Ansett Air Passenger Ticket Levy
There are three regular commercial lies uttered. They are: 1. My cheque is in the mail. 2. Yes, my dear, I will love you in the morning. 3. I am from the government and I am here to help you.
On or about 12 September 2001, the Ansett group of companies were placed under external administration. Ultimately, 15,000 employees lost their jobs. The Prime Minister announced on 14th September 2001 that a special employee entitlements scheme would be established to provide a safety net for Ansett employees. He was from the government and he was assuredly going to help the Ansett employees in their darkest hour of need.
To fund this scheme, an air ticket levy was imposed from 1st October 2001 to 30th June 2003. In all, about $300 million was raised. Did any of this levy find its way into the hands of Ansett employees? The answer is a resounding no. The levy funds ultimately wound up in consolidated revenue to fund all, and any, random expenditure that the Federal Cabinet thought worthy. Sad but true.
Firstly, the legislation. The Air Passenger Ticket Levy (Collection) Act 2001 and its companion The Air Passenger Ticket Levy (Imposition) Act 2001 were enacted. It is instructive to note that two acts were necessary. The two acts constitute an income tax measure to comply with S55 of the Constitution. This section requires an imposition Act and a separate administrative Act. There is no doubt that this was a federal tax. So much for the supply side of the equation.
Dealing with the demand side requires a reader to pay close attention, lest he or she find themselves lost in the game of pass the parcel indulged in before any funds issue to the poor employees.
The dramatis personae are:
- The Federal government, Department of Employment and Workplace Relations (DEWR);
- The Federal government, Department of Transport and Regional Services (DOTARS);
- Special Employee Entitlements Scheme for Ansett group employees (SEESA);
- Bentleys MRI a firm of accountants;
- SEES Pty Ltd, a corporate vehicle to implement the scheme;
- Commonwealth Bank, a lender of first resort;
- Consolidated Revenue Fund, (CRF) the Commonwealth coffers;
- Andersons, Charted Accountants, KordaMentha, the Ansett administrators;
The facts were that Ansett group of companies went to the wall and its employees were owed many millions in accumulated employee entitlements. The Federal government saw an opportunity to ‘help’ the employees, get some well deserved praise, impose a tax and not spend a dollar on employee entitlements. That they have achieved it is a master stroke of spin over substance.
The operation of the scheme revolved around a corporate vehicle, SEES Pty Ltd Bentleys MRI, who were appointed to manage the accounting of the scheme. They set up the vehicle, SEES Pty Ltd. The company had no money. The levy in place produced money for the CRF. But this money could not be legally directly allocated to SEES Pty Ltd. So the Commonwealth Bank was approached to provide funds. Bankers are not silly and they required a guarantee from the Commonwealth for the loan; incidentally, about $284 million. The Commonwealth wanted to be sure they were repaid for their magnanimous gesture. DEWR was going to administer the personnel to whom the funds in SEES Pty Ltd were to be distributed.
The Administrators, meanwhile, were charged with gathering in the assets of the defunct Ansett group, rendering it into cash and paying out to secured creditors, employee entitlements and unsecured creditors. Of course, the administrators got first bite of the asset cash fund for their administration costs. Dear reader, you will notice that the administrator had the legal responsibility to pay the employee entitlements in full. Where do the pollies come in with their scheme?
Meanwhile, the various politicians were making splendid fellows of themselves by announcing the Special Employee Entitlements Scheme for Ansett employees (SEESA). According to the various spokesmen, this scheme was going to ensure that ALL employees were going to get their FULL employment entitlements. Initially though, each employee was to get paid up to ‘community standard’. This ‘community standard’ was a long way short of full entitlements. It consisted of : ‘All unpaid wages; all unpaid annual leave; all entitlements paid in lieu of notice; All long service leave and up to eight weeks unpaid redundancy leave.’ Full entitlement included all unpaid redundancy leave. In some cases about $35,000.
DEWR was tasked with finding all Ansett employees and determining the amount owed on the community standard basis. This was then passed to SEES Pty Ltd who liaised with the Administrators who ultimately paid the Ansett employees and so satisfied their legal obligation under insolvency laws.
Meanwhile, the public was shelling out the tax under the ticket levy. This was accumulating somewhere in the Commonwealth till. It is not certain that it was bound for the CRF but apparently it did get there. The accumulated ticket levy ended up at somewhere near $300 million. CRF, after verifying both DOTAR’s and DEWR’s account, reimbursed the Commonwealth Bank for the loan to SEES Pty Ltd. SEES Pty Ltd paid KordaMentha, who paid the ‘community standard’ amount to the employees.
This payment was only allowed after vetting and approval by DEWR and DOTARs. The employees got part of their entitlements. The remainder of the full payment was to come from the asset sale by KordaMentha.
Is that not what was intended? Of course it is. The early payment by the administrators to the employees of something is a good thing? Of course it is. The rub lies in the dealings between the Federal Government and the administrators which did not see the light of day until the Australian National Audit Office report No 21 came out on 22nd December 2003. Before the Federal Government would allow the payment of the community standard to the Ansett employees, the administrators, KordaMentha, had to guarantee the Ansett asset cash fund would reimburse the amount of money advanced the CRF from the ticket levy to SEES Pty Ltd which, in turn, paid it to the sale of Ansett assets.
In this way, the funds extracted from the people for air tickets from 1st October 2002 to 30th June 2003 was not disbursed to the employees for the community standard payments. The money disbursed to the employees on the miserly scale of the ‘community standard, came, ultimately, from the sale of assets of the collapsed Ansett empire. The guaranteed reimbursement was approximately $284 million and was made an order of the Federal Court without notifying the secured creditors, employees or unsecured creditors that the asset recovery fund was being reduced by this amount and the $284 million was not now available to pay the extra unpaid redundancy leave that the employees were entitled to. To the court’s credit, it tried to ameliorate the loss of this money which would have funded the employee’s full entitlements and other unsecured creditors, but the persons entitled probably did not have the legal advice or adequate notice to mount a challenge to what was an unlawful demand by the Commonwealth and contrary to insolvency law as it is understood.
The Ansett air passenger ticket levy was reimbursed for any funds spent on the employees and in its entirety was swallowed by the CRF. The pollies did not help the poor Ansett employees at all. They simply lined the coffers of the Commonwealth with a new tax on air passenger tickets. It would have been more honest to admit that the levy was simply a tax instead of waxing lyrical on the pollies and the government’s efforts to ‘help’ the Ansett employees.
Watch this space…