit my refund.

      So some time in August,  I’m ready to roll. It then takes less than an hour to finalise and check the whole thing. The e-Tax form is reasonably straightforward to use.

      About 10 days later, the refund appears in my account.

      No Tax Pack. No Tax Agent. No shoeboxes. No gazillion receipts. 

      And certainly no “giving up a weekend”.

    • Rose says:

      08:48am | 17/10/12

      I can’t understand why most PAYG employees don’t do their own tax, it’s simple, quick, painfree and most importantly FREE. I do mine and my kids, although next year the oldest two will be on their own, I’ve shown them how and I’ll be around if they need me but it’s time for them to take the plunge. The problem with DIY tax returns has nothing to do with actually doing it, it’s the fear that some have about it.
      If you have complex investments or are self employed (my husband’s tax is done by an accountant) I can see that an accountant would be required, but for most people I just don’t see the need. Maybe it’s because in general I can’t usually justify paying some one to do something that I can easily do.

    • GROBP says:

      06:19am | 17/10/12

      Maybe the only thing in life I’m organised for and ready for on time. I find it easy to do a little each time something comes up. Then I don’t have a massive job come tax time. That reminds me, I left a receipt on the front seat of the car.

      I like how complicated our tax system is. If you use it to your advantage, understand it, you’re ahead.

    • Mahhrat says:

      06:42am | 17/10/12

      I’ve always used an agent, simply for the sake of laziness.  It’s worth $80 a year to me to know that a professional has not cocked up my return, that there’s appropriate documentation, plus I get a crash course in what’s making good money, since my accountant is a pretty decent chap who knows his business.

      Besides, it’s a tax deduction itself.  I just go visit this nice fellow, he gets paid, I get paid, it’s all good.

      It’ll be especially useful in a couple years when I become a landlord and start renting out my house - all that mumbo-jumbo and he can simply tell me what to do.

    • Wayne says:

      07:34am | 17/10/12

      Yup, with 4 investment properties, and constant changes to the tax laws, it is worth the time to take the receipts to a tax agent, and each year, you claim for last year’s bill.

      No brainer, really, let the professionals do their job.

    • marley says:

      07:41am | 17/10/12

      Me too.  My tax is not especially complicated (except that a lot of my income is from Canada, which brings tax treaties and exchange rates into the mix), but it’s worth my while to have an accountant handle it for me.

    • Mahhrat says:

      07:46am | 17/10/12

      @Wayne:  Aye, I see it like most home improvements.

      I’ll paint a room, or (as I’m doing now), erecting a simple fence.  When I needed the driveway gates done though, tall and strong to keep the dogs in, then I got the pros in.

      Same thing.  I can do my own tax, but having my accountant gives me peace of mind.  He’s also younger than me, so hopefully he’ll help manage my affairs for most of my life.

    • acotrel says:

      07:47am | 17/10/12

      When I had my business, I always used a tax agent.  My refund usually just covered the cost of having him do my return after I had supplied him with all the information. It made perfect sense at the time - at least I felt like a capitalist for a minute. Then I discoved I could simply register a business name, without being incorporated and paying the fees,  get a personal ABN and not collect GST anyway, then do my own tax returns. But my accountant did not advise me about all that cheapskate stuff ! Well, the good thing is it kept his kids from going hungry.  It is what is known as the ‘trickle down effect of wealth’. (or perhaps ‘revenue leakage’ ? )

    • Al says:

      07:54am | 17/10/12

      Only 1 problem with using a tax agent, if they get it wrong (and some do, and some just don’t realy keep up to date with changes etc) then it is you as an individual who is held liable by the tax office, not the agent.

    • marley says:

      08:24am | 17/10/12

      @Al - that’s true, but I do run an eye over the return, and it’s not like I’m using complex tax shelters for anything.  It’s just a tiresome bu rather mechanical process I’d rather offload, and worth a few bucks to do it.

    • Tubesteak says:

      06:50am | 17/10/12

      As someone that has worked in tax for many years for many different types of entities I could wax lyrical about the woeful state of tax policy and tax reform over the course of each government going back to Keating….....

      For most people, tax isn’t that complex. Put a few numbers in a few boxes and send. The ATO isn’t going to audit you. They’re not interested in you. You’re too small.

      The tick and flick approach seemed like an ok idea. Maybe a bit of a vote-buyer.

      The egregious mistake was eliminating the 50% tax reduction for interest. For most people, money sitting in a bank account has alreay been subject to tax. It’s like the government getting a second bite at the cherry. Passive income really should be tax free. Only active income should be subject to tax at a flat rate for everyone above a certain tax-free threshold. That would immensely simplify the system.

    • PW says:

      07:34am | 17/10/12

      “For most people, money sitting in a bank account has alreay been subject to tax”

      This is like saying if I buy an investment property with after tax dollars, the return on it should be tax free. It would be nice, but it don’t work like that.

      All the 50% discount does is allow banks, etc to offer lower interest rates on deposits.

