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Scrap tax returns and give everyone $3,000: think tank

  • April 28 2021
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Earn

Scrap tax returns and give everyone $3,000: think tank

By Cameron Micallef
April 28 2021

Australia should move on from the hassle of a tax return and instead adopt an opt-in standardised $3,000 deduction covering all work-related and personal deductions, a think tank has said.

tax returns

Scrap tax returns and give everyone $3,000: think tank

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  • April 28 2021
  • Share

Australia should move on from the hassle of a tax return and instead adopt an opt-in standardised $3,000 deduction covering all work-related and personal deductions, a think tank has said.

tax returns

The Blueprint Institute released a report that found Australians spend $2.3 billion a year on managing their tax affairs, with the Australian Taxation Office spending a further $3.8 billion a year to enforce tax laws.

Instead of spending $1 in every $300 raised in taxes on administration fees, lawyers and accountants, the Blueprint institute said taxes should be standardised.

Under the policy, 80 per cent of the taxpayers would benefit between $400 and $600, with the remaining being able to lodge their returns independently to ensure they do not miss out.

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The Blueprint Institute’s proposal would see 11 million taxpayers better off.

Additional claims, including charitable donations, super contributions, investment expenses such as negative gearing, would be excluded.

However, taxpayers eligible for more than $3,000 worth of deductions would retain the right to continue to itemize their deductions.

Speaking at the Blueprint Institute’s tax reform conference in Sydney on Monday, Blueprint Institute chief economist Steven Hamilton said that it’s a system that’s already working in other countries around the world, and could relieve taxpayers of administrative burden and cost in Australia, too.

“A lot of countries have moved to this system of tax returns, where they have the systems necessary – in certain cases, standard deductions – to just wipe away all of that complexity,” Mr Hamilton said.

Mr Hamilton also opined the current system remains unfair for workers, with higher-income earners better at playing the game and can afford top accountants and tax lawyers, meaning they can claim greater benefits.

“The current deduction system is modestly regressive,” he said, adding that the standard deduction would go some way to correcting the balance by favouring lower-income earners who tend to have fewer deductions,” he said.

The report acknowledged that the idea behind a standard deduction is not new, with the 2009 Henry Tax Review first examining the benefit behind providing taxpayers with a choice to claim a standard amount or a higher amount with itemisation and substantiation.

The government, however, had previously ruled out such a move after the House of Representatives standing committee on tax and revenue suggested the standard deduction concept in 2018.

“A longstanding principle of the Australian tax system is to tax a person on their income after accounting for legitimate costs incurred in earning that income,” the government said at the time.

Scrap tax returns and give everyone $3,000: think tank
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

author image
Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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