Are myTax Users Paying Too Much Tax?
It may be predicable that a tax professional is biased about a free lodgement option offered by the ATO to taxpayers, and at least the vested interest here is obvious – of course we prefer taxpayers come to our office for professional support than use the ATO’s own product.
And while we are declaring our vested interest, we also declare that we even recommend to some clients to use myTax because we are concerned that our service may be perceived to offer little more than the ATO’s free product. Usually such clients keep coming back to us, year after year.
Initially, myTax was intended to provide taxpayers with simple tax affairs an easy and free lodgement option but in recent years the ATO have promoted the same product as being able to handle a range of taxpayers.
Even taxpayers who have very “complex” taxation affairs.
The ATO generally has income from your employer, interest income on some bank accounts, some managed funds and other information such as a private health policy. Much of this information can be ‘prefilled’ in myTax.
The ATO promotes the product as being easy to use and will even tell you if it thinks you are making an error. For example, if you claim an amount of work related expenses that is greater than taxpayers similar to you, with reference to your occupation code, income level and even your postcode, the ATO product might even let you know, so you can consider reducing your claims.
So What Are The Risks?
As far as we know, the product does not let you know if you are under claiming your deductions.
If you do not try to make a deduction, that other taxpayers of your profile generally claim, it does not call out to you and say “Hey Taxpayer, you might be missing a tax deduction”.
It does not prefill any, most, or all of the deductions you may be entitled to.
It does not tell you if you are paying too much tax!
Sometimes, it prompts you about shares you have sold if it has this information from the share registry, but it does not determine the capital gain or loss you made. It has no details on your ‘cost base’, to help you calculate the tax result.
It does not prefill any rental income or deductions.
It does not prefill spouse information and complete critical private health insurance reconciliation for the tax offset entitlement you may have.
It does not have all of your information from managed funds. For example, we have a client who has over $80,000 in distributions from managed funds, and the ATO prefill information does not record 1 cent of this income!
It is not “all there”. It wasn’t there, at all.
It cannot even be relied upon to prefill information that the ATO is itself responsible for. You may know, that if you underpay or overpay the ATO, or pay them late, you may have interest charged or remitted on your account with the ATO. Frequently our office has reviewed these records and found that clients have paid ‘net interest’ to the ATO, and this is a tax deduction to them, reducing their taxable income. Yet the ATO summary of the same transactions, suggests the amount is ‘net income’, adding to their taxable income. The ATO prefill information, is wrong.
We have found this can be many thousands of dollars! Yet taxpayers would have relied upon the ATO’s myTax product prefilling this income to their income tax return, and assumed the ATO must be right about the income it has paid to you. In some cases, it will be right – and that is part of the problem, our office has found that it is inconsistently, right and wrong, for no apparent reason.
It does not track the critical cost base arising from any shares acquired during the year arising from your participation in Dividend Reinvestment Plans, or Employee Share Plans, making for a future tax nightmare when you sell any of these shares.
It does not prefill your business income, or your deductions. For example, it does not include the information for the uber driving you do, or the Airbnb rental of your property. And speaking of Airbnb, it does not warn you about the ATO Blitz On Share Economy Income and the crucial CGT exemption you may have sacrificed on your home.
It does not necessarily capture opening balances, such as capital losses or deferred business tax losses you may have.
The tax return that can be ‘easily’ and ‘quickly’ prepared using myTax may be missing a great deal of information that could be costing you a lot of tax.
Why is the ATO encouraging taxpayers to use such a lodgement option? Does the ATO, have a vested interest to dclare?
It does not provide you any tax guidance or advice, to help you manage or optimise your taxation affairs for the year, over the years, or for your changing circumstances.
It does not help you with elections you can make, that may have a dramatic impact on your tax results for the year. Or in several years.
It is very interesting to note, that of the income tax returns prepared by Tax Services Australia hardly resemble the ‘prefill’ information the ATO has.
The tax returns from the prefill vis-à-vis the returns prepared by our office, are totally different.
And the tax results are markedly different.
So as we tell some of our clients, myTax may suit them. But many taxpayers are relying on myTax and it may be costing them a lot of money.
If you want a tax professional to be focused and dedicated to take care of your taxation affairs, pop through a message to us today.
Tax Services Australia has been helping Australians with quality, independent and reliable taxation advice since 2001. If you have run into problems with the ATO regarding your residency, or wish to proactively plan for it to seek out the right tax opportunities available in your situation, contact us today.