Eliminating work related tax deductions makes a lot of sense.
Since Malcolm Turnbull became Australia’s 29th Prime Minister on 15th September 2015 tax reform and increasing the GST rate to 15% has received a lot of media speculation.
What is less well known is his long running proposal to reduce marginal tax rates and eliminate work related tax deductions. These tax reform proposals were first proposed by Mr Turnbull in 2005 in his 52 page tax reform paper titled ‘Taxation Reform in Australia: Some Alternatives and Indicative Costings’.
From an economic efficiency or productivity point of view reducing tax rates and eliminating work related tax deductions is a ‘no brainer’. If taxpayers are not paying any extra tax overall then they will support the proposal as they save both time and money by not needing to pay an accountant to lodge their tax return each year. This compulsory paper shuffling currently costs employee taxpayers more than $1billion pa.
Many accountants and tax professionals are archaic, self-interested ($1billion service fees pa at risk), and tunnel visioned so have previously raged against these reforms.
But in reality the accounting profession will benefit overall by:
- No longer needing to spend so much time preparing basic employee tax returns. This basic form filling has ‘dumbed down’ the accounting profession. What is the point of spending three years studying an accounting degree to fill your days by preparing employee salary tax returns?
- Using the freed up time and resources to finally concentrate on adding value to their small business clients. This involves assisting businesses to reduce their tax liabilities, make more profits, and run a better business. Many accountants talk about this but very few actually do it.
In all likelihood, these tax reforms will be implemented shortly. It is therefore important that accountants become less complacent and start upgrading their skills and service offerings to business clients now. The speed of change is evidenced by what Uber has done to the San Francisco taxi industry. They have wiped out 75% of the industry in only 3 years. The world is changing at a fast pace, so accountants need to change too or pay the price.