The Government used tonight’s Budget to abolish the proposed standard deduction for work-related expenses, saving over $2 billion and making the accounting profession happy.
A standard deduction was set to be imposed on July 1, 2013 and so the Treasurer Wayne Swan says his decision not to proceed with the measure will not impact on the current taxation arrangements of any person.
“Given the significant reform of tripling the tax-free threshold from July 1, this year – freeing up to one million Australians from having to lodge a tax return and changing and simplifying the arrangements for the Education Tax Refund, the Government has decided not to proceed with the standard deduction for work-related expenses,” says Swan.
Get business news first
Sign up to SmartCompany’s daily newsletter
The Government also pointed to moves by the Australian Tax Office to make it easier for people to complete their tax return through improvements in pre-filing.
Based on forward estimates the Government expects to save $2.094 billion by not proceeding with the standard deduction.
This includes savings of $2.5 million in 2012-13, $91.9 million in 2013-14, $600 million in 2014-15 and $1.4 billion in 2015-16.
Swan says the decision to scrap the standard deduction “reflects the Government’s commitment to disciplined budget management and strong public finances”.
“Making the tax system more sustainable not only achieves savings now, but benefits the budget bottom line for decades to come,” says Swan.
“It’s this fiscal discipline that has earned us a AAA-rating from all three major ratings agencies for the very first time in our history.”
The accounting profession will be pleased the decision to scrap the standard deduction, as it had feared a loss of revenue if clients no longer required them to find expense claims.