The meaning of consultation
The trucking industry has spoken with one voice over the ATO’s planned changes
The trucking industry has spoken with one voice over the ATO’s planned changes
I t was one of the more bizarre cases of government-industry relations failure, even given the annals are littered with them.
It should have been a textbook example of how liaison with industry bodies well ahead of time would allow trucking companies and their drivers ample time to come to terms with what seemed a fairly innocuous tightening of the rules, but it blew up in the Australian Taxation Office’s face.
The ATO has now closed down any correspondence with the media, particularly ATN, on its new approach, or ‘determination’, known as TD 2017/19.
The last indication ATN had was that a meeting with the industry bodies, including the Transport Workers Union ( TWU) was to take place shortly after the September edition went to press and
a couple of days before August 20. Before it pulled down the shutters, the ATO did give an inkling of the thinking that led to TD 2017/19 and how it was handled, but it is doubtful whether it will engage in in- depth analysis publically.
MORE THAN A DECADE
The TD 2017/19 part of the issue can be traced back to 2004, when Taxation Ruling TR 2004/6, which “applies to individuals who incur work-related deductions for travel expenses or overtime meal expenses where these expenses are covered by an allowance paid by the person’s employer”, was released.
TR 2004/6 sets out what the annual reasonable expense determinations are to be about.
Paragraph 4 states: “This Ruling explains the way in which the substantiation exception operates for work expenses of employees that are either reasonable travel allowance expenses or reasonable overtime meal allowance expenses.”
And Paragraph 25 of it states: “In determining the reasonable amount to claim for meals, reference should be made to the period of the travel. That is, what meals (breakfast, lunch and/or dinner) would it be reasonable for that employee to incur during the period from the commencement to the end of the travel that are covered by the allowance, given the individual employment circumstances of the employee.”
The ATO said it had reason to tighten up on such claims.
“The outcomes of audits and a number of Administrative Appeals Tribunal decisions highlighted some employee truck drivers were not correctly making claims for food and drink expenses,” according to an ATO spokesperson.
“For example, claims were being made for meals consumed on days not associated with overnight travel, also the total daily rate was being claimed including for meals that had not been consumed when travelling, for example, when the travel had concluded in the afternoon and dinner was consumed at home.
“Accordingly, a single daily rate was provided to simplify the process required for a truck driver to make a claim using the reasonable expense amount.”
To take the ATO at face value, something that some elements of the industry are unprepared to do, its intention was to undertake an industry consultation on the proposed changes.
This should have taken place under the ‘ATO consultation framework’ and coordinated by the ‘ATO Consultation Hub’. Though there is flexibility in the types of consultation, the process should be to: • Identify the right people to consult –
industry or professional associations, experts • Publish the topic in Matters under consultation • Decide how the consultation will be
conducted • Undertake the consultation • Communicate the outcome of the
consultation to all interested parties • Act on the outcome • Update Matters under consultation once the consultation is completed. And aspects of what was actually done seem to back this up, to a certain extent.
Though it was in the website section ‘Papers for comment’, a consultation paper titled Substantiation exception for reasonable travel allowance expenses was published, dated September 30, 2016. In it, the ATO noted
“The outcomes of audits ... highlighted some employee truck drivers were not correctly making claims for food and drink expenses”
that since a 1995 amendment to the 1985 Tax Reform, there have been no changes to the law. However, the industry had changed, including: • Long-distance truck drivers who are owner-drivers have been excluded from the annual taxation determination • Sleeper cabs have become commonplace for
trucks used on long-distance trips • Fly-in fly-out and drive-in drive-out work has become a feature of many construction projects • Goods and Services Tax has been introduced • Industrial awards have been modernised so that an award travel allowance rate is not a feature of many awards. Most awards with travel rates had the rates set many years ago and have been adjusted annually in line with the consumer price index. The travel allowances paid in the absence of an award rate are usually based on the amount we consider reasonable each year. The sweetener would be that employees will be better placed to correctly claim the amount they are properly entitled to claim as a deduction each year, leading a reduced need for the ATO checking these claims and “in turn there will be less confusion and disputes in this area”.
Late last year, it must have seemed pretty straight forward.
The ATO certainly had National Tax & Accountants’ Association (NTAA) and Tax & Super Australia submissions, pleading for direction and clarity.
“The NTAA believes that the ATO should provide more guidance, specifically by way of examples, on what will be accepted as a ‘bona fide’ travel allowance,” was one of its comments.
And some tax accountancies and law firms, who are very sensitive to the ATO’s ways, were up to speed and advising members and customers about the move.
The ATO would not say what other submissions it got but it certainly had none from the trucking industry and admitted as much.
The first the industry knew of it was when the determination came into effect around July 3, which is when it came into force and when the Australian Road Transport Industrial Organisation (ARTIO) and the Queensland Transport Association (QTA) rang the alarm.
“We are aware that it is common in the industry for some employers to make a component of wages ‘non-taxable’ to account for the tax determination,” it said.
“For example, some employers tend to deduct the amount from gross wages, tax the remainder, then add the $97.00/night back on.
