While tax returns are up by 1 million over the same period last year, most of that growth has been via the myTax system. Lodgements from accountants are up 5.6 per cent over last year but those through myTax – which is almost always done by individuals – have soared by almost 25 per cent.
About 70 per cent of Australians traditionally lodge their tax via an accountant, one of the highest rates in the developed world. So far this year, however, the tax agent lodgement rate is 61 per cent.
Economists, the government and the Reserve Bank had hoped the larger tax offset would give a major financial boost to households that would then flow into the retail sector and the broader economy.
Chartered Accountants Australia and New Zealand tax leader Michael Croker said there appeared to be a drift away from tax agents to the self-serve myTax system.
While income data was now automatically pre-filled and sent to the ATO by banks and listed companies, deductions had to be remembered, catalogued and lodged by taxpayers.
Mr Croker said with the government talking up its low and middle-income tax offset, many people had decided they didn’t need an accountant, while warnings from the ATO about over-claiming tax deductions were affecting the number of claims being made.
“Without a tax agent, a taxpayer may overlook income which the ATO doesn’t pre-fill. Tax calculations may be incorrect,” he said.
“And it’s not a good look for the tax system if taxpayers aren’t alerted to tax deductions they’re entitled to.”
The Reserve Bank has consistently raised the issue of increasing tax paid by households and what this may be doing to the broader economy.
Last week, RBA governor Philip Lowe noted that household disposable income had been growing slowly for an extended period, “reflecting both subdued wage increases and strong growth in taxes paid”.
The tax-to-income ratio, as measured by the RBA, is now at its highest level since the middle of last decade, with concerns that people have become wary of making substantial tax deductions.
The central bank is set to cut interest rates to a new record low at its board meeting on Tuesday, with markets forecasting a more than four-in-five chance of the RBA cutting to 0.75 per cent.
If rates are cut, Treasurer Josh Frydenberg will urge the big four banks to pass on as “much as they can” to mortgage holders, recognising lower rates are squeezing the banks’ net interest margins.
Shadow treasurer Jim Chalmers went further, arguing banks should “absolutely” pass the forecast rate cut on in full.
“It is disappointing when that doesn’t happen and they then thumb their nose at the Reserve Bank,” he said. “The economy needs it at a time when consumption is very weak and retail is very weak.”
Despite sluggish economic growth, the forecast interest rate cut has fuelled concerns that cheaper credit will fire up a recovering housing market.
CoreLogic figures to be released on Tuesday are expected to show a further increase in house prices in Sydney and Melbourne. Any significant surge has been tempered by new data from the RBA that shows credit for owner-occupier housing rose by its slowest rate since the series began in 1977 after it grew by just 3.1 per cent.
CoreLogic found the housing slowdown has seen 10 per cent of home owners and 20 per cent of apartment owners sell for less than what they bought for in the three months to June.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra