Govt Renews Attack on Contractors

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Politicians lie! Who knew??!!

After confirming there would be “no change to PSI legislation”, Bill Shorten has simply implemented what was proposed under the PSI changes by attacking construction industry independent contractors via budget changes which require mandatory transaction reporting. What does this mean? That businesses who hire contractors will be required to report all payments made to those contractors to the ATO.

What a red tape nightmare!

Robert Gottliebsen’s analysis of the budget describes how this is to occur:

“The government plans to require that anyone in the building and construction industry who hires a contractor must report to the government every cent they pay to that contractor. And every contractor must report every cent they pay to their contractors. This is part of the vigorous union-encouraged attack that the government is planning on the self-employed.”

And if you think it will stay only with construction think again. The Australian Financial Review reported on Thursday 30 June:

“While sham contracting is commonly associated with the building and construction industries, the ATO has highlighted a swag of industries in which it says the problems are more prevalent …. retail, tourism and hospitality, cleaning, logistics, security, health and telecommunications”.

According to the AFR report – This financial year the ATO chased the smallest businesses for outstanding returns and reaped $1.6B; another $500M from SME audits; $111M from microbusiness audits; and $435M from GST audits of the smallest businesses.

So SMEs and microbusinesses are definitely on the ATO radar.

See Independent Contractors Australia response to the proposal here.

So what will these reporting requirements mean for Virtual Assistants? Well, for a start can you imagine the added administrative responsibility that will now fall to clients contracting VA services? They will be required to report every cent paid to their VA. A VA who subcontracts will be required to report every cent they pay their subcontractors. We’ll be so tied up with mandatory reporting when will we get any work done? For clients, if they have this additional responsibility imposed on them, what is the point of having a VA? If contracting a VA becomes problematic they’ll simply outsource offshore or employ someone (which is exactly what the government is trying to enforce).

Knock-on effects abound. I’ve already pointed out that clients will probably look offshore – so this directly impacts the economy here as money that would have been paid to a local VA (who pays tax and spends here) will now benefit a foreign economy.

What happens when the VA loses clients who find it too much of a hassle to contract them? They’re out of business. That means they’re looking for work. Who provides the jobs? Will they miraculously appear out of thin air? Many VAs are located regionally. Jobs are harder to come by in regional areas. Many VAs are work-at-home mums. Who will provide the additional childcare places required for these mums when they’re forced to close their businesses and find employment?

In their attempt to keep the Unions happy the current Government has completely lost sight of a sector of Australia that contributes millions to the economy – the small business and self-employed/independent contractor sector.

©Lyn Prowse-Bishop – www.execstress.com

2 comments

  1. Ken Phillips says:

    yeh and will this bring in more tax. Not a penny! Its more likely to encourage tax cheats.
    this is my current comment http://bit.ly/iUCCbf

  2. execva says:

    Good points Ken – particularly regarding more cash transactions.

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