Why wont people prepare their own return?

In the 2012 year there were 12.7 individual tax returns lodged with the ATO. 9.2 million of these were lodged by tax agents. Given that just over a quarter of all of these individual returns were nil tax payable, this means that tax agents lodged about 6.9 million “tax payable” tax returns.

An uncomfortable aside thought is that if the average fee for these returns is at least $140, Australians are spending $1 billion on individual tax return preparation…

Apart from Italy (over 95% use an agent), Australia has the highest percentage use of tax agents for individual returns. The Scandinavian rate is a bit over 10% and New Zealand is a bit over 30%.

These countries use prefilling, and in some cases, totally prefilled returns. They also have simplified returns for certain taxpayers. They also use standard deductions rather than actual deductions.

We have had some prefilling of returns in Australia for some time and there has been limited change in self lodging. We also almost had a standard deduction when Treasurer Swan promised he would implement one, and then gave it up in an attempt to find a budget surplus (I imagine he is not good at finding the TV remote either).

This year we were given a new simple way to do simple tax returns. Called MyTax it is in my opinion brilliant for what it sets out to achieve. I sat and watched someone with no tax background knock out a correct return in eleven minutes (and they did not pretend they have $300 of unsubstantiated expenses like most of the bulk preparers do so their return was correct!)

But did people use it? It looks like we will get about 2.8 million using either MyTax or ETax to do their return… So the answer is no. This is no greater a percentage than lodged their own return before MyTax.

It looks like we have been convinced (and in many respects conned) that either the risks are too high, or we wont get as large a refund if we lodge our own return. The third reason often given is that it is too hard. Now It is not it is too hard, given how easy MyTax is.

It might be that people who used an agent before just continued to use them, and that over time more people will lodge using MyTax. It might be as people realise how easy it is the percentage of self preparers will go up.

But if you had to judge the first year of MyTax on the statistics, it is a fail. Lets hope it is much better next year.

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About Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.
This entry was posted in Income Tax, Tax Policy. Bookmark the permalink.

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