The mean­ing of con­sul­ta­tion

The truck­ing in­dus­try has spo­ken with one voice over the ATO’s planned changes

Australian Transport News - - Contents - WORDS R OB M cKAY

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.”

THE PROCESS

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”.

IN­DUS­TRY ALARM

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.”

WHAT DIS­CUS­SION?

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.

IR ire

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.”

BIG GUN

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.

CONCILIATORY NOTE

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

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