Speaking on the campaign trail, Mr Shorten said that Labor was not against accountants despite its plans to introduce a $3,000 deductions cap for the cost of managing tax affairs.
“I think our CPAs are excellent. Love accountants. There was the usual propaganda from News Limited which [said] that we are against the profession; we are not,” Mr Shorten said.
“Am I surprised a vested interest whose business model relies on tax subsidies isn’t happy if we are going to reform it? No, I get why they might not like it.
“At the end of the day, we are not changing the ability of accountants to do work for their customers. We are just saying that, perhaps, once you are paying over $3,000 a year to an accountant, you shouldn’t be able to deduct that off your tax.
“We have to ask ourselves in this country, are we just a country who wants to maintain tax subsidies and loopholes for the big end of town, or a country who wants to invest in our people?”
Labor has based its policy on the ATO’s 2014–15 figures which showed that 48 people who earned more than $1 million paid zero tax, with 19 of them claiming an average of $1.1 million in deductions for the cost of managing tax affairs.
The figures do not differentiate between fees paid to an adviser or the costs of appealing to the Administrative Appeals Tribunal or courts in relation to tax affairs, interest charges by the ATO and dealing with the ATO about tax affairs.
Labor expects to raise $1.8 billion over 10 years from this measure, and will only affect less than 1 per cent of all taxpayers, roughly 90,000.
Speaking to Accountants Daily, the Tax Institute’s senior tax counsel, Professor Robert Deutsch, said that it was unfair to place a cap on the entire taxpaying population because a few were claiming higher amounts.
“It is a very strange policy to adopt to saddle the entire community with a cap because 48 people appear to be doing the wrong thing. It would be far more appropriate if direct action was taken against those 48 people and the rules that are currently there remain in place,” he said.
Instead, Professor Deutsch believes the proposal will have a bigger impact on taxpayers who are experiencing one-off life events that require additional tax advice.
“In relation to people who are well-to-do, a cap is not going to do anything to them. If they are going to incur large tax expenses, they will continue to do that whether they get a deduction or not because it will still be worth it for them to pursue the tax savings obtained by spending that additional money,” Professor Deutsch said.
“The people who will be negatively impacted are those who have particularly difficult personal circumstances that require a lot of tax advice, and these could be people who are going through a divorce or someone who have bereavement.”
Tax specialist Darren Wynen said that the Tax Office should release figures to differentiate between the cost of tax agent fees, and the appeals costs and general and shortfall interest charges imposed in the income year.
“The problem is, we are not comparing apples with apples; Labor is bashing tax agents when in fact that dollar figure doesn’t only include tax agent fees,” the Insyt chief executive said.
“I work a lot with taxpayers who are in battle with the ATO by way of objections or going before the tribunal, and the simple fact is that it can be a long, drawn-out process.
“I’ve got a client who is a taxpayer on a $60,000 income and she’s been defrauded by her brother and she’s got a tax bill of $150,000. So these are ordinary people who need that one-off advice because the ATO is a big adversary unless you have people who have that expertise and can deal with that.”
DBA Lawyers director Daniel Butler called the proposal “absurd” and noted that the complexity of tax laws in Australia required taxpayers to lean on the expertise of tax specialists.
“Australia has a reputation for being one of the most complex tax systems in the world and probably ranks second to the United States,” Mr Butler said.
“Indeed, the ATO’s extensive powers are becoming even more frightening for many taxpayers and the complexity of our system — simple ATO computer errors can cost thousands of dollars of unnecessary fees to respond to systematic ATO errors.
“The system is so bewildering and so one-sided that taxpayers do not stand much chance in being represented against a more powerful and tax collection-driven ATO.”