MPs claim tax deductions of up to $50,000 each yearly

POLITICIANS are claiming as much as $50,000 a year in tax deductions, allowing some to dodge paying the top tax rate and the deficit levy.

POLITICIANS are claiming as much as $50,000 a year in tax deductions, allowing some to dodge paying the top tax rate and the deficit levy.

This tax minimisation is legal. But federal MPs are claiming deductions six times higher than regular workers on the same wage who, on ­average, only claim $9000 a year in deductions.

The Sunday Telegraph asked the Australian Taxation Office to provide tax data for every state and federal MP in Australia who lodge tax ­returns under the same occupation code.

It reveals MPs are claiming deductions worth $1000 a week on average for negative gearing, car leases, electorate allowances and election expenses.

MPs who spoke on condition of anonymity argued that their $35,000 a year electorate allowance inflated their deductions because any money spent was booked as a tax deduction.

The revelations undermine Tax Commissioner Chris Jordan’s assurances that there are “no special rules’’ for MPs.

While the rules may be the same, the figures reveal our politicians are claiming much larger tax deductions.

They also have access to deductions for election ­expenses and electorate ­allowances that other workers do not have.

Stressing there were “no special rules” for members of parliament, Mr Jordan ­announced a review of MPs’ travel allowances last week after The Sunday Telegraph revealed double dipping MPs are claiming both a $273 a night accommodation allowance in Canberra and a tax break for property they own or rent.

“The rules are the same for every taxpayer, ­regardless of their occupation,” Mr Jordan said.

Politicians have argued that it is not double dipping to claim both a $273 a night travel allowance to sleep in your own Canberra home and a tax deduction for the cost of rent, mortgage, electricity and rates as long as you also declare the travel allowance as income.

MPs can only claim both the $273 allowance and the tax deduction if they are confident the cost of running the property would exceed the cost of the travel allowance, worth around $1000 a week when Parliament is sitting.

They can then declare the allowance as taxable income but bank a “loss’’ or tax deduction that would exceed the ­allowance.

Some MPs prefer not to claim a tax deduction for rent or a Canberra mortgage and simply enjoy the $273-a-night allowance, tax-free.

The tax office said MPs earned $221,000 on average last year and claimed $40,000 in tax deductions.

By reducing their taxable income to $180,000 they avoided the deficit levy and the top tax rate of 45c. But these figures are not finalised, suggesting some MPs have failed to lodge a tax return.

In finalised figures for the previous year, 800 MPs earned $264,000 on average and claimed $49,058 in deductions.

MPs who also claimed tax breaks for election expenses at the last federal election claimed $55,000 on average.

Pollies are claiming as much as $50,000 a year in tax deductions.

THE NUMBERS

■ Average tax deduction for MPs: $49,058*

■ Average salary: $264,305

■ Number of MPs: 845

Source: Australian Taxation Office 2013-14

Last year, the average taxable income was $180,507 for 722 MPs who had lodged claims to date.

By reducing the taxable income to $180,000 they are not paying the deficit levy, the top tax rate of 45 cents in the dollar or the higher Medicare Levy which would apply to their actual salary of $221,828.

By bringing their taxable income under $180,000 they are reducing their tax by around $20,000-a-year when the deficit levy, Medicare levy and the top tax rate is taken into account.

Source: Australian Taxation Office 2014-15

WHAT MPS CAN CLAIM

■ Federal and state MPs can claim all the normal deductions available to workers including negative gearing of investment properties, car leases and work related deductions.

There are also some added extras only politicians can claim including election expenses, electorate allowances and buying a second property to live in when in Canberra.

■ Election expenses

You can claim a deduction for election expenses but if you claim a deduction for any election expense you must include the reimbursement as income on your tax return.

Deductions include:

— advertising and promotional expenses incurred during the election period;

costs of election-related opinion polls or other research undertaken during the election period;

— travel and accommodation costs associated with the campaign;

— wages paid to persons employed for campaign purposes; costs of campaign novelty items — car stickers, T-shirts, lapel buttons or badges, pens, pencils or balloons;

■ Electorate Allowance

Federal MPs get an “Electorate allowance” of $32,000 as part of their salary. MPs need receipts and any cash is treated as taxable income. Allowable include the cost of presentations at school speech days, buying raffle tickets, gifts to sporting clubs and community groups and senior citizens awards and other donations. For example, an MP who spent $20,000 would secure an effective tax deduction of $20,000.

■ Second property not used as a Member’s residence

MPs can 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 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. The ATO argues the same rules apply to other taxpayers but not many other workers would fly to Canberra for 20 weeks a year and get a $271 allowance to sleep in their own investment property. MPs can choose to take the allowance tax-free and not claim a tax deduction. MPs who believe the costs of the investment property are more than the travel allowance of around $1,000 a week when Parliament is sitting can claim a deduction but must declare the allowance as income. MPs only do that if they know their costs would reduce their taxable income by the same amount or more.