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Government payroll backflip

By Canfan - 17 June 2014 52

During questions from the opposition during yesterday’s estimates hearing, ACT Treasurer Andrew Barr revealed the government is reconsidering its proposed payroll tax amendments to remove the genuine employer exemption, due to their affect on ACT small businesses and contractors. Only after an outcry from small business and the Canberra Liberals has Mr Barr acted, Shadow Treasurer Brendan Smyth said today.

“The Treasurer conceded that consultations after the budget was announced revealed the difficulties this bill has caused ACT businesses. I am astounded at the lack of forethought the government has put into this bill,” Mr Smyth said.

“The government seemed unaware that most of the negotiations for contracts for the coming financial year, especially with the federal government, have in the main been concluded.

“It is amazing that at a time that the government has funded a program to assist federal public servants moving into private enterprise, they are taking away the exemption that will in many cases make that move viable.

“Additionally