11 May 2010

Standard Deduction to Increase Tax Returns for 6.4 Million Australians


Joint Media Release
Senator The Hon Nick Sherry
Assistant Treasurer

The Rudd Government will make it easier to fill out tax returns by offering a standard tax deduction that is expected to deliver a bigger tax return for 6.4 million Australians.

The Government is committed to making tax time easier, and this major new initiative will remove the hassle of shoeboxes full of receipts and the costs of professional tax advice.

This is an important step towards a 'tick and flick' system of pre-filled tax returns that will make life easier for working families at tax time and provide a bit of extra assistance to household budgets, particularly for low and middle income families.

From 1 July 2012 the Government will provide individual taxpayers with an optional standard deduction of $500 in lieu of claiming work-related expenses and the cost of managing their tax affairs. The standard deduction will be increased to $1,000 from 1 July 2013.

Under the current system, taxpayers face costly and unneeded complexity as they try to interpret what is deductible, correctly quantify work-related costs and apportion expenses between income-earning purposes and private purposes. Providing a standard deduction will remove this burden for many taxpayers and increase their tax return.

No taxpayers will be disadvantaged. Taxpayers with expenses above the standard deduction will be able to continue to claim those expenses when lodging their tax return under the existing rules.

Choosing the standard deduction is expected to be a better choice for 4.6 million taxpayers in 2012‑13, both financially and in terms of simplicity. In 2013-14 an estimated 6.4 million taxpayers are expected to be better off from choosing the standard deduction.

Of those that benefit, it is expected that around 66 per cent would have a taxable income of less than $50,000 in 2012-13 and around 60 per cent would have a taxable income of less than $50,000 in 2013-14.

The standard deduction initiative delivers on an important recommendation of the independent Australia's Future Tax System report.

This major step to make tax time easier is part of the Government's plan to build a stronger economy that delivers real gains for working families.