Tax Return Preparation Workflow 

Tax Return Preparation Workflow Steps At a Glance

1. Gather documentation
2. Prepare a workpaper (Xero)
3. Populate the tax return (Xero)
4. Validate & complete the return (Xero)
5. Pre-lodge the return (Xero)
6. Submit the return for review and fix review points (email/Xero)

👉 View the relevant drop-in session that covers the topic of workflows here 

This article summarises the overarching steps, however specific guides for different return scenarios are available here:

• How to Prepare Deductions for an Individual Tax Return
• How to Prepare a Business Schedule
• How to Prepare a Rental Property Schedule 

Always refer back to the foundational courses for a visual representation of these steps, for each return type: 

• Mastering Individual Tax Returns Using Xero Tax

• Mastering Company Tax Returns Using Xero Tax

• Mastering Tax Deductions

• Mastering Rental Property Schedules

• Mastering Business Schedules

 Step 1 – Gather Documentation

Before any work begins in Xero, collect all source documents needed to prepare the return. Depending on the client, this may include income statements, bank and investment summaries, dividend statements, rental property schedules, private health insurance statements, receipts for deductible expenses, and prior-year returns and assessments. 

To ensure the completeness of deductions claimed and documents gathered, you can:

• access client document checklists and onboarding forms here, and

• use the Xero workpaper templates as a guide for what deductions are applicable to each tax return type. 

Step 2 – Prepare a Workpaper (Xero)

Create a workpaper pack for the client in Xero Classic Workpapers for the relevant income year. The workpaper is the foundation of the engagement file: it documents how each figure in the return was calculated and provides the audit trail that supports our work if the ATO ever queries the return. 

Remember: The TAA courses are a crucial visual guide on how to properly prepare workpaper packs (links above). 

Supporting documents are critical at this stage. Every material figure in the workpaper should be backed by evidence — upload the source documents gathered in Step 1 directly to the relevant sections of the workpaper.  A figure without a supporting document attached is a figure we cannot substantiate, and substantiation is a core ATO requirement. Uploading documents to the workpaper (rather than leaving them in emails or local folders) keeps everything in one place, makes the reviewer's job far easier, and ensures the file is complete if it is ever needed for an ATO review or audit.

Work through each section of the workpaper, reconciling figures, noting any judgements or assumptions made, and flagging queries for the reviewer where treatment is uncertain.

Step 3 – Populate the Tax Return (Xero)

With the workpaper complete, create the return in Xero Tax and populate it. Import ATO pre-fill data where available, then enter or confirm each label using the figures from the workpaper. Every amount in the return should trace back to the workpaper — if a figure appears in the return but not in the workpaper, go back and document it. 

Step 4 – Validate and Complete the Return (Xero)

Once the return is populated, run Xero Tax's validation by clicking "validate" to identify errors and warnings. Resolve every error, and review each warning to confirm it is either corrected or genuinely not applicable.

Then complete a self-review of the whole return: check it against the workpaper line by line, confirm the estimated outcome (refund or payable) is reasonable and explainable, and compare against the prior year to identify any unusual movements that need explanation.

Once these steps are finalised, click "complete" to trigger the ability to pre-lodge (next step). 

Step 5 – Pre-lodge the Return (Xero)

Run the pre-lodge check in Xero Tax by clicking "pre-lodge". This submits the return to the ATO's systems for validation without actually lodging it, confirming the return would be accepted as lodged. If pre-lodge returns errors, resolve them and re-run the check until the return passes cleanly. 

Step 6 – Submit the Return for Review and Fix Review Points (Email/Xero)

When the return has passed validation and pre-lodge, submit it for review using the TAA process: How to Submit a Tax Return for Review. 

Respond to any review points prior to proceeding to lodgement. 

NEXT UP > Tax Return Lodgement Workflow