Tax law out of touch with needs of ordinary workers

THIS week I'm going to waltz you through a fantasy.

There has been a huge discovery. A metal called kryptonite has the properties to be five times stronger than steel but it must be smelted into kryptonium.

The world's biggest deposit of kryptonite has been found west of the Divide.

BOP, the world's biggest miner, has its finger on the deposits and is now engineering a process where the stuff can be mined in the west, transported to and smelted in a port town prior to export.

It will mean plenty of construction at the mine itself, in building a rail link, in building the smelter and in upgrading the port. Maybe 15,000 jobs!

Next step? Appoint Botox Ltd, a multinational with a long history of getting it right as the principal construction contractor.

Enter the unions, greenies and the "community" at the port town.

The greenies have their say about threats to the habitat of long-nosed scarabs, an EBA is negotiated which is binding on Botox Ltd and its array of sub-contractors, and Botox Ltd is forced into an agreement to recruit locals first, despite the absence of workers with required skill levels.

Unemployment is high across the country. Botox Ltd and its sub-contractors go to Melbourne, Sydney and Brisbane in a recruitment drive for skilled workers, with the promise that if they can provide a "local" address, they will be assured of a job.

Meanwhile they tie up every available rental property, pub and motel to house essential workers such as engineers, project managers and plant operators while they wait for a donga village to be built. Full board and lodging!

What this does is leave a dreadful void in the marketplace for those who have committed to leaving their families at home in the south to seek a "local" address.

Those that take up Botox's job offers are hit with huge costs - high rental, food and incidentals prices.

Plus, as breadwinners, they still have to pay rental costs, mortgage payments, school fees, living expenses and so forth for the family back home.

Two lots of day to day expenses, the impact of which can't be diminished by the glib argument that they'd have to feed themselves anyway if they were at home.

Plus the travel cost in getting home to see the family when possible. Envy the fellow workers who didn't have to be "local" and have got themselves a free ride in their fully supported home-away-from-home.

My story is about our disgracefully inconsistent tax system.

What happens is this: Botox Ltd and its sub-contractors are rewarded for providing work to Aussies.

Under the Fringe Benefits Tax Act 1986 they can claim the expense of housing and feeding workers, but at the same time are exempt from paying FBT.

However, under section 8-1 of the Income Tax Act 1997, those that are recruited because they have been able to provide a "local" address are not entitled to claim the day-to-day expenses in living away from their families in order to generate an assessable income.

Why the distinction? Because various hairy-chested tax commissioners and myopic judges have said so!

This ridiculous enforced distinction between two tranches of the same body of tax laws has been enshrined once again in two 2013 cases: Hancox in the Federal Court and Fox in the AAT.

Though the facts in the cases were not more than tangential to the content of my story, both times the judgement reinforced the ridiculous notion of "free choice", the implication being that if you are forced to move away from your family home to seek work, then you should either take the family with you or simply suck it up, as the kids say.

Read these cases and wonder - as I have for decades. 

Unfortunately, Australian tax law has become a conga line of precedents that have nothing to do with intelligent empathy for ordinary people or even a smidgen of sensibility.

Maybe our Premier is right when he says our judges have lost touch with reality.

Bob Lamont is director of Corporate Accountants at the Night Owl centre, Gladstone.