First-Time Tax Returns: Prepare a New Client

To prepare a client’s tax return for the first time, establish their lodgment obligation, verify identity and authority, then reconcile income and supported claims. Give the client the completed return to review and approve before you lodge it.

Decide Whether a Return is Needed

Check the relevant income year before opening a first-return job. A first-time worker does not automatically need to lodge, and low income alone does not settle the question. Tax withheld can create a lodgment obligation even when income is below the ordinary tax-free threshold.

1. Establish the client’s tax residency and whether it changed during the income year. Ask about arrival, departure and overseas work. Citizenship or a visa label alone does not determine tax residency.
2. List their income sources and amounts withheld. Include work paid outside payroll and relevant government payments, not just the first employer’s statement.
3. Apply the ATO’s individual return instructions for that income year and its return-obligation guidance. Record the facts behind your decision.
4. If a return is unnecessary, arrange non-lodgment advice for that year where required. Check whether the client also needs to confirm income with Services Australia for payments or child support.

Treat earlier income years separately. Someone who has never lodged may have an earlier obligation, even if the return you are preparing covers their first full year of employment. The checkpoint is a recorded decision for each relevant year, with a reason for lodging or giving non-lodgment advice.

Prepare the First Return

Establish identity and the client’s appointment before accessing their ATO information. Under the TPB’s client-verification guidance, an individual’s name and address or birth details must match appropriate identification evidence. Follow an accepted verification method and record what you checked, how you checked it and who completed the check.

For the first file, collect the client’s TFN through a secure channel, current contact details and refund bank details. Confirm the account holder, BSB and account number with the verified client. Investigate conflicting details before changing the refund destination.

Ask the client to authorise your practice to act for the agreed income year and services. Keep that appointment with the engagement letter, then establish the client relationship through your authorised ATO agent services. The appointment and the declaration approving a particular return are separate records.

A parent, partner or other person sending information is not automatically authorised to act for the client. Verify that person’s identity and authority when they represent the client. The client keeps their personal myGov password and sign-in codes private. Your practice uses its own agent access.

Before preparation starts, your file must identify the taxpayer, the person giving instructions and the agreed work. Use the annual tax-return record request when you need the broader recurring collection checklist.

Reconcile the First Year’s Income

Match ATO pre-fill against the client’s records and explanation of their work. For employment income, use income statements marked tax ready or the relevant payment summaries. The ATO’s income-statement guidance explains that the employer finalises the statement before it becomes tax ready.

Ask about every employer, bank account and government payment. Check bank interest against account records, including the client’s share of joint-account interest. Review payment summaries for government benefits and identify any other amounts the client received that need tax treatment.

Ask directly about ABN work, overseas earnings and periods outside Australia. For ABN work, obtain receipts and expense records and assess whether the activity is employment, a business or another income source. An ABN does not determine that treatment. For overseas work, establish residency and obtain foreign income and tax records before deciding what belongs in the Australian return.

If an income statement is incomplete or wrong, compare it with payslips and ask the client to seek a correction from the employer. Record the discrepancy and resolve the amount used. Missing pre-fill does not establish that income is absent. A partial year also needs a residency assessment before you apply any adjusted threshold.

The income schedule is ready when every source the client identifies has a supported amount and treatment, and any difference from pre-fill has an explanation.

Review Claims Before Lodgment

For each proposed deduction, establish what the client paid and how it relates to earning income. Check whether they received reimbursement and what evidence supports the claim. Mixed private and work use needs a supported allocation. Capital items can require different treatment from an immediate expense deduction.

The ATO’s work-expense guide explains the claim and record requirements. A receipt proves a purchase, but the work connection still needs evidence. If the client claims ordinary commuting or everyday lunches, explain why a personal expense does not become deductible merely because they work.

Consider this fictional employee’s claim. They pay $200 for deductible work expenses, receive no reimbursement and have the required evidence. Assume the entire deduction falls within an income-tax band of 30%, with no change to offsets or Medicare levy.

The deduction reduces taxable income by $200. On those assumptions, income tax falls by $60: $200 multiplied by 30%. It does not produce a $200 refund. Any eventual refund depends on the full assessment and tax already paid or withheld. A deduction can instead reduce a bill.

Record the accepted claim amount and calculation. Explain a rejected or reduced claim before presenting the return for approval, so the client can supply missing evidence or correct the facts.

Get Approval and Explain What Comes Next

Complete your technical review before asking the client to approve the return. Check the income year, residency treatment and reconciled income. Review claim evidence, withholding credits and relevant offsets, then confirm the refund bank details and the explanation for the estimated result.

Give the client the completed return and explain any amount they need to check. Obtain their written, signed declaration before lodgment. It must confirm that the information is true and correct and authorise you to lodge that return. The ATO’s declaration requirements apply to each approved form. The initial appointment cannot replace this declaration.

Collect the first-year answers in one request. Tax Genie’s guided client form checks answers and automatically requests missing information on the same private link. You use the completed records to decide tax treatment and prepare the return in your tax software, then obtain the client’s approval to lodge.

After lodgment, give the client a copy of the lodged return and a short handover:

• Explain that the notice of assessment confirms the ATO’s assessed result. Compare it with the lodged return and investigate an unexpected difference.
• Confirm whether the assessment shows a refund or an amount payable. Check the account outcome and any payment instructions instead of promising the estimated refund will arrive unchanged.
• Tell the client which income and claim records to keep. Work-expense records generally need to be kept for five years from lodgment, with longer periods for some circumstances.
• Explain how to contact the practice if a missing income item or incorrect amount comes to light after lodgment.

Use the assessment and refund follow-up guide for status checks. Close the first-return job when lodgment is acknowledged, the assessment is checked and the client knows their payment or refund position and record-keeping obligations.