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A mid-tier accounting firm has slammed the Labor Party’s proposal to put a cap on the amount individuals can deduct for the management of their tax affairs, which would impact the extent to which an individual can claim deductions for tax advice.
Last week, Bill Shorten delivered the opposition’s federal budget reply speech in which he proposed a cap on the amount individuals can claim as a tax deduction for the management of their tax affairs.
“In 2014-15, 48 Australians earned more than $1 million and paid no tax at all. Not even the Medicare levy. Instead, using clever tax lawyers, they deducted their income down from an average of nearly $2.5 million … to below the tax-free threshold,” Mr Shorten said.
“One of the biggest deductions claimed was the money they paid to their accountants, averaging over $1 million. That’s why a Labor government will cap the amount individuals can deduct for the management of their tax affairs at $3,000.”
Walker Wayland Australasia tax practice group chair Paul Marini said that such a cap would not be effective, with individuals potentially getting penalised for simply having to deal with a complex tax system and ever increasing requirements of the Tax Office.
“A cap is unlikely to affect the majority of individuals. However, it does have the potential to disadvantage more sophisticated taxpayers who are trying to do the right thing,” Mr Marini said.
“Incurring accounting fees in excess of $3,000 for the management of an individual’s tax affairs does not necessarily mean the taxpayer is involved in aggressive tax minimisation.”
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