Play Verses Purposeful

Drivers get into the independent operator industry for different reasons. Most will say it is because they want to make more money. National averages on this issue are too inconsistent to provide a clear answer as to whether they are right or not. The Independent Operator industry is rather transient. 5-10% of all Operators who are driving today will not be driving in 12 months. Then, 5-10% of the industry in any given year hosts brand new operators. This means that turnover affects the question; “do Operators make more money than Drivers”. Some years they do, and some years they don’t. It depends on how many ‘new’ Operators there are verses how many seasoned ones still exist.

It’s very important to differentiate between ‘make more money’ and ‘increased cash flow’. Without a doubt, being an Independent Operator increases cash flow (on average). Drivers have the full amount of income taxes taken off their check while Operators don’t. Drivers don’t get GST/HST refunds on their business purchases in Canada; Operators do. So, when someone becomes an Operator, they go from a paycheck of $4-5,000 per month as a Driver to $10-14,000+ per month. That is a doubling or tripling of the cash flow and it can be exhilarating, even dopamine encased. However, after a truck payment, repairs and future taxes are set aside… there is little difference to make mention of. With one major exception.

Using non-taxable benefits in your business eliminates $12,000+ of income taxes annually from your year over year cash flow. It is the ONLY thing that truly can be shown to save Operators AFTER TAX CASH FLOW. If it wasn’t for NTB, the net cash flow for being an Independent Operator (National Averages) would be ZERO… until the highway tractor is completely paid for. This fact is supported by the research I wrote about in my second book “Making Your Miles Count: Choosing a Trucking Company”. Using data from 1996 and 2012 I showed that the statistics on increased income from being an Operator only comes into effect once the truck is paid for. The data showed a lot more than just that, but this article is only dealing with why Drivers become Operators, not a range of other industry issues.

If an Operator sets his business up properly from the start, by the time the first wave of maintenance begins to eat up the cash flow (approximately 2 years into a new truck) the $25,000 in tax savings comes in handy. Over a 6-year period, non-taxable benefits saved $72,000 in taxes (on average). That level of cash flow advantage is difficult to walk away from… yet Operators do it all the time when they rush into their new business. NTB is more work than what accountants normally are used to, but the return on investment is bizarrely high for the Operator. The onus is on the Operator to demand, not the accountant to provide.

When a Driver gets the ‘Operator bug’, too often they do what the surrounding infrastructure tells them to do… sign here, buy that, choose this. The advice givers almost universally know nothing about NTB, because it’s not their area of expertise and they usually just try and move equipment off their yards. Too often they have little concern for the long-term survival of that move. It sounds predatory, and to some it may be, but usually it falls under the ‘Buyer-Beware’ category of business. It’s up to the Operator to find the system that is best for him or her.

If you are an Operator and your accountant asks you “how many days did you drive in Canada and how many in the USA” … you are using the TL2 simplified method. You are NOT using NTB! You can change but your accountant must teach you to use it, learn how to apply it to CRA returns and then defend it. Do your research, find out how to save $12+K a year on taxes. It seems so simple, especially in a short article like this, but 99% of all Operators in Canada are NOT using NTB; they are using the TL2 simplified method and therefore paying too much in taxes. Our firm has kept track of all our clients’ tax savings, and this year overtook the $75 million dollar barrier in tax savings (since 2006).

Check out our PODCASTS or call us. We can walk you through understanding Non-Taxable Benefits. It separates the purposeful Operators from those who just play in the business.

About the Author:
Robert D. Scheper is a leading Accountant and Consultant exclusively serving the Lease/Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His second book “Choosing a Trucking company” is the most in-depth analysis of the independent operator industry today. He has a Master’s degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars.

You can find him at www.makingyourmilescount.com or 1-877-987-9787.