Taxi licence buy-back Victoria: State Government faces bill to stop compo income tax

THE Andrews Government could face a multimillion-dollar bill to prevent taxi ­licence holders paying income tax on compensation payments worth up to $100,000.

Taxi drivers protest on the steps of Victorian Parliament. Picture: Nicole Garmston

THE Andrews Government could face a multimillion-dollar bill to prevent taxi ­licence holders paying income tax on compensation payments worth up to $100,000.

Treasurer Scott Morrison has blasted Victorian Public Transport Minister Jacinta Allan after she asked him for help to remove taxes on the payments, which were introduced to help those affected by the government’s move to legalise ride-sharing.

Mr Morrison accused Ms Allan of failing to understand how the tax system worked and said it was up to the Victorian government to decide if it needed to increase the payments “to fairly compensate taxi drivers and to take ­account of any income tax”.

In a letter to Ms Allan, seen by the Herald Sun, the Treasurer said it was up to the Australian Taxation Office to decide how the payments were taxed. Licence holders are eligible for $100,000 for their first licence and $50,000 each for up to three more.

Mr Morrison said he would not intervene in the ATO’s work because doing so would be “unethical”.

Taxi drivers protest on the steps of Victorian Parliament. Picture: Nicole Garmston

Ms Allan’s spokeswoman accused Mr Morrison of “hanging hardworking taxi drivers out to dry”.

“While we want to help them transition, he wants to tax them,” she said.

“It’s disgraceful and he should immediately reconsider.”

But the Treasurer said it was up to the Victorian government to structure the payments, given it established the compensation scheme.

“Your request shows a lack of understanding about tax administration and a failure to properly structure the payments. It is unfortunate you did not engage adequate legal advice,” Mr Morrison said in the letter.

“Being independent of government, the ATO’s decisions are not — and should not be — subject to ministerial discretion.”

Mr Morrison said the government’s “failure” to structure the compensation legislation “in a way that takes account of long standing income tax law” was its own problem to fix.

“Your failure to undertake the necessary due diligence in designing the payments should not be compensated for by federal taxpayers,” he said.

Treasurer Scott Morrison. Picture: Mick Tsikas/AAP

Ms Allan’s office says they originally received advice from the Treasurer to say that if the payments were compensating for the reduction in value of an asset then they would not be considered assessable for income tax.

Mr Morrison said discussions were continuing between ATO officials and the Victorian Department of Economic Development, Jobs, Transport and Resources.

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