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”.
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!