Shorten to hold discussions on independent contractors tax arrangements

New Minister for Financial Services Bill Shorten says he will hold discussions with contractor groups and unions over tax arrangements for independent contractors, but says changing tax laws to crackdown on so-called sham contractors is not currently Labor Government policy.

The comments come after it was revealed a special union committee made up of representatives from unions including the CFMEU, the AMWU and the TWU met with Labor Government ministers including Julia Gillard, Craig Emerson and Nick Sherry to discuss the way independent contractors.

But the head of Independent Contractors Australia, Ken Phillips, is furious the issue of taxation of independent contractors is back on the agenda and has accused Labor and the unions of having an “agenda against Australia’s self employed”.

Shorten said in a statement provided to SmartCompany that he will “monitor compliance and administrative approaches to ensuring compliance with the personal services income rules”.

“I recognise the importance of ensuring that contractors comply with their obligations and I will meet with contractors’ representatives and unions in the near future to discuss these issues,”
he said.

“The ATO continues to focus on the risk that a number of contractors will seek to alienate their personal services income to through entities.”

However, Shorten said the Government is not planning to move on recommendations from the Board of Taxation and the Henry Review to crackdown on independent contractors who are essentially working as employees.

“The Government has indicated that the recommendation to consider revising the alienation of personal services income regime is not Government policy at this time.”

Phillips says he received a tip that there was a union committee working to “kill off” independent contractors more than a year ago, and is not surprised that the issue remains on the Government’s agenda.

“The disclosure now that there is a committee confirms the tip off we had and heightens and raises our suspicions that there is a secret agenda here being driven by the unions to kill off self-employment. And they will do this by stealth.”

Shorten says that under Kevin Rudd, Labor made a number of positive and practical changes to its policies around independent contractors, including introducing a department of independent contractors under then small business minster Craig Emerson, and new research into the sector.

“This is a return to the old Labor party that took a highly aggressive approach to self-employed people for a long, long time.”

The Board of Taxation recommended changes to personal services income rules that would have forced Australia’s two million contractors to separate income earned from capital (tools and other equipment) from income earned from labour. The latter group would be taxed as employees.

Phillips says he remains open to talking with Shorten, but is not expecting to be included in any discussions.

“If these guys want to talk practical common sense about tax administration and the way it’s handled, we’ll join them. But sorry guys, no crap.”