Yahoo Finance New tax proposal could make you $600 richer at tax time
Filling out a tax return in the new financial year can be a stressful and arduous job. Imagine if you could get an automated return instead?
Think tank the Blueprint Institute has proposed just that. It has suggested that the Australian Tax Office (ATO) offer a standard claim for around 80 per cent of taxpayers, effectively removing the need for taxpayers to fill in their forms.
It has proposed the ATO offer work-related expenses claims at a standard $3,000, which would mean 80 per cent of taxpayers would receive $400-600 in tax relief.
However taxpayers would still need to file claims for items like charitable giving, interest earnt on negatively geared property and super contributions.
Workers with high levels of workplace expenses would also still need to file a return to receive the full benefit.
If taxpayers chose to itemise their workplace expenses rather than receive the automated amount, that would also remain an option.
The cost of managing tax affairs
According to the Blueprint Institute, Australians spend $2.3 billion managing their tax affairs every year. As accountants and tax agents are tax deductible, a large sum of that is also paid for by the taxpayer.
“The ATO costs us $3.8 billion a year to administer and enforce the tax law, employing nearly 20,000 people,” the Institute wrote.
“That means one in every $300 in our economy goes to the ATO or a personal tax accountant or lawyer — two sides of the same coin.”
Blueprint chief economist Steven Hamilton said the “vage system of deductions” allows “considerable discretion” to taxpayers.
He said “gaming” of the system needs to end.
The Institute found a standard deduction would reduce compliance costs by $4 billion a year, while accounting and legal fees would also fall $750 million a year. However, it would cost the budget around $5 billion annually.
“Our failure to introduce a standard deduction, despite a series of reviews recommending it, is a microcosm of our failure to enact serious tax reform in the last two decades. A new tax reform process must focus on tangibly improving people’s lives. On simplifying our tax system, cutting away the red tape that makes our lives more difficult,” Hamilton said.
Former Labor treasurer Wayne Swan in 2010 promised to introduce a standard deduction that would increase from $500 to $1,000 over two years. However the plan was later abandoned.
