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A standard deduction for work-related deductions is unlikely to materialise in an election year but taxpayers should expect additional ATO funding in light of the Commissioner’s recent warnings around rental deductions.
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Federal budget tipped to bring extra ATO funding, compliance activities
29 March 2019
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While calls for standard deductions for work-related expenses have been around since the Henry Tax Review recommended it in 2010, and more recently during a House of Representatives Standing Committee on Tax and Revenue inquiry, CPA Australia’s general manager of external affairs Paul Drum believes the government will unlikely consider it during next week’s federal budget.
“In an election year of all years, to go down the path of standard deductions, or to even entertain that thought of a standard deduction for work-related expenses would be extraordinarily politically unpalatable so we’re not expecting to see anything on that,” said Mr Drum.
A move to standard deductions was widely predicted last year, as the ATO made several high profile statements and speeches about the state of work-related deductions.
Instead, the government poured $130.8 million into the Tax Office to increase compliance activities targeting individual taxpayers and their tax agents.
Mr Drum believes tax agents and their clients can similarly expect another boost to funding, after Commissioner Chris Jordan revealed that audits of over 300 rental property claims found errors in almost nine out of 10 returns reviewed.
According to the Tax Office, 2.1 million taxpayers claimed $47.4 billion in deductions against $44.1 billion in reported income.
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“It is a dramatic revelation so it wouldn’t surprise us if there was extra funding to the ATO to undertake more substantial reviews in the area of rental properties and rental losses,” said Mr Drum.
“In a political context, that might counter what the opposition is doing about curbing negative gearing on certain investments – if you have the ATO equipped to do its job better and making sure people aren’t claiming what they are not entitled to, then it is contrary to the argument that negative gearing should be removed.”
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