One think tank has suggested a standardised $3000 deduction to simplify the tax system and save Australians money on accountants.
A report, appropriately titled Bye–Bye Tax Returns, proposes the federal government introduce a $3,000 standardised deduction to help taxpayers avoid the paperwork and costs associated with preparing and submitting tax returns. Taxpayers eligible for more than $3,000 worth of deductions would retain the right to continue itemising their deductions.
The think tank, The Blueprint Institute, has proposed reforms which would offer 80 per cent of Australians:
- A tax cut of up to $1,000
- A reduction of annual compliance costs by $4 billion
- Save Australians $750 million a year in accounting and legal fees by eliminating between 7 and 8 million tax returns
- Cost the budget $5 billion less annually; and, as a result, make the tax system more progressive.
“A lot of countries have moved to this system of tax returns, where they have the systems necessary — in certain cases, standard deductions — to just wipe away all of that complexity,” Steven Hamilton, Blueprint Institute chief economist, said recently at his company’s tax reform conference.
The government, however, has also rejected such a proposed move before, as reported by Accountant’s Daily, after the House of Representatives Standing Committee on Tax and Revenue suggested the standard deduction concept in 2018.
“A long-standing principle of the Australian tax system is to tax a person on their income after accounting for legitimate costs incurred in earning that income,” the government said at the time. “Deductions for costs incurred in producing income recognise that people incur different costs in producing income and permitting deductions is intended to equalise the treatment between those who incur costs in producing their income and those who do not.”