The accounting associations have defended the right of Australians to deduct accounting service fees from their taxable income and called for Bill Shorten to apologise following the Labor leader’s declaration that these tax deductions for accounting fees “a rort”. The Labor party has a proposal to cap the tax deductibility of accounting advice for individuals to $3000.
Although Labor announced its intention to pursue this policy in May 2017, last Friday Shorten was touting the measure all day - in a speech he said “Did you know you can also claim as a tax deduction the hundreds of thousands dollars you give to your accountant to deduct millions out of the tax system”.
Political Strategy
The political strategy from Shorten seems clear. He seeks to frame the measure as closing a loophole used by the super wealthy. He continued “why on earth is this government defending the ability of the super wealthy to pay their accountants, to minimise their tax and then even claim the cost to pay their accountants.” He's banking on appealing to anyone who doesn't consider themselves "super wealthy" (ie basically everyone).
The proposal is expected to raise $1.8 billion to 2028-29, and will affect less than 1% of all taxpayers, roughly 90,000 people. This is a finely focussed definitive target for the Labor party, no doubt they believe overall 1% is a small enough amount and few of the 90,000 affected would vote for them anyway. Figures from the same year showed that the total value of deductions claimed for managing tax affairs was $2.34 billion, with the average deduction at $378 across 6.2 million Australians who claimed the deduction. The success of this strategy will depend largely on the reaction from the Government and industry, to see if they can mount a successful counter argument that gains traction.
The PM and Treasurer have written to the accounting community addressing this and other Labor proposals regarding tax policy, saying they had “real concerns”. The Institute of Public Accountants (IPA) said it had received the letter and was disseminating it to its members.
"Tax Deductions Are A Right"
In reply to Shorten, Chartered Accountants Australia New Zealand tax leader Michael Croker said that, because managing tax affairs covered such a variety of circumstances, it was unlikely that millionaires would be the only taxpayers hit by the proposed $3,000 cap. “Tax deductions are not a rort...they are a right” he said. “It’s the people who invest and need to assess taxation, depreciation, capital gains and other implications. It's the migrant or expat Australian with foreign income. It is the people who are thinking about a separation or going through a divorce. It is the people making decisions in the lead up to retirement.”
Speaking to the Accountants Daily website, CEO of the IPA Andrew Conway called on Mr Shorten to issue an apology to the tax profession, for his inaccurate representation of tax agents. “His comments show no understanding of the practical tax advice that agents give…by every measure, accountants are the trusted adviser to the SME community,” he said. “People go to a tax agent for very normal life situations - divorce, financial distress, investment. This impacts the SME community, and mum and dad taxpayers,” Mr Conway said.
In reply to this criticism, yesterday 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 (but) 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?”
Maybe someone could suggest to Mr Shorten that if some money is saved by the government with this policy, the least they could do would be to extend the same courtesy to financial advisers and make financial advice tax deductible up to the same amount. That would go a small way to encouraging people to get advice, it would potentially give the industry a shot in the arm that it badly needs and would be one way to vastly improve financial literacy and financial outcomes of average people in this country.
Now that would be real leadership for you!
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Comments12
"Shortens comment really confirms his ignorance of anything to do with the financial system! People with wealth have company and trust structures to distribute income, individuals paying that amount for tax advice are few and far between. Sounds like another poorly planned Labor money coup like the resources tax. That was a profitable one!!!"
Steve S 08:02 on 20 Apr 19
"The guy is a joke. Just look at his FOFA mess !"
Chris 09:17 on 18 Apr 19
"Where do you start? Politicians have made the tax system so unwieldy that have forced Australians to obtain compliance advice. To deny a tax deduction for complying with the politically created morass is the height of hypocrisy. The suggestion that clients willingly fork over money to their accountants is absurd - like any other expense they carefully manage their money and spend where they need to. For Mr Shorten to describe tax deducting accounting fees as a is shameful. What next Bill - perhaps claiming cost of goods sold is the new 'rort' to be exposed!"
Chris Waples 09:04 on 18 Apr 19
"This guy has no idea how the economy works--and he wants to run the country!!-- with the militant unions--it will set the economy/country back 10 years.. "
mal 18:29 on 17 Apr 19
"such an arrogant man. Is it any wonder that people don't trust or like him. Union fees are tax deductible - why am I subsidizing his thugs! "
anne Cavenagh 16:29 on 17 Apr 19
"To be honest, as an accountant practice that deals mostly with individuals we haven't seen any individual pay more than $3k for individual tax returns and tax advice. I'd love to find clients that would be willing but it really won't affect that many individuals. You could still charge a couple 3k each and it isn't supposed to affect companies or businesses with an ABN where the real workload is. The real question is as it's just a shot from the hip, but not sure why people can claim a tax deduction for union membership if the union hasn't done any EBA negotiation or work for the individual in the year claimed? Cost of union membership - $600-$800per annum and rising....."
Tim 15:37 on 17 Apr 19
"This smacks of Bill Short On Ideas other that increase taxes or deny deductions in other words taxing Australians to death. If he is genuine in tax rorting introduce legislation to change the rorts he has identified. I think what Short On Ideas really means is there are opportunities for you to minimise your taxes but we don't want you to go to your accountants to find out what they are. Just a joke of a politician."
Sergio 15:31 on 17 Apr 19
"I would ask Mr Shorten to examine his Party and find out if anyone of his Ministers or Back Benchers are rorting the tax system by claiming a tax deduction for their Accounting Fees and why they are at it advise whether they claim tax deductions for which they are legally allowed to."
Anonymous 14:54 on 17 Apr 19
"So I am guessing that the Accounting world would also support tax deductions for people seeking financial advice. "
wayno 14:47 on 17 Apr 19
"Cue all the vested interests in the in finance industry squealing anti Labour slogans"
noname 14:35 on 17 Apr 19
"Just another example of Shorten's incompetence. Anyone who votes Labour in this election is financially illiterate."
Simon T 14:33 on 17 Apr 19
"I know this won't be popular here but this policy is a decent way to raise a bit of money. The well off 1% will still pay more than $3k for the accounting services anyway - so accountants still get paid, and the govt can skim a little back from those super wealthy who pay shedloads to minimise their tax. You can still minimise your tax as much as you want, the deduction for accounting services is just not one way to do it anymore. And correct me if I'm wrong - it just applies to individuals, not companies - so companies can still deduct?"
ALP Voter 14:29 on 17 Apr 19