The head of a major accounting body is warning against moves by the government to open trade tax deductions for lower income tax rates, claiming the impact could be catastrophic for small businesses in particular.
Andrew Conway, CEO of the Institute of Public Accountants, said the issue – currently being investigated by the House of Representatives Economics Committee – could be a genuine threat to the rights of small businesses and their employees.
“While a reduction in personal income tax is an attractive proposition to most people, it will not compensate the majority for the loss in having the right to claim legitimate work-related deductions,” Mr Conway said.
“Under such a proposal, up to nine million Australian taxpayers would lose their existing ability to claim deductions relating to expenses incurred in earning their income; a fundamental entitlement under our tax system.
“And employees should not be under the false assumption that employers will pick up the slack. Most businesses in Australia are small businesses who can ill afford to fund the shortfall."
Mr Conway said that as a result, employees may choose not to buy essential tools for work purposes, such as mobile phones and laptops, if they are not able to claim tax deductions for these expenses.
“Loss of essential tools of trade will lead to further deterioration of Australia’s already declining productivity," he said.
“Taxpayers may not be aware that self-education expenses are a component of work-related deductions. Any talk of losing the ability to claim a deduction for self-education is contrary to the government’s push for innovation."