The letter outlines how the cap could cause hardship and put individuals at a disadvantage.

It notes that the proposed cap could apply to any Australian regardless of wealth for costs such as dealing with the ATO on the client’s behalf where their tax affairs are audited or they need to obtain a private binding ruling.

It would also apply to costs such as litigation costs on a tax matter, obtaining a valuation for tax purposes and any interest charges the ATO imposes on the taxpayer.

Feedback received from the ATO is that the big deduction claims that Labor talks about relate to long-running tax disputes with large litigation costs and ATO-imposed interest costs, CA ANZ explained.

“If the ATO didn’t consider these deductions to be legitimate, then the deductions would have been challenged,” the letter states.

“The Opposition Leader’s rhetoric implies there are wealthy Australians who willingly hand money to their tax adviser simply to get a tax deduction.”

Insyt chief executive Darren Wynen previously told SMSF Adviser that, in the context of SMSFs, an SMSF trustee may have a situation where they need specific advice such as contesting an ATO audit claim or an objection.

“I think in those situations where there’s a lumpy claim in a particular year, I don’t think they should be capped, because I think, generally, individuals, small businesses and SMSFs are up against it anyway with the ATO because the ATO has unlimited resources at their disposal and often what’s needed if they’re going to have any chance of success is a well-constructed argument,” Mr Wynen said.

The Tax Institute has also pointed out that there are many situations where individuals will need more than $3,000 of assistance, such as someone looking to create a new business.

“People with foreign income or assets [such as] migrants also need to address aspects of tax law that are complex even by the standards of the tax regime in general.”