Taxing times

Death and taxes, are, of course, inevitable. Fortunately, you don’t die every year.

Tax time, of course arrives all too regularly . In Australia, our financial year is July through June. I decided to do both my personal and company tax last week.

Over our married years, we had been using a tax accountant to compile our returns.  (OK, credit where credit is due. My ex spouse is much better organised than I and deserves considerable thanks for keeping track of the finances and sorting out the mountain of paperwork that comes with shares in particular!  )

Twenty years ago the accounting business was a small shopfront in the local street.

Then, about 10 years ago, they merged with a larger company, changed their name and moved to some swankier offices further away. Two years ago they moved to a suite in St Kilda Rd – really upmarket. Every move heralded a ferocious hike in the fees they charged.

Last year, as a result of the separation and no longer having any shares, my personal tax affairs simplified somewhat. I handled my own personal income tax return via the E-tax online system but still got the accountant to do my company tax. I think they might have been a bit miffed. But they still hit me for $900 for a rather junior accountant to prepare the company return. Even after I’d done everything in my power to keep the bill down – I even scanned all my own financial documents and supplied them in PDF form. (The accountant normally scans and files all the documents, and charges me for the time taken to do so).

This year, I decided to bite the bullet and see what preparing the company return was really worth. Last week I took the last couple of years of business tax folders that the accountant prepared and went into forensic mode, analysing the relationships between all those numbers and the output from my accounting program. I generated spreadsheets to produce identical results and validated them against some earlier years. I then produced equivalents of the formal declarations and stuff to produce form letters. Then I plugged in this years’ figures.

Lo and behold, this years tax return and associated company memorandums and motions is complete. It would probably have cost me about $800 if I’d had to pay for my own time at a mid-level accountants rates. But at the end of the day, I have generated everything I need to do next years company tax inside an hour or two.

Why didn’t I do my own company tax some years and some thousands of dollars ago?

Perhaps I’m the victim of the insidious “write-on” practice. A write-on occurs, for example, when an accountant continues to charge a high price for services even if that service has since been streamlined and now costs him (sometimes far) less to perform. Or perhaps the customer has been led to believe that a particular service is normally charged at about a certain rate. The accountant charges this price anyhow, even if the clients’ job ends up being trivial.

In my case, it may well have been a reasonable charge when I first formed the company. But my tax affairs are not complex and I supply my business accounts in a well-organised form to the accountant, who gives it to a junior to process. Realistically, given that they have all their spreadsheets and form letters from last year, it should take the junior accountant less than an hour to plug in my new figures and less than another hour to print out and collate the standard output (It’s the same every year).

See what the accounting profession themselves say about write-ons ….below the fold.

What is a Write On?

That’s where there is time charged to the job and when it comes to invoicing the Partner or manager says “that job is worth much more than that, we created so much value for the Client, it should be worth $X” – and the price in promptly increased.

Or it’s when there is a fixed fee arrangement in place and the team member doing the job has completed the task in less time than the budgeted time. The price is not changed because at the time of agreeing on the price the Client perceived value for money. The difference from time cost to invoice is the write on.

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