Insyt chief executive Darren Wynen said that the proposal by Labor to cap the deductions available for tax advice to $3,000 a year is completely unwarranted and will unfairly impact those in difficult or complex situations requiring tax advice with a high fee.
“They may have a lumpy situation where they need specific advice such as contesting an ATO audit claim or an objection,” Mr Wynen told SMSF Adviser.
“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 that taxpayers, small business owners and SMSF trustees need the ability to be able to contest, and limiting the amount that can be claimed as a deduction makes it more expensive to contest.
“You don’t know if you’re going to be successful, so you’re taking a punt anyway, and removing the amount of tax advice that can be claimed as a tax deduction just increases the costs and also the likelihood that they might just decide to put up with what the ATO [is] saying or what they’ve issued,” Mr Wynen said.
“I think that’s contrary to what both parties have been putting out, which is that they want to level the playing field between the ATO and small businesses and the like, who want to be able to contest a claim.”
DBA Lawyers director Daniel Butler also noted that many Australians encounter significant one-off life events, such as divorce, inheritance and retirement, when they require specialist advice that would easily cost more than $3,000.
“Simply carrying out proper planning for large life events such as commencing a business or working overseas could easily exceed this cap,” Mr Butler said.
“This sort of planning is necessary to ensure tax laws are properly followed and taxpayers don’t fall foul of the ATO.”
DBA Lawyers also noted that it is yet to be determined if this limit will include litigation costs, ATO audit costs and ATO interest payment costs.
“With so many other proposed changes to tax laws likely to require advice, many would exceed this cap simply trying to understand these changes and manage their affairs accordingly,” Mr Butler said.
Every year more laws are enacted or varied or withdrawn. For registered tax agents it is a significant job to keep up with the law. Most agents will devote over one week of their year to training, some go much further than this. Our services are valuable and we deserve appropriate reward. Tax services are not a one-size fits all and the example provided shows this. We may prepare one year, we may do 19 years at once! The taxpayer can dispute fees. We also need to bear in mind the complexity of the tax system is imposed by the Government. It seems very “rich” for a limitation to deductions when the Government legislated it so.
Approximately two years ago I had a client subject to a high wealth ATO review. We had to supply four years worth of information covering multiple entities and respond to further requisitions. It will come as no surprise that the costs to do this work significantly exceeded $3,000. The ATO had no issues and thanked us for our cooperation. I wrote to Shorten on 15 May 2017 asking him whether it was fair that the Australian government could request this information from a taxpayer and at the same time deny them a tax deduction for the work involved. I am still awaiting a reply.
Would the $3k cap apply to each entity and thus multiple amounts of up to $3k deductible via each entity ?
That being said I don’t agree with Labor communist limit approach
Can we limit the salaries of the labour party idiots that come up with these ideas?
Before Labor puts a limit on tax deductions for tax advice, Labor should remove all complexity from the tax laws so that people can actually understand it. What a joke.
Totally agree. Pensioner bashing to the extreme and bullying the little man who is simply trying to save for retirement.
Australians have to really rethink how they vote at the next election as these totally ridiculous changes will hit us all in the hip pocket now and in the future.
This should be a big warning to all of us but i fear that those living on handouts from labour will only be thinking of their handouts.
Idiot Idea – why not control the price of bread and water -wake up Australia
Labor is really on a roll with all their proposed attacks on taxpayers, small business and SMSFs.
This proposal breaks new ground. What next: limiting the amount of rent a business can claim as a deduction? Telephone, electricity? Where will it end? I am all for tax reform but this is preposterous.