Deduction boom means tax returns are here to stay

A boom in tax deduction claims has been good news for tax agents but could undermine plans to do away with compulsory tax returns, comments by Australia’s tax supremo suggest.

Last year the amount claimed by individuals as work-related expenses increased by 9.5% to $13.1 billion, with the total value of all deductions claimed reaching $27 billion.

That means Australia is unlikely to replace the compulsory tax return, as has happened in Britain and been suggested here, Tax Commissioner Michael D’Ascenzo reportedly said in a speech in Sydney yesterday.

But bad news for taxpayers is good news for tax agents and accountants – the average taxpayer who used an agent paid $251 for having their tax done in 2007, up 31% from 2002.

The popularity of using professional tax services to get tax done has also increased, with the number of taxpayers claiming deductions for professional tax services over the past four years increasing by almost 340,000.

Just over 72% of individual taxpayers lodged their tax returns through a tax agent in 2005-05.

As for businesses, D’Ascenzo pointed to evidence business taxpayers have traded cost for convenience when it comes to getting their tax paperwork done in recent years.

The average amount of time per dollar spent on tax compliance has fallen between 2002 and 2007, as have business perceptions of the burden imposed by tax compliance.

The reduction is likely a result of the “bedding down” of the GST over the past few years, D’Ascenzo says.

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