    • Matt says:

      08:48am | 17/10/12

      @PW, rental properties have a 50% discount on capital gains made after 12 months. You are also able to take advantage of generous Div 40 and Div 43 provisions, so your analogy is meaningless.

      The problem is, interest represents (essentially) the time-value of money. So too does capital gains on shares or a rental property (although that is a very simple way of looking at it, I know). Being able to generate capital income as opposed to ordinary income gives you a tax advantage, hence there is a tax disparity between interest earnings and other investments, and Tubesteak’s argument is a valid one.

    • Tubesteak says:

      10:57am | 17/10/12

      Matt is correct

    • Al says:

      06:51am | 17/10/12

      I am still a little surprised that it takes me less time to do my own tax return, have it lodged and have the return paid (I ALWAYS get a return) than it does for me to receive my Group Certificate (or Payment Summary) and details from my Union membership (as its tax deductabile, and I have gone into my reasons for union membership previously and it has NOTHING to do with supporting the Union or the Labor Party).
      Once I get all the crap I can’t control my return is done in under 2 hours. Receive it in my account no more than 2 weeks later.

    • acotrel says:

      08:50am | 17/10/12

      ’ I have gone into my reasons for union membership previously and it has NOTHING to do with supporting the Union or the Labor Party’

      The government should place a tax on hypocrisy, when people join unions yet intend to be scabs. You are a member of the union, yet don’t intend to support your fellow workers although you have a democratic representation and choice in all decisions - what is THAT ? Have you ever stood up and been counted in your whole life ? It is one of the problems with Australia, most of our blokes are weak underneath the surface. Scratch their backs, and you will find yellow underneath.
      Always look after number one ?

    • acotrel says:

      08:52am | 17/10/12

      Just refuse to join the union if you don’t believe in unionism.  Do you have no integrity whatsoever ?

    • Tator says:

      09:36am | 17/10/12

      I agree with Al and do the same, I have been a member of PASA since I signed up with SAPOL, apart from enterprise agreements, PASA provides serving police officers with legal support for when complaints are made against individual members when they were just conducting their duties in good faith.  I have absolutely no faith in the ALP as I do not subscribe to their ideology about big government being the solution to societies problems or their philosophies on wealth redistribution and tax and spend budgeting.  BTW I spent 4 years as a PASA delegate and the organisation prides itself on being apolitical and not supporting any political party.  In fact, both parties here in SA tried to recruit our former President who wouldn’t have a bar with either party and one of our Secretaries Sam Bass was a Liberal MP in the 90’s after he retired from PASA yet other members are members of the ALP so PASA supports the broad church of police politics and favours neither side.

    • Al says:

      09:51am | 17/10/12

      acotrel - as I have explained a number of times previously the ONLY reason I joined the union was due to changes in the coverage of public servants of workers compensation regarding injury occuring traveling too and from work and during breaks (although the latter was later changed back). Checking the costs of getting my own income protection insurance v’s the cost of joining the union who took out a policy to cover all their memebrs for this the cost of joining the union was cheaper (and is tax deductible).
      Purely a financial decision.

      Re: “Have you ever stood up and been counted in your whole life” - well yes, the last time we were bargaining for our terms and conditions of employment I represented myself and many of my views were contrary to what the union wanted (many of which were unreasonable).
      “Always look after number one” well yes, no one else is going to look out for me.
      I view my union membership as my income protection insurance policy and that is it.

    • FINK says:

      06:59am | 17/10/12

      The ATO knows exactly how much you earn and how much tax you pay. They get data feeds from the financial institutions, they know exactly how much interest you earned, what dividends you received and the tax paid on those. Unless you are trying to get deductions there should be no need to submit a tax return except for all the middle class welfare sections that need to filled out and all the medicare stuff that requires you to identify your partners income. Get rid of the stupid medicare fines reduce the tax rate and remove deductions (or allow a one set deduction allowance per industry / job code) and there is no real need to submit a tax return for most of us peasants.

    • acotrel says:

      07:38am | 17/10/12

      We should just have all of our salaries paid to the ATO, and they could refund the rest through C*ntlink, after they have finished running the country for the current financial year ?

    • Jane Goodluck says:

      08:22am | 17/10/12

      acotrel, you have too much time on your hands.

      Find something more productive to do, please, elsewhere.

      Something that keeps you from making a goose of yourself here every day, posting tripe and misinformation.

    • FINK says:

      09:00am | 17/10/12

      “We should just have all of our salaries paid to the ATO”
      Is that pretty much how it works now!
      Rather than a maternity leave scheme, why can’t the governments introduce equitable income splitting? oh that’s right most parents are single these days anyway so no incentive there.

    • Tim says:

      07:02am | 17/10/12

      Takes 15 minutes on etax.

      Yep, extremely onerous.

    • Andrew Leembruhhen says:

      07:20am | 17/10/12

      Our tax system needs a radical overhaul.

