Morrison’s warning on Labor tax advice cap

The PM and Treasurer have written to accounting bodies condemning Labor’s tax advice cap.

reasurer Josh Frydenberg. Picture: Aaron Francis

More than six million Australians claimed $2.3 billion worth of deductions in 2016-17 to cover the cost of managing their tax affairs, and Scott Morrison has warned Labor would change the rules to deny relief to people “during a divorce or following the death of a family member”.

The Prime Minister made the claim in a joint letter signed by Treasurer Josh Frydenberg and sent to peak accounting bodies on Friday. Bill Shorten yesterday said the Labor overhaul would funnel more revenue into essential services, including better access to lifesaving cancer treatments.

The sector is split on whether to pass on the Prime Minister’s letter to its membership base, but is strongly opposed to the Labor policy, which will limit deductions for professional advice at tax time at $3000.

The cap will affect individuals, trusts and partnerships although an exemption is to apply for individual small businesses with positive business income and annual turnover up to $2 million.

One in every 100 taxpayers will be caught by the Labor shake-up, which is estimated to raise $1.8bn over the decade.

In his letter, Mr Morrison says the Labor policy will hit individuals restructuring their finances following significant ­personal events in their lives.

“Discouraging Australians from getting the financial advice they need and then depriving them of their rightful income is a double burden that cannot be justified,” the Prime Minister said.

“There are good reasons why many individuals and businesses require extensive tax advice, such as during a divorce or following the death of a family member.

“Imposing a cap may lead to taxpayers limiting the advice they seek and making the wrong ­decision.”

Chartered Accountants Australia New Zealand has left the door open to passing on Mr Morrison’s letter to its Australian membership, which is comprised of about 80,000 accountants.

Tax leader at CA ANZ Michael Croker told The Australian: “My sense is our members would like to have more material outlining the policy reasons behind why we think the Labor policy is objectionable.”

The Institute of Public Accountants has decided to pass on the letter to its 15,000-strong membership, which includes 5000 practising accountants. IPA chief executive Andrew Conway said the overhaul represented an ­attack on “millions of hardworking taxpayers who are doing the right thing”.

He likened it to a revenue grab and warned the $3000 cap would deter taxpayers from getting appropriate tax advice.

“If the opposition provides a response to these concerns, we will also distribute the correspondence to members,” he said.

CPA Australia head of external affairs Paul Drum said a decision had been taken not to pass on the letter to members but he condemned the Labor policy as ­inefficient, inequitable and unsustainable.

Mr Shorten yesterday stood by the policy, saying Labor was committed to closing “tax subsidies and loopholes for the big end of town” and some individuals were using the deduction to reduce their taxable income by up to $1m.

“Can we afford to be giving away millions of dollars of tax subsidy to people for the cost of minimising their tax already?” he said.

“I would rather use that taxpayer money for the best schools in the world, for the best TAFE, for the best aged care, for the best healthcare system.

“It is a matter of priorities.

“We are just saying that perhaps once you are paying over $3000 a year to an accountant you shouldn’t be able to deduct that off your tax.

“Do we want to be a country who can’t afford to be alongside you when you are in the fight of your life on cancer?”