Too taxing: reducing red tape

Removing S&W deductions from tax returns using tax cuts

Maybe as little as 10 years ago there used to be a lot of talk about removing the need for individuals to lodge tax returns. This talk seems to have disappeared in recent years. While I agree that the boat has probably sailed on that idea, I think there is a way to simplify individual tax returns by reducing the need for S&W individuals to claim work related expenses.

 

This could be done using tax cuts to 'give' individuals an automatic deduction. So the government would 'purchase' say a $2,000 tax deduction using a tax cut. If you had $5,000 worth of deductions you could claim the additional $3,000 but you would of course have to substantiate ALL of it. A change like this would most benefit the people who currently claim the least - usually people on the lowest incomes. Lots of record keeping saved for people who have low amounts of deductions. The automatic deduction could be increased over time if it would produce further benefits.

 

In time, this idea might also encourage employers to stop expecting employees to incur expenditure on behalf of the employer - because the employer would, of course, get the benefit of the deduction when the employee would not if they were under the threshold. Even if this led to some potentially odd transfers of expenditure back to the employer - at the moment tax cuts are just money for nothing, so this would still be an improvement.

 

This idea - as opposed to removing the need for lodgment at all - would hopefully keep the tax profession reasonably happy and reduce the lobbying that would undoubtedly occur if total removal was suggested.

 

If I recall correctly, this method was used to remove concessional expenditure in the 80's.

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Idea No. 79