Yahoo Finance This ‘commonly overlooked’ tax deduction could save Aussies thousands
Australian taxpayers are potentially losing thousands of dollars over their working lives by choosing not to claim a deduction on their accountant’s services, money experts are warning.
Claiming a deduction for the cost of managing tax affairs is a “commonly overlooked deduction”, money expert at Finder, Bessie Hassan told Yahoo Finance.
And with Australians set to spend $3.7 billion on preparing their tax returns, it’s a deduction that adds up.
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According to the Australian Tax Office (ATO), 71 per cent of taxpayers in 2016/17 used an agent to lodge their tax return. But according to The Australian Institute, only 47 per cent of taxpayers actually claimed a deduction on the service.
As the ATO explains, Australians can claim a deduction for expenses incurred in managing tax affairs, including lodging tax returns through a registered tax agent. Taxpayers can also claim for travel costs incurred when visiting a registered tax agent.
Why use a tax agent?
“Tax agents liaise closely with their clients to help them claim as many deductions as possible and get the biggest tax return,” Hassan said.
And while the average taxpayer lodging with an agent will spend $380, there are better deals around. Some agents charge as little as $79 for their services.
“So, be sure to shop around,” Hassan added.
Tax deductions a controversial issue
A report by The Australia Institute in 2017 found the average amount deducted on tax agent fees was $378, but the median was significantly lower at $156.
“A large difference between the average and median indicates that a small minority are claiming considerably larger amounts than the average. This minority are dragging up the average,” economist Matt Grudnoff said, explaining that some Australians spend large amounts of money on tax advice to find and take advantage of tax loopholes.
“They can then reduce their disposable income further by deducting the cost of this advice. Extreme examples of this have emerged where people earning considerable amounts of money are claiming more than a million dollars for the management of their tax affairs.”
The research coincided with a Labor party proposal to limit the maximum tax deduction claimed on tax agent fees to $3,0000, with the Institute research finding it would be mainly very high income earners affected by such a policy.
The policy, which Labor went to the 2019 Federal Election with, was expected to save the budget $1.8 billion over a decade, Labor expected.
However, the Institute of Public Accountants said is was “misinformation” to suggest only rich Australians were claiming tax deductions.
“It is highly inappropriate to have a universal cap for all taxpayers as circumstances differ; a one-size-fits-all is inequitable,” said IPA chief executive officer, Andrew Conway.
“Our tax system is complex. Denying deductibility for seeking advice from a trusted adviser is inappropriate.”
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