This is one tax rule that is easily fixed

POLITICIANS’ travel and negative gearing deal is a rort that should have eneded years ago, writes Terry McCrann. So end it now.

Tax Commissioner Chris Jordan has some explaining to do.

ACCORDING to the Tax Commissioner, Chris Jordan, the way the ATO treats the travel allowances for the 226 federal pollies so far as tax is concerned, is exactly the same as the way it treats such allowances for the other 25 million Australians.

But bizarrely, he made the claim late yesterday in an announcement that the Australian Taxation Office would review its ruling on, well, those allowances for those pollies.

In other words: move on, there’s nothing to see here — apart from that stinking pollies travel allowance carcass. For why on earth does the ATO have to review one of its rulings for a specific group of taxpayers when it supposedly rules exactly the same as for everyone else?

The other “interesting” feature of Jordan’s statement was that it very deftly completely ignored the central issue — the central problem. This is the way the pollies’ travel allowance intersects with those same pollies owning property in Canberra.

As our Samantha Maiden revealed exclusively on Sunday, some 222 senators and members of the House of Reps — I’m assuming the four Canberra residents, two in the senate, two in the reps would be excluded — have a special deal that enables them, if they so choose, to do negative gearing on speed.

Now, as billionaire John Singleton once pungently noted, “a rort is only a rort if you are not in on it”.

Well this would be the mother of all rorts as 25 million or so Australians were not only “not in on it,” but, according to the implication of Maiden’s story, specifically prohibited from being “in on it”.

Senator David Leyonhjelm is the scourge of government spending waste.

It’s a rort — sorry, “alleged” rort — which is seemingly reserved by a combination of the federal Parliament and the Australian Taxation Office, exclusively for the benefit of just those 222 senators and members of the reps of that very Parliament!

Although it appears that only up to a maximum of around 40 of the 222 have availed themselves of it. At the moment.

Now, I’ve taken that number of “up to 40” from Maiden. That’s the number identified as owning property in Canberra.

The supposed rort is based on something which in itself is quite reasonable: the payment of a “living-away-from-home allowance” to the federal pollies when they’re in Canberra, or indeed for any night spent (legitimately) away from home while on parliamentary business.

At the moment that payment is set at $273 a night. It’s not taxed in the hands of the pollie — and nor should it be, for it is intended to cover a specific expense; the cost of staying in Canberra when your home’s in Melbourne, Sydney or indeed Perth.

Some might argue it’s too high; others might argue it was not enough, especially if you also had to pay for an “away-from-home” dinner and breakfast.

Whatever, I don’t think the sum is worth quibbling over. Nor the other thing that gets journalists and the public all (over) excited; that pollies get the money even when they stay in their own or their spouse’s or their mate’s home in Canberra. The issue is the payment of an appropriate sum for the cost imposed on pollies having to stay in Canberra as opposed to their normal homes in their home state.

It is completely irrelevant where they choose to stay; and so to whom the money is paid — whether to a hotel, on a rented property or an owned property.

But, enter the rort. For as Maiden detailed (apparently, with the help of the scourge of government spending waste, NSW Liberal Democrat Senator David Leyonhjelm) when you pay the money to yourself, it’s not considered income by the ATO.

Well, Chris, is it or isn’t it? You deftly didn’t say yesterday.

Pay the $273 to a hotel or to a landlord, and it’s income and so taxable in their hands. Shouldn’t the pollie staying in their own home be deemed to have paid it to themself?

Because if not, those “up to 40 senators and members” who have been identified as owning a property in Canberra could get all the normal tax deductions of owning a rental property such as interest, rates and upkeep.

Again, like the allowance itself, that is perfectly legitimate. Provided of course, the property is intended to be available for rental. But if Maiden’s story is correct, that requirement doesn’t apply for the pollies.

There can’t be one rule for politicians and another for everyone else.

One can only assume she’s correct because Jordan’s statement made no effort to rebut the claim, which is absolutely central to the alleged rort. Because there would be no rental income recorded on the other side.

Simply, it would add up to having a rental property with no tenant.

If so, it’s outrageous and indefensible and there’s a pretty simple solution.

Simply, that any senator/member claiming the allowance who has not made a payment for each night claimed to an arm’s-length third party, but is living in their own or spouse’s/partner’s home, will be deemed to have paid it or a reasonable percentage of it as rent to the homeowner.

There’s the usual obfuscation (a more colloquial word would be crap) going on. Of course it shouldn’t be deemed income in the hands of the actual member or senator. It is a reimbursement of an expense which we the public impose on him or her by forcing them to come to Canberra.

But that’s also the critical point: if there’s an expense to be reimbursed, the expense must have been incurred.

The pollie must have paid some or all of the money if not to a third party, to themselves.

If there is no expense — and so, by definition, no income received by someone — there is no expense to be reimbursed.

Each pollie staying in their own home could make the choice. You pay a notional rent or you don’t claim for an expense you did not incur.

At least with normal negative gearing there is some income from the property against which all the expenses are deducted, so the net deduction against the owner’s other taxable income is reduced.

With this little earner, the gross property expense tax deductions become the net property expense tax deductions. Negative gearing on speed.

It is exactly the relatively small sort of thing that puts all pollies on the nose with voters; and over time seriously damages the brand of especially the major parties.

Now of course we could be entirely wrong. But then why didn’t Jordan specifically address the issue? Indeed, why did he go out of his way to shoot down a straw man, making no reference at all to the elephant — or the carcass — in the room?

It’s a rort that should have been ended years ago. Do. It. Now.

Originally published as This is one tax rule that is easily fixed