In May 2017, opposition leader Bill Shorten announced that, if elected, Labor would cap the amount that individuals can deduct for the management of their tax affairs at $3,000.
Speaking to SMSF Adviser, Institute of Public Accountants (IPA) chief executive Andrew Conway said that while there has been very little detail released about this measure, the IPA’s assumption is that the cap on deductions for managing tax affairs would apply to SMSFs in much the same way it will to individual income taxpayers.
“It’s a concern for the integrity of the tax system because what we believe this measure would do is potentially restrict a taxpayer’s ability to engage the best possible advice they can and obtain private tax rulings. Private tax rulings are complex and time-consuming and generally best managed through a tax agent or specialist,” Mr Conway said.
“If you’re going to restrict a person’s ability to get something like a private tax ruling, that actually then brings into question the integrity of the tax system itself.”
Mr Conway said that the tax system should be equitable and fair, and simply because a person might have a higher income and therefore require more complex tax returns shouldn’t mean they have less of a capacity to deduct the cost of managing their tax affairs.
While the primary concern among practitioners, he said, is their ability to provide the best tax advice to clients, there could also be some clients who ask their tax agent to limit the services they receive to the $3,000 fee mark as a result of this measure.
“It doesn’t make a lot of sense to have this cap imposed for a very small number or taxpayers for the purposes of clawing back revenue for the Commonwealth coffers,” he said.
“If there’s an issue with tax law, fix the tax law, don’t address it by way of opposing arbitrary caps on deductibility.”
The cap won’t stop many people as you simply change the way the invoice reads and make sure it does not refer to tax. For example accounting services, SIS compliance services, audit. None of these are tax services so should not be caught by the cap anyway Another example of not thinking things through properly
So what will happen is that trustees will take their SMSFs from good accountants and go online for the one stop accounting and audit package for $999. Way to go.
Aren’t these deductible management costs anyway in most cases? The general deduction provision would allow most of them.
I dont think Labor have thought it through… in opposition they don’t really have to either. When they get into office it is a different kettle of fish. Lobbying needs to be hard here… too late once they are engaged on a pathway. We found that out with FASEA…. lack of detail meant complacency then all of a sudden, its too late.
It’s simply applying “negative gearing “ to tax expenses in general …..illogical accounting …….. it can only be expected that accounting /compliance costs will increase dramatically
Perhaps Labor needs to reduce the complexity of the tax system before they limit caps on deductions.
This is interesting and from my experience most advice relates to SIS compliance issues – can a JV be completed, who are death benefits to be paid to, rather than pure taxation. This issue is important and glad IPA is raising it and suggest that it be looked at clarified and expanded for the full range of possible advice – including audit fees (compliance or potentially 47% non-complying tax rate).