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The introduction of a $3,000 standardised deduction would likely effect little change to the way tax returns are prepared and submitted, says one industry body.
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‘Too simplistic’: Standardised deductions aren’t a silver bullet
10 May 2021
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Tax & Super Australia (TSA) has now raised questions over the calculation, costing and scope pitched by a recent report released by the Blueprint Institute earlier this month that proposes the federal government introduce a $3,000 standardised deduction.
The tax and super not-for-profit suggested the report failed to deliver insights from working tax professionals, who may have been able to steer the report into more “temperate” and “balanced” territory.
“The Blueprint Institute’s report suffers a glaring omission from its panel of authors — it lacks a person who actually works in the tax system,” said John Jeffreys, tax counsel at Tax & Super Australia.
“The addition of such a person may have resulted in a more temperate and balanced view.”
The Blueprint Institute in April released a report titled Bye–Bye Tax Returns which proposes the federal government introduce a $3,000 standardised deduction to help taxpayers avoid the paperwork and costs associated with preparing and submitting tax returns.
However, taxpayers eligible for more than $3,000 worth of deductions would retain the right to continue itemising their deductions.
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The report estimates that, because tax returns aren’t pre-filled and taxpayers have to “keep a box of receipts they take down to their accountant at tax time”, Australians spend $5 billion a year on compliance costs.
However, Mr Jeffreys said the report misleads in suggesting that claiming work-related expenses comprises a large portion of taxpayers’ compliance costs.
“The report seems to assume that claiming tax deductions for work-related expenses is a significant part of the cost of using a tax agent. This is simply incorrect,” Mr Jeffreys said.
“The work-related deductions part of the process is relatively minor. If you speak with most tax agents, you will find they have efficient ways of dealing with these deductions. The biggest cause of compliance costs is the complexity of the overall tax system.”
Mr Jeffreys said that the value of tax agents in Australia reaches far beyond working with taxpayers to itemise their work-related expenses.
“As the report states, the percentage of taxpayers using a tax agent has hardly changed over the last 10 years,” Mr Jeffreys said. “Why is this? It is not because taxpayers have a significant need to have their tax agents work out their work-related deductions.
“It is because the Australian people need help dealing with — and sometimes getting referrals to other professionals — for a whole range of issues. These include capital gains, rental properties, financing, superannuation, advice on financial concepts and many other matters.”
Mr Jeffreys’ defence of the value agents offer taxpayers echoes those made by H&R Block’s director of tax communications, Mark Chapman, who in April said that not only are the reforms unlikely to pass, but that tax agents would still be able to provide value to taxpayers if such reforms were introduced.
“Over 2 million people own investment properties, there are innumerable small business owners — including thousands of Uber drivers, Airbnb renters and Airtasker workers — and countless investors in everything from shares to cryptocurrency,” Mr Chapman said.
“All of them are unaffected by these proposals and all of them need help with tax obligations.”
It’s also a sentiment shared by Susan Franks, senior tax advocate at Chartered Accountants Australia and New Zealand (CA ANZ), who earlier that week said that even if such reforms were to spell the end of the tax return, the role of the tax agent extends far beyond filing them.
“The role the profession plays extends far beyond tax returns, and the proof of this can be seen in the last 12 months alone where many members were the first port of call,” Ms Franks said.
“With the current economic situation and high level of uncertainty, the upcoming tax time requires a period of stability, so we look forward to continuing this discussion and ensuring members’ voices are heard.”
Even without the lodgement of tax returns, tax agents still provide value to their clients, said Elinor Kasapidis, senior manager of tax policy at CPA Australia. They play a pivotal role in offering taxpayers more insight into their entitlements than a standardised deduction or other auxiliary digital resources could.
“Tax agents do add more value,” Ms Kasapidis said. “There is complexity that remains in the system, and people will still need to visit them — it’s in their interest to do so. They play this really important education role in making sure that taxpayers are aware of how they can claim what they’re entitled to.”
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