“This gives the employee a higher net pay week to week as it was providing the drivers a non-taxable component to their wages.
“Employers who engage in this practice will need to amend the amount otherwise the employee will be left with a significant tax bill at the end of the year.”
The advice was that that care be takes to avoid confusing the nature of the change and that the ATO determination “is a ‘ Tax Law’ issue allowing a tax deduction from taxable income for work related expenses such as travel.
“This is a very separate issue from the requirement under industrial law for employers to pay under Awards travel allowances (e.g Long Distance Award travel allowance $38.43) an amount compensating employees for having to take major rest breaks within the vehicle.
“Although it is common practice, it is not an employer obligation to make the ATO expense amount a non-taxable component to wages as per the example above.
“Drivers can claim the amount directly in line with the determination when lodging a tax return at ‘tax time’ meaning they get a ‘lump sum’ refund from their tax return.
“ARTIO/QTA believes that placing the onus on employees the claim the deduction
“The ATO would not say what other submissions it got”
provides significantly less complication and risk to employers for breaching possible PAYG tax obligations.”
Events gained momentum when questions were asked about fairness and consultation.
The TWU got on the case for drivers and state organisations affiliated with the ARTIO piled in on behalf of drivers and their employers after the ATO insisted it had liaised on the consultation paper.
“This paper provided an opportunity for all interested parties to respond to us with their feedback, opinions and suggestions,” the ATO spokesperson told ATN.
“As part of the consultation process, emails were sent directly to more than 60 industry groups requesting feedback on the consultation paper.
“Almost half of these emails were sent to federal and state based organisations and associations within the transport industry.
“This included the Australian Road Transport Industry [sic], Australian Trucking Association, Owner Drivers Australia, National Road Transport Association, Queensland Trucking Association, Road Freight NSW, South Australian Road Transport Association and the Tasmanian Transport Association.”
Later it confi rmed the TWU was included in the emails send but ATN was unable to fi nd an industry organisation who could say it had got one.
Along with the consultation question, the industry gained an industrial relations angle courtesy of Peter Anderson, in his capacity as ARTIO secretary and treasurer.
“We are amazed the ATO has made such a far-reaching Determination that will leave drivers and their families so significantly out-of-pocket without bothering to inform the industry,” Anderson said.
“Equally concerning are flow-on effects the Determination will have on Enterprise Bargaining Agreements that had already factored in the previous rate.
“We have highlighted to the ATO that employers who have had EBAs specifying amounts payable in these circumstances approved by the Fair Work Commission could now be in breach of legal obligations because of the change.”
On that, the Fair Work Commission (FWC) played a dead bat.
Asked by ATN if the ATO liaises with the FWC about the changes it makes, such as with the TD 2017/19, an FWC spokesperson said: “There is no requirement for the ATO to consult with the Fair Work Commission regarding issues related to taxation law.
“The ATO determination does not have an impact on the entitlements negotiated under an enterprise agreement or made in a modern award, it is a decision that the ATO has made regarding what they believe to be a reasonable rate for allowances for the purpose of income tax deductions.”
The industry then went national, with the Australian Trucking Association (ATA) loosing a barrage at the ATO on all the points raised.
“There is absolutely no excuse for this
“This is simply not the case. “If the ATO had consulted with industry, it would have known that this decision is an unfair assault on the hip pockets of hard-working Australians.
“Page 13 of the ATO’s own tax determination confirms that it was not issued as a draught before the tax commissioner signed it off on 3 July 2017.”
And the ATO finally admitted it had received no submissions from any of the 60 bodies it said it had “consulted” with.
After the angry words – not least about the lack of evidence to support the decision to slash the reasonable amount for truck driver claims and the lack of statistics, case studies or references to relevant court or AAT cases – it seems negotiation and discussion is taking place.
More positively, Crouch points to the “very high quality” work the ATO does with the Fuel Schemes Stakeholder Group.
“Its consultation with industry through this group has been exemplary, and as a result we have got some great results for trucking operators,” he said.
Whether hope for a similar, more progressive relationship is well-placed will become clear after the meeting.
“The tax office decreased the allowance for truck drivers from $97.40 to $55.30”
unjustifiable attack by the ATO on Australian truck drivers,” ATA chair Geoff Crouch said.
“In the determination, the tax office increased the reasonable food and drink allowance for comparable employees in other industries from $106.90 per day to $109.35 per day.
“But the tax office decreased the allowance for truck drivers from $97.40 to $55.30, seemingly in the belief that today’s truck drivers fill up on soda and junk food. “They couldn’t be more wrong. “The industry is united behind the need to make sure our drivers can eat healthily and well.
“The meal allowance for truck drivers should be the same as the meal allowance for any other employee,” he said.
Crouch categorically dismissed the ATO’s claim that it had consulted with industry bodies about the cut.
Above: The TWU, amongst others, is not happy with the ATO
Top: ATA chair Geoff Crouch Above: Peter Anderson is the ARTIO secretary and treasurer Opposite: The email the ATO said it sent out to industry groups that none could say they had seen