PSI Criteria Update


Regular readers will remember when I broke the news to the VA industry that the Labor Government had on its agenda proposed changes to PSI Criteria that would potentially affect over 2 million self-employed and independent contractors (updated on 18 August).

This week the Australian Financial Review exposed the fact that the ALP has effectively formed a sub-committee made up of the unions including CFMEU, AMWU, AWU, TWU and CEPU whose mandate appears to be to target independent contractors specifically and the self-employed more generally. Subsequently, this interesting article appeared on Smart Company:

It’s reassuring to see that the Federal Labor Government are now saying it’s “not government policy” to change the tax laws – but the fact that these meetings have been held for weeks in the absence of input from interested parties means there’s a good chance it may well become policy sooner rather than later with little or no input from the sector. (Also not the use of the words “… at this time“.) That’s change by stealth and that’s something the sector should be very concerned about.

It’s also interesting to note that the ministers within the party who were for working with ICs and the self-employed between 2007 and 2010 and who were encouraging the ALP not to discount the effect that our sector can have on the outcome of elections (ie – they should talk to us!), have now been shifted off into other portfolios and the ones now in charge of small business are ex-Union men. Unfortunately all the indicators are that we are heading back to a culture of requiring employment (viz Australia of the 70s).

Whilst the focus is still on personal services income it will affect all self-employed and contractors with proposed changes meaning we will have to differentiate between income earned from capital (tools and equipment) and income earned for our labour (with the latter being deemed employees). I wonder if we can claim our income is coming from our primary tool – the computer? Tax deductions for business expenses will be less generous and clients may be required to deduct and withhold tax from invoices.

Assistant Treasurer Bill Shorten has now made his first policy announcement and his focus is the self-employed (PSI) tax.

I am passionate about our industry. I am personally affronted when it looks to me like our way of life is in jeopardy. And from what I’ve been reading of late, I believe it is. I was quoted in the Australian Financial Review this week as saying that if these proposed changes go through the advantages of working with a virtual assistant in particular are eradicated – putting nearly 1000 of us across Australia out of work immediately.

Here is a timeline of events in this regard*:

  • 2006-07: The Rudd ALP said “no change” to PSI tax laws.
  • Mid-2009: ICA receives a union tip-off that the ACTU and ALP have a committee designing a tax attack against self-employed people.
  • Late 2009: The Board of Taxation comes out with a recommendation to turn PSI laws on their head.
  • Early 2010: The Henry Tax Review gives tax talk ‘waffle’ on the issue.
  • Early 2010: ICA ask the Rudd Government to confirm “no change”. Silence is the response.
  • 2 August 2010: Just before the election, the Gillard Government sends a letter saying “…the issue is not government policy”:
  • 23 September 2010: Assistant Treasurer Shorten issues a statement saying change “…is not government policy at this time“.

See an in-depth history at ICA here. It’s an eye-opening read.

Can anything be done? Well, perhaps naively I believe we still live in a democracy and despite internal pressures the Labor Government still needs to listen to the people. There are enough self-employed people in key marginal seats for the ALP to be concerned about winning their votes.

Contacting your local MP with your concerns is still the best way to be proactive – and I would recommend contacting the local MP from both camps.

Approaching the Independents who will no doubt be a critical element of the current government is another avenue of opportunity. There is a good boilerplate letter at the ICA site here that self-employed business people can use over their own signature – the last two paragraphs could be replaced with your own concerns for the ongoing future of our sector.

One of the dangers is that self-employed people are more often than not too busy working in their business to be involved in this type of activism, but the recent disturbing shift in the ALP landscape means that if not now, when? Delaying action may result in a lot of people out of work and I believe in our right to work for ourselves, in our own businesses, free from political and union harassment.


Australian Financial Review
Smart Company

(*Source: Independent Contractors Australia)

© Lyn Prowse-Bishop –

1 comment

  1. david says:

    it is all about the the Lefts or Labor’s philosophy.

    Always used to be the workers and unions against the employers.

    The oppressed vs the oppressor but they cant do it with independent contractors who are in all reality the employer, employee and the union all in one.

    They cant pigeon hole them because we the independent contractor are far too free minded and INDEPENDENT of both sides.

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