The Rear-admiral’s vice

Pick a card, any card

There is an old joke about the Rear-admiral’s vice being the Vice-admiral’s rear, (and the Vice-admiral’s rear being the Rear-admiral’s vice). But in the case of Rear-admiral Geoff Smith, his vice seems to have been of a quite different nature. Apparently the chief executive of Sydney Ferries made some $237,000 worth of questionable purchases on his corporate credit card.

Now, all of us who have a corporate credit card know the score. The card is a bit of a perk. You can make a few questionable purchases on the card, and effectively avoid a bit of income tax. Think about it – you make a few grand of purchases on the card – a few taxi fares, some boozy lunches, a new set of clothes, and even the occasional interstate trip, and these quietly get charged to the plastic, with the silent approval of The Boss.

The money is charged to the company (your employer) instead of having to be paid as bonuses. You end up better off because you don’t have to pay income tax on the money (it shows up as a company expense, not taxable income), and your employer doesn’t have to pay payroll tax on the money. Every one ends up better off. Everyone except for Wayne Swan that is, and let’s face it – he’d just use the money to lend to his used-car-selling mates anyway.

So The Corporate Card is a functional tool in tax minimisation, as well as being a powerful symbol of status and trust. Trust, that is, that you won’t over spend on school fees, alcohol, furniture, trips to the theatre and overseas trips for the wife – like the Rear-admiral did. His excuse was that “No one told me I shouldn’t”, and that he thought that using the cards for personal expenses was “an entitlement”.

Many public servants claim to have a strong sense of ‘social justice’. Apparently it’s not as strong as their sense of entitlement.

Of course it’s one thing for a private company to give a little extra to a loyal employee. It’s quite another for those in government to give a little extra to their mates. That’s why the public service has much stricter guidelines about employee conduct than the mere public who pay their wages. The endless (and expensive) paperwork, the double and triple checking that goes into just buying a paper clip – it’s all for the common good to protect your taxes.

But where were the checks and balances on the Admiral’s vice? Apparently no-one was taking up the Vice-admiral’s rear. Apparently no-one told them they should. Or maybe the vice goes further than the Rear-admiral?

Or maybe privatization would mean that at least it wouldn’t be the tax-payer’s problem.

10 thoughts on “The Rear-admiral’s vice

  1. Hmm. Nowhere that I have worked (all private sector) is the corporate credit card treated as a perk to be used for personal benefit. The possible exception being sizable staff events where the card is behind the bar. And even in those cases I’m reasonably sure the cost appears on the GL as staff entertainment.

  2. Agree with terje – all companies I’ve worked for have pretty satrict rules about corporate card use.

    A mate of mine in sales used his to buy a bottle of wine once, and got hauled in front of finance. He was travelling interstate, and would have been entitled to purchase a restaurant meal, with wine served. instead he went to a mates for dinner and brought the wine. Despite claiming he’d saved the company money as the cost of the wine was less than a restaurant meal he had to pay it back.

    Also, I don’t think you can use a corporate card to dodge tax in the way you’re describing. The buggers in government, while they are bad at many things, are quite good at protecting their revenue. They created Fringe Benefits tax to close precisely this loophole.

  3. Terje – just for fun, I once did a search of my work’s GL for the pub across the road.

    There was a sizeable chunk in there, but the account codings were quite creative – not just staff entertainment, but training, conferences, seminars, subscriptions, and general admin

  4. If it is accounted for as staff amentity instead of staff entertainment and if the booze isn’t explicitly declared as booze then you can dodge the fringe benefits tax. However a tax inspector would probably spot it if you get audited.

  5. Guys,

    Yes, those of you not hiding behind a nom de guerre have to write those things.

    Of COURSE you never pad the expense account, right?


  6. Terje, you have led an extraordinarily sheltered life. Strawman is quite correct – the boss often looks the other way on expense claims because his own claims are usually equally creative. Some companies might get a bit anal about it but the majority have unwritten “flexibility”.

    The Admiral has no excuses though. He was a public servant in the Navy as well as working for NSW Ferries. It’s not as if he had to adjust to a new culture. Taxpayers money must be managed more scrupulously than most. I don’t mind an occasional lunch, but he went berserk. I hope he gets banged up for it.

  7. oh I’m aware that creative claims exist. The most creative ones are generally by a Boss/PA or Boss/Subordinate tag team – ‘put it on your card and I’ll sign it off’

    But in the corporates I’ve worked for it probably wouldn’t get to $237k before it was picked up

  8. “He was a public servant in the Navy as well as working for NSW Ferries. It’s not as if he had to adjust to a new culture”

    Maybe he did need to adjust to the culuture. You would be surprised to learn of the corruption that occurred on HMAS Parramatta while he was the Commanding Officer.

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