ATO figures show Government’s standard tax deduction plan may not entice workers

Taxpayers are urged to do the maths on their workplace-related expenses, as Tax Office figures show average claims well exceed the Government’s planned standard deduction level of $500.

According to The Australian Financial Review, Australian Taxation Office figures show the average work-expenses claim came in at $2,039 for the 2009 financial year, an increase from $1,950 the year before.

This is well above the Government’s plans to allow taxpayers to claim a $500 standard income tax deduction without receipts from July 2012, instead of requiring them to dig up paperwork for work-related expenses.

The figure also covers the cost of managing tax affairs, and would rise to $1,000 form July 2013.

The Government expects the standard deduction offer to “be a better choice” for 4.6 million taxpayers in the 2013 financial year, rising to 6.4 million the following year.

But Paul Drum, CPA Australia head of business and investment policy, says that while his organisation supported the government’s push, it’s not the “be-all and end-all” of fixing compliance costs.

“We’re not saying the initiative is a waste… but we’re making the observation that nobody really expects that 14 million taxpayers are going to sign up to the $500 standard deduction,” Drum told SmartCompany.

“CPA encourages all Australians to claim whatever they’re entitled to claim.

“And against the average [of $2,039], a standard deduction is not going to be cost-effective.”

Drum recommends people do the maths on taking the standard deduction figure or working through claims.

“Look at the averages: there will be a lot of people who are claiming less than $2,000 per annum,” Drum says.

Yasser El-Ansary, tax counsel at the Institute of Chartered Accountants of Australia, has described the government’s plans as a ‘deal or no deal’ offer to taxpayers.

“Claim $500 without needing to keep any receipts, or claim a different amount if you want to maintain documentation to support your claim.”

While describing it as a ‘win/win’ scenario for taxpayers and good news for some tax agents, El-Ansary said in his blog the simplification relies on a “significant take-up.”

“The question is whether or not $500 (or even $1,000) will be enough to entice people to take the deal,” he writes.

“Data suggests that individuals claim an average of around $2,000 per year for work-related expenses.

“When budget conditions improve, I think the Government will need to make the offer much more attractive in order to ensure a significant take-up across the population.”