The aim of the measure is to limit the use of expensive accountants by wealthy individuals to find them tax loopholes.
Leading accountancy bodies have slammed the proposal, saying it is not only millionaires who clam more than $3000 in tax advice costs but ordinary people who go through one-off life events – such as an ex-pat with foreign income, or people who are going through a separation or divorce.
Labor’s proposed cap would apply to personal tax affairs and, although the point is still a little unclear and full details are yet to come, it appears that businesses paying a tax agent to complete a Business Activity Statement or accounting for company tax obligations would not be capped under the proposal, with carve outs for businesses with small turnovers.
However, the cap will apply to the trustees of self managed superannuation funds and also to trusts and partnerships.
The number of SMSFs in Australia ballooned to almost 600,000 at the end of June 2018, the latest statistics available from the Australian Taxation Office show.
With Labor’s changes to negative gearing and franking credits, the tax affairs of many people are likely to become more complex if Labor wins the May 18 election, but even so, the cap of $3000 appears generous.
You would think that most people would have serious complications with their individual tax affairs to come anywhere near the proposed deductions limit.
About two thirds of those who lodge a tax return use a tax agent or accountant and, of those, the median or typical deduction for managing their tax affairs in 2016-17 was $171, showing that the vast majority of taxpayers have straightforward tax affairs.
With a typical cost of managing tax affairs for individuals of less than $200, Labor’s proposal allowing a further $2800 to be claimed for those who need it, such as those who are audited by the tax office, are unlikely to cause too much fuss for taxpayers when it comes to casting their votes.
Writes about personal finance for The Sydney Morning Herald and The Age.