Speaking to Accountants Daily, H&R Block director of tax communications Mark Chapman said that because the fundamentals of Australia’s tax system have yet to change, the workability of standardised deductions remains as unlikely as it was in 2009.
“The reasons why this was a bad idea in 2009, and in 2015, are still there now,” Mr Chapman said.
“There are certain interest groups who would like to do away with work-related expenses; they’ll keep on putting forward these proposals for a standard deduction. But out in the real world, nothing has changed.”
Mr Chapman’s criticisms follow a report released by the Blueprint Institute on Tuesday that 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.
According to the report, the think tank’s proposed reforms would offer 80 per cent of Australians a tax cut of up to $1,000; reduce annual compliance costs by $4 billion; save Australians $750 million a year in accounting and legal fees by eliminating between 7 and 9 million tax returns; cost the budget $5 billion less annually; and, as a result, make the tax system more progressive.
However, even if an opt-in standardised deduction were to pass, Mr Chapman said, it would likely drive inequities across the tax system, and most taxpayers would continue to consult their tax agents on work-related expenses.
“People who have bought $3,000 [worth of work-related expenses] are going to claim the expenses,” he said, “and people who have less than that are either going to take the difference and get a tax cut.
“Or they’re going to work out what their expenses would be, and figure out whether they’re going to be better off or worse off. They’re not actually getting the benefit of reducing compliance costs.
“If people still have to work out what the tax-related expenses are, before they play with deduction, then there’s simply no benefit.”
The Blueprint Institute’s proposal isn’t new — much of it borrows from the 2009 Henry Tax Review, which the report acknowledges. However, it has reignited conversations around a need for the simplification of Australia’s tax system, and the future of the tax return.
However, Mr Chapman believes that, not only are the reforms unlikely to pass, 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,” he said.
“All of them are unaffected by these proposals and all of them need help with tax obligations.”
It’s a sentiment shared by Susan Franks, senior tax advocate at Chartered Accountants Australia and New Zealand (CA ANZ), who on Wednesday 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 with the lodgement of tax returns, tax agents still provide value to their clients, said Elinor Kasapidis, senior manager of tax policy at CPA Australia, on Wednesday. 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.”
John Buckley is a journalist at Accountants Daily.
Before joining the team in 2021, John worked at The Sydney Morning Herald. His reporting has featured in a range of outlets including The Washington Post, The Age, and The Saturday Paper.