Federal Budget 2010: Psst! The Government is giving away hundreds of dollars, but there’s a catch

Writing about tax returns is not strictly a topic for a superannuation website, but since the Federal Government released all the exciting super stuff the week before the Federal Budget, I have time to explain some of the other wealth-creating policies announced by the Government.

From July 2012, the Government promises to 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. From July 2013, this standard deduction will increase to $1,000 from 1 July 2013.

According to the Federal Government, the introduction of this policy will deliver 6.4 million Australians a tax refund (and 4.6 million Australians in the 2012/2013 year) without the cost of getting a tax professional to help prepare the tax return.

Now, if you expect to have tax deductions substantially greater than $500 for the 2012/2013 year, or greater than $1,000 for the 2013/2014 year, then the Government’s announcement is of no help at all. You must then continue to keep receipts and complete and lodge your tax return – in other words, business as usual.

According to the media release issued by Federal Treasurer Wayne Swan:

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 Government is moving towards a system of pre-filled tax returns, and the standard deduction of $500 (and $1,000) is a mechanism that the Government anticipates will make Australians more likely to use such a standardised system, and hopefully give the average Aussie a few extra hundred dollars at tax time.

Related topics