Master Builders Australia calls for more consultation on sham contracting crackdown

Building groups have called for more consultation from the Federal Government for its planned crackdown on sham contracting in the building and construction industry, saying the mooted changes are based on a small sample and represent big costs for the nation’s contractors.

Richard Calver, legal counsel for Master Builders Australia, says the government needs to avoid “sensationalist” policies.

Calver says the scheme could potentially affect 400,000 contractors, but is based on Australian Tax Office figures that show just 792 taxpayers have done the wrong thing.

“Although 792 is more than we would like, it’s no avalanche,” Calver says. “We need more analysis and more numbers.”

Calver says while the MBA opposes tax evasion, a scheme that will cost at least $45 million per year, or $300 per contractor, is not necessary. He also says a four-week consultation period is not sufficient to flesh out the issue.

The government last month announced a discussion paper on the budget plan for a reporting regime for payments made to contractors in the building and construction industry.

It wants building and construction businesses to report annually to the ATO payments they have made to contractors within the industry.

A spokesman for Assistant Treasurer Bill Shorten this morning said the Government had already consulted with the MBA and other industry groups. 

“The Government decided to proceed with the measure based on five years’ worth of compliance data from the ATO,” he said.

“And perhaps most importantly, this regime will be data matching information that should already be collected by businesses in the building and construction industry.

“The new reporting regime will not start for another 12 months, providing time for further consultation and education on the details of the regime.

“This Government has no concerns with contractors, just people who seek to avoid tax.”

Meanwhile, Glenn Simpson, general counsel of the Housing Industry Assocation, told SmartCompany that the record-keeping requirements – particularly separating labour from goods – will place considerable burdens on the industry, likening it to a sledgehammer cracking open a walnut.

Simpson notes that sham contracting is not the same as tax avoidance, and was not convinced the building industry was outstanding for tax avoidance.

The ATO has long raised awareness about sham contracting – where a worker is wrongly classed as a contractor rather than employee, thereby stripping the need for entitlement payments – within the building industry.