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Monday, July 25, 2011

A reminder about what “simplified tax returns” actually means.

I know I covered this last year following the 2010 Federal Budget, but I thought it was worth re-visiting as it’s a topic that seems to have caused some confusion.

You may recall at the time, Wayne Swan tried to promote the proposal by saying it will give most people “more time with their loved ones.” Talk about a stretch!! Methinks he needs a tad more spin doctor training.

The idea is that from 1 July 2012, individual taxpayers will have the option of claiming a standard deduction of $500 for work related expenses and the cost of managing their tax affairs. From 1 July 2013, the Government will increase this standard deduction to $1,000.

This is supposed to make it easier to lodge your own tax return, and in some instances this will be the case. The standard deduction is optional, you can still claim your full “actual” expenses if you believe they will be higher.

An important statistic to take into account that the government is not promoting is that the ATO have released figures showing that the actual average deductions claimed is more than $2,800.

So it begs the question - do you trust the government with your tax deductions? And please bear in mind they are talking about $1,000 of deductions, not a $1,000 refund. At the 30% marginal tax rate the ATO’s actual average taxpayer will be doing themselves out of almost $600 refund.

By making it simpler, are they really hoping that we’ll get lazy and forego our higher tax refund for the easier option? After all, it’s the government trying to save themselves money through reduced administration. Call me cynical, but I just don’t see the government introducing this policy to make my life easier, there has to be more in it for them.

Talk soon,

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