      At present governments and oppositions use the tax system to pander to demographics in the electorate to win elections.

      Is it time to eliminate deductions, lift thresholds and lower rates.  Flat systems with a very broad base.  The cost of compliance is too high a price across the economy.

    • FINK says:

      07:39am | 17/10/12

      That makes to much common sense. Common sense went out of the bureaucracy years ago.

    • Greg says:

      07:47am | 17/10/12

      Friend of mine is an accountant, come tax time all his friends bring their stuff over and he charges them to fill in e-tax…..

      Hilarious, if people can’t be bothered taking some time to learn about how the tax system works then they don’t deserve a refund.

    • Jeff says:

      07:47am | 17/10/12

      the thought of Jessica weeping into her pillow every night is just so sad…...

    • bananabender56 says:

      07:52am | 17/10/12

      If you’re late in paying overdue tax the ATO applies interest - yet if after paying PAYE tax all year and you overpaid/were given a refund, you don’t get any interest from the Government. Should be some sort of payback. Make the whole system easier by abolishing personal tax and making GST 27% or something close.

    • Modern Primitive says:

      08:40am | 17/10/12

      But then how would we afford all our social welfare programs?

    • Carl Palmer says:

      08:17am | 17/10/12

      Our return is completed by our accountant and as was pointed out, his cost is claimed the following year. I’m no tax guru so as far as we are concerned, happy to pay an expert. It’s paid for itself in tax saved.

      We do our paperwork throughout the year making the end of year process much simpler AND quicker. Last year’s return was done and dusted by end of July and thanks to Swannie, we received a *very nice* refund in August. As for the tax reform, another backflip.

    • dancan says:

      08:23am | 17/10/12

      I haven’t done my tax in about 10 years I probably should care, I just don’t.  There’s always something better to do instead.

      oh and before anyone says I pay my tax, a lot of tax.  I just don’t care about the amount of work for the refund

    • Matt says:

      08:50am | 17/10/12

      Good luck if you need any form of finance in the future. Also, tax isn’t optional. Go get it done!!

    • Caedrel says:

      08:39am | 17/10/12

      I’ve been putting off doing mine for ages; it was way simpler when my wife wasn’t earning an income from a partnership. I’ve used a tax agent once, when I wasn’t sure how the baby bonus was worked out, and they were absically useless, and I went back to doing it myself.

    • I hate pies says:

      08:47am | 17/10/12

      We should overhaul the tax system to make it equitable - there should be a single flat tax rate for all, regardless of how much you earn. Then everyone contributes - at the moment most of the income tax paid in this country is paid by a few.
      By the way, E-Tax is easy; takes me ten minutes to do mine and ten minutes to do my wifes.

    • Sharon says:

      05:12pm | 17/10/12

      Makes too much sense for the Government who exist just to screw you rotten with a tax system that is geared towards stalling incentive than creating it.

    • Markus says:

      09:32am | 17/10/12

      I’m a single male with no dependents, so there is pretty much nothing I can actually claim. It kind of kills the incentive to get your tax return in early when you are just going to end up with nothing, or even owing an extra few hundred dollars.

      Mind you, it turns out this time around that I had overpaid my outstanding HECS debt, so am expecting a nice little $3,500 return.

    • Anna C says:

      10:20am | 17/10/12

      I’m planning on doing my taxes as well as my parent’s taxes this weekend.  Gee can’t wait.

    • Dave says:

      12:27pm | 17/10/12

      E-tax is pretty good - my only real gripe is that it doesn’t seem to be compatible with using a Mac.  Apparently will be next year but I would have thought there were enough Mac users around for the ATO to have this a greater priority - particularly as they realy want us to use e-tax.

    • Esteban says:

      12:49pm | 17/10/12

      “It has been estimated that the total cost of taxpayer compliance with the tax system is as high as 2.1 per cent of our annual economic production”

      I wonder if that 2.1% is business or just PAYE?

      It seems a lot for PAYE but the whole article is about PAYE not business.

    • expat says:

      02:40pm | 17/10/12

      Your accountant is your best friend and if you are paying any more tax than you have to, then you are losing to the thieving so & so’s. By accountant I am referring to the creative ones, not X&Y Tax Professionals down the local shop…

      Acotrel, captilasm is your friend, I can think of countless hobbies from aircraft to race cars that make awesome deductions if you have the right accountant to point you in the right direction.

    • Matt says:

      03:42pm | 17/10/12

      @expat, just because it is claimed as a deduction doesn’t mean it will hold up to a tax audit. For claiming deductions against hobbies, you should look at the non-commercial losses tests for further information.

    • Robinoz says:

      05:04pm | 17/10/12

      I used to do my own taxation, but with several rental properties and a business, it became to much trouble. It was bad enough having to gather up all the details and put them into a spreadsheet to send to my accountant.

      Now retired with an income from superannuation, a small income from consulting, and one rental property, it’s still easier to let someone else do it. My accountant keeps up to date and I hate taxation, so it’s horses for courses.


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