The Australian accounting institutes
are unimpressed with the lukewarm response from the Australian
government to a major tax review.
The Henry Review into Australia’s tax system,
headed by Treasury Secretary Ken Henry, made a series of
recommendations early this year. But the government’s response,
released on 2 May, was underwhelming.
“We expected the government to address every
one of the 138 recommendations in some way, to say whether or not
it supported a proposal or whether or not certain proposals were
worth exploration in the future,” Institute of Chartered
Accountants in Australia (ICAA) tax counsel Yasser El-Ansary
“Instead all we got was the announcement of a
proposal for a tax on the mining sector and a handful of very small
changes to the tax system. This really doesn’t represent the
serious tax reform that we were all expecting.”
One small step
One minor change is a proposed simplification
to individual tax returns.
Australia has a complex tax system that has led
to a disproportionately high number of tax payers using the
services of a tax agent. El-Ansary said about 72% of Australian
adult tax payers use a tax agent every year to get annual tax
returns completed, compared with an average of about 35% in other
Organisation of Economic Co-operation and Development
However, despite the need for simplification,
the proposed change is superficial.
Individual tax payers will be allowed to choose
a standard deduction of A$500 ($416) for work related expenses in
the first year, rising to A$1,000 in the second year.
National Institute of Accountants senior tax
adviser Tony Greco said the average claim for work related expenses
is currently A$2,000, so most tax payers will probably continue to
claim whatever deduction they think they are entitled to.
“The government is saying that five million or
six million people will be eligible, and that is half the size of
the number of people who are required to lodge returns. We can’t
understand how they got to those numbers,” Greco said.
El-Ansary said that although the simplified
deduction proposals represent a visible leap forward, the
Australian tax authority has, through technology advances, been
moving towards simplification for about a decade.
The simplification of tax returns will not
adversely affect many members of the three professional bodies.
El-Ansary said that even the ICAA members that
could be affected support simplification efforts.
“They would like to see simplified tax returns
introduced as quickly as possible because it would allow those
accountants to focus more of their energy, time and resources
towards working with clients who really do require high value
accounting and tax services,” El-Ansary said.