Should expense claims be scrapped in favour of a standard tax deduction?

About 75 per cent of Australians lodge their tax return via a tax agent, many unnecessarily, because the tax system is complex and difficult to understand, a parliamentary inquiry has heard.

The Tax Institute says individuals with straightforward affairs don’t need a tax agent but find the system hard to access and cannot sort misinformation from correct information so feel they need to pay for expert help.

The Institute applauds the ATO’s move to electronic communications but says it could be improved by the ATO pre-filling as much information as possible and more transparency in data collected.

The Institute told a Federal Parliamentary inquiry into taxpayer engagement with the tax system that Australia is out of step with other OECD countries in allowing work-related expenses. It says these could be scrapped in favour of a standard deduction.

But this option is opposed by CPA Australia, which says a standard deduction creates “windfall winners” among people who don’t have many expenses, while others cannot claim for all they spend on earning an income.

The ATO has signaled a crack down on expense claims, with Commissioner Chris Jordan telling the National Press Club last year that a large amount of overclaiming of small amounts added up to a large loss of revenue.

The Parliamentary Budget Office has estimated a loss to revenue from work-related expenses of $8.3 billion in 2016/17 and $8.74 billion in 2017/18.

January 2018