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Pain piles up for impoverished taxi licence holders hit with new tax bill

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Millions of dollars pledged to some of Victoria’s most financially stricken taxi licence owners looks set to be clawed back by the tax office.

A recent ruling by the ATO will increase the financial pain for a number of smaller operators in the taxi industry who were assessed by government-commissioned auditors as virtually destitute.

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The Andrews government paid out $4 million last year to taxi licence owners who were left in poverty by the recent collapse in the value of the licences.

The strictly controlled Hardship Fund was made available only to those hit so hard by the sharp decline in values that they were at risk of no longer being able to pay for “the necessities of food, shelter, clothing, medical expenses, education for children and other basic requirements”.

The Andrews government announced in February that taxi licences would be scrapped. The Andrews government announced in February that taxi licences would be scrapped. Photo: Angela Wylie

Those recipients, who were paid a lump sum last September, have in recent weeks been told the handout will be taxed, after the Australian Tax Office ruled in mid-March that the lump-sum payments were taxable income.

A separate $50 million Fairness Fund is yet to make any payments. 

Fairfax Media met two men on Sunday who each received $62,400 from the Hardship Fund, both of whom immediately used the money to service debts.

Neither was warned when they received the money from the fund that it would be taxed, only that the state Department of Economic Development, Jobs, Transport and Resources was “seeking to confirm the tax implications of your fund payment”.  

Hire car driver Adam Lust has applied to the government's Taxi Fairness Fund. Hire car driver Adam Lust has applied to the government’s Taxi Fairness Fund.  Photo: Simon Schluter

One of the men has been sleeping in his taxi and in a rooming house after he sold his home to service debts on his taxi licence.

“That money is all gone,” he said of his payment. “I don’t know how I am going to be able to pay any of it back.”

The other recipient used all of his $62,400 payout to repay friends who had lent him money.

He divorced his wife in 2010, when taxi licences were at the peak of their value and were trading for more than $500,000. It was agreed in the Family Court that his former wife would keep the family home and he would keep the taxi licence.

At the time it was an equitable split, but licence values quickly began to fall, and in February the Andrews government announced taxi licences would be scrapped completely, leaving the man with a $270,000 debt for an essentially worthless asset.

The government has created two separate funds for people suffering economic hardship from changes to the taxi industry.

The $4 million Hardship Fund arose from changes that followed the former Napthine government’s taxi industry inquiry.

A $50 million Fairness Fund is attached to more recent changes that pave the way for the legalisation of Uber but are yet to pass the state upper house. Applications for the fund closed on Sunday and it is likely millions will ultimately be returned to government coffers given the precedent the tax office set with the Hardship Fund.

The government would say only that how the Fairness Fund is taxed was a matter for the ATO.

In February it said that “early payments will be made available to eligible applicants in priority cases, before the fund closes”.

But by Sunday, not one such early payment had been made.

Adam Lust, a hire car driver, applied to the fund three months ago but has not heard back from the government apart from an initial confirmation note.

In that time, his finances and his mental health have deteriorated further, he said.

“To think this fund was designed to provide immediate relief for people suffering hardship but the only response I have received to my application was a generic thank you for submitting an application is devastating and simply irresponsible,” Mr Lust said.

Public Transport Minister Jacinta Allan indicated payments could not be made before the legislation passed the upper house.

“We encourage the Parliament to pass this legislation as soon as possible, so we can provide this critical assistance,” Ms Allan said.  

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