Contracts beware – the Government is coming after you: Gottliebsen

Small contractors of Australia need to gird themselves for a fight for survival because the government is considering a massive assault on contracting.

The industry that will be most affected is home building where the costs of a house are lower than building apartments partly because of the flexibility delivered by the contracting system. But the computer industry will not be far behind. These are major Australian industries that are potentially under attack.

And the opposition can smell blood.

In simple terms, to be classed as a contractor for tax purposes you must pass the so called results test. If you fail that, there are a series of other tests, including whether 80% of your business is with one client. As has been widely reported in Business Spectator and other media, assistant treasurer Nick Sherry endorsed a series of radical proposals from the Board of Taxation, which would decimate contracting in Australia.

Yesterday, a jubilant Bruce Billson, Shadow Minister for Small Business, announced in the Senate during question time that “the Rudd Labor government refused to rule out adopting recommendations being considered by the Henry Tax Review that would turn tens of thousands of self-employed and small business contractors into ’employees’ for tax purposes despite an election promise not to make any changes”.

Billson then went onto spell out some of the more outrageous statements Nick Sherry has made on the issue which link the push to decimate contractors to union movement pressure. In fairness to Nick Sherry, it is early days and refusing to rule out a frontal attack on contractors is not the same as launching such an attack.

But before the election the government is going to have to make a statement of its intentions and there is now a clear warning that a fight over Australian contracting cannot be ruled out.

One of the problems that the contractors will have is that many in the accounting profession are not familiar with the results tests and have been giving people wrong advice on what is required to be a contractor.

Once the building, computer and other industries understand they are in the government gun, they’ll be watching fireworks.

This article first appeared on Business Spectator.