A spotlight has been put on this controversial entitlement where MPs and senators are allowed to claim a tax-free $273-a-night travel allowance – to stay at their own Canberra properties. At the same time, they are also allowed to simultaneously deducting rent, rates, maintenance and other costs on the property from their taxable income.
Apparently, some politicians also stay at properties owned by their spouses and use the $273 nightly allowance to pay off the mortgages.
The Australian Tax Office says that they will review this entitlement which has enabled politicians from both sides to cash in on generous tax deductions, a system that opposition Leader Bill Shorten said was not fair.
The ATO has now promised to review the 1999 ruling that underpins the entitlement. But Tax Commissioner Chris Jordan stressed that politicians were not afforded any “special” treatment by the tax system.
“Any taxpayer who has had to travel overnight for work is entitled to deduct the costs of meals and accommodation under our tax laws,” Mr Jordan said to SMH.
“Given that there are clear misunderstandings of how the ruling is applied, we will undertake to review the 1999 ruling to give greater clarity for all taxpayers on the treatment of allowances they may receive from their employer to cover the costs of work-related travel.”
Finance Minister Mathias Cormann, Labor’s environment spokesman Mark Butler and Liberal Democracy senator David Leyonhjelm have all outed themselves as “double-dippers” in the system, claiming both the travel allowance and aforementioned tax deductions on their own properties.
Prime Minister Malcolm Turnbull said he had claimed the $273-a-night travel allowance “like every politician” but would not say whether he had also claimed tax deductions.
Mr Shorten said he was not aware of the particular entitlement that allows for costs associated with the properties to be deducted from taxable income.
“I was not aware that you could do that. I have not made those claims but I understand they are within the existing rules,” he told reporters.
“Now, what I have asked Chris Bowen and my treasury team to do is to look at how we close down this ruling.”
The 1999 ruling says that MPs can deduct 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”, as long as the property is not regarded as a second residence.
“A deduction is also allowable for depreciation of plant used in connection with such a property,” the ruling states.