Labor’s $3k tax affairs cap tipped to hit SMSF trustees
With Labor’s proposed $3,000 limit on deductions for managing tax affairs also expected to apply to SMSF trustees, the IPA is concerned this may restrict the ability of trustees to obtain private binding rulings and more complex tax advice.
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.”