Accounting, Tax

Numbers for cap on tax advice based on wrong data set

tax advice

Calls to cap deductions for costs related to tax advice have been based on inaccurate and limited data.

Calls for a reduction in the level of deductions for managing tax affairs have been based on a small sample of figures and do not present an accurate picture of accountants’ fees for providing tax advice, according to the Institute of Public Accountants (IPA).

The IPA made the claim following statements by the opposition leader Bill Shorten, as part of the federal election campaign, that an incoming Labor government would seek to cap deductions for tax advice at $3000.

IPA chief executive Andrew Conway said the numbers being used by the opposition to justify the cap were creating misinformation and would not lead to the predicted savings.

“The figures used are based on a very small sample. These in themselves do not justify a policy of capping deductions for tax advice,” Conway said.

“In addition, if the numbers being bandied around are using aggregated data, they will result in grossly overstated averages for adviser fees for this sample size,” he added.

Conway said the ATO data being referenced, in terms of saving, was drawn from the 2016/17 financial year and the label in the income tax return that made up the figure for managing tax affairs include advice fees, ATO interest charges and litigation costs.

“If aggregated figures are being used, then this is misleading the public,” Conway ex[plained, adding, “Importantly, if aggregated figures are being used, the predicted savings will not be realised.”

“You can polish the crystal ball as much as you like, it doesn’t mean you will see future savings,” he said.

Conway noted that, with the release of costings by Labor, the IPA wanted further clarity around the figures used and said people were being misinformed by the statement that only the rich could access tax deductions when they were accessible by all Australians.

“It is highly inappropriate to have a universal cap for all taxpayers as circumstances differ; a one-size-fits-all is inequitable,” he argued.

“Our tax system is complex. Denying deductibility for seeking advice from a trusted adviser is inappropriate.”

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