Monday, 30 May 2016

Australian Federal Election 2016: oh the pain, it burns!

I’m sure there is more than one voter on a low income who is chortling about what went down in Week Three of the federal election campaign.

This has been the state of play for members of the Australian Parliament since 1999.

Excerpts from TR 1999/10 Taxation Ruling Income tax and fringe benefits tax: Members of Parliament – allowances, reimbursements, donations and gifts, benefits, deductions and recoupments:

10. Members commonly receive the following types of allowances, in addition to their Parliamentary ‘salaries’ (see paragraphs 42 to 45). Particular allowances may vary depending on the Parliament in which a Member serves.
• Committee allowance
• Daily expense allowance
• Electorate allowance
• Expense or entertainment allowance
• Opposition spokespersons’ allowance
• Postage allowance
• Printing and stationery allowance
• Private vehicle allowance/motor vehicle allowance
• Telephone allowance
• Travel allowance.
These allowances, like MPs and senators parliamentary salaries, are considered assessable income by the Australian Taxation Office.
Second property not used as a Member’s residence: A deduction is allowable for expenses of a non-capital nature, and for depreciation of plant, where the property is not properly regarded as a second residence. However, the deduction is limited to the extent to which the expenditure is incurred in respect of a property that is used by a Member for work-related travel purposes on overnight stays away from his or her residence, and the expenditure is not private or domestic in nature (paragraphs 328 to 336).

Second residence expenses: A deduction is not allowable for the costs of maintaining a property that is used as a second residence (paragraphs 337 to 343)……

These two sections of the ruling appear to allow parliamentarians to double-dip at the ordinary taxpayers expense – first using the overnight travel allowance to pay down the mortgage on a Canberra residence if it’s not owned outright and then claiming tax deductions including mortgage interest, rates, insurance and utilities on the same residence.

Then this cosy little arrangement became public knowledge……., 22 May 2016:
TAXPAYERS are helping to pay the mortgage and the rent for federal MPs who are raking in $1000 a week to sleep in Canberra and then, on top of that, claiming a big tax deduction for rent, rates, electricity and mortgage.
In a little-known tax ruling, MPs who rent can also claim a tax deduction for a second residence including “lease payments; rent; interest on borrowings used for the acquisition of the property; rates; taxes; insurance; general maintenance of the building, plant and grounds’’.
Finance Minister Mathias Cormann, charged with cracking down on budget waste, is just one of the MPs double-dipping by claiming a $273-a-night travel allowance (which, bizarrely, is not regarded as taxable income) and scoring a tax deduction as well….
The rules state that an MP “may choose to rent or buy a property rather than stay in a hotel or other commercial establishment when travelling. A deduction is allowable for expenses, that are not of a capital, private or domestic nature, in respect of such a property where it is used by a Member for accommodation when he or she is undertaking work-related travel.
“Such expenses include: lease payments; rent; interest on borrowings used for the acquisition of the property; rates; taxes; insurance; general maintenance of the building, plant and grounds.’’

The Guardian, 22 May 2016:
The finance minister, Mathias Cormann, has defended politicians receiving both a $273 a night travel allowance and tax deductions for mortgages and rents for properties in Canberra.
Speaking on Insiders on Sunday, Cormann said the remuneration tribunal granted the travel allowance and the tax office allowed deductions for politicians’ accommodation expenses.
Reports have revealed that on top of the allowance, MPs who rent or buy a property to stay in during work-related travel can also claim tax deductions for rent, interest on borrowings used for the acquisition of the property, rates, taxes, insurance and general maintenance.
The first report indicates that some federal politicians may be under the impression that a travel allowance paid for a presumed expense was not taxable income.
Then came this painful revelation……
ABC News, 23 May 2016:
Tax Commissioner Chris Jordan stressed that members of Parliament had to abide by the same standards as everyone else.
"The rules are the same for every taxpayer, regardless of their occupation," Mr Jordan said in a statement.
"Any taxpayer who has had to travel overnight for work is entitled to deduct the costs of meals and accommodation under our tax laws.
"However, given that there are clear misunderstandings of how the ruling is applied, we will undertake to review the 1999 ruling to give greater clarity for all taxpayers on the treatment of allowances they may receive from their employer to cover the costs of work related travel."
The ATO said the returns of all taxpayers, including MPs were scrutinised, and that any taxpayer should not be claiming deductions for travel expenses unless they have declared the allowance as income in their tax returns.
In 1999, the ATO issued a ruling about how it assesses travel allowances and tax deductions for MPs.
That ruling will now be reviewed in light of the issue being thrust into the campaign spotlight.

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