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The government has shied away from adopting a compensation arrangement for tax agents for poor delivery outcomes and a standard deduction concept for work-related expenses in its long-awaited response to a parliamentary inquiry.
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Government silent on agent compensation, standard deductions
18 February 2020
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The government has finally tabled its response to the 13 recommendations listed in the House of Representatives Standing Committee on Tax and Revenue’s report on taxpayer engagement with the tax system.
The report, released in September 2018, was initiated in 2016 by the then minister for revenue and financial services, Kelly O’Dwyer.
One of the key recommendations in the report called for the ATO to include a “service level agreement with end users, especially tax agents, that includes among other things, consideration of payments to end users for poor delivery outcomes”.
Instead, in its response, the government said it noted the recommendation and that the ATO was already “committed to providing highly available digital services to the community”.
“The ATO has developed Service Availability Standards which will provide greater transparency of availability across all digital channels for the community. The Improving ATO Systems Program, its multi-year program of work, will deliver incremental improvements towards achieving the full Service Standards,” the government said in its response.
Calls by the profession for the Compensation for Detriment Caused by Defective Administration (CDDA) scheme to be revisited so that practitioners would be able to claim compensation for ATO digital system failures, or for a dedicated compensation scheme for practitioners, have continually fallen on deaf ears.
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Standard deductions
The report had also called for the work-related deductions scheme to be reformed by introducing the standard deduction concept as proposed by Australia’s Future Tax System Review, in a bid to simplify taxpayer engagement with the tax system.
It believed equity could be achieved by enabling individuals to claim above the set amount by providing full substantiation through the tax return process.
However, the government refrained from agreeing with the recommendation.
“A long-standing principle of the Australian tax system is to tax a person on their income after accounting for legitimate costs incurred in earning that income,” the government said.
“Deductions for costs incurred in producing income recognise that people incur different costs in producing income and permitting deductions is intended to equalise the treatment between those who incur costs in producing their income and those who do not.”
Instead, the ATO will work towards the concept of “push returns” by further developing pre-filling of individual tax returns.
“The ATO is consulting with the community to help shape the design of the future return lodgement experience and this includes the concept of ‘push returns’,” the government said.
The government has also accepted the recommendation for the ATO to adopt a roadmap for the abolition of paper-based returns, while maintaining a paper lodgement channel for the “immediate future”, with the ultimate aim of only accepting paper lodgements from clients who meet certain exclusion criteria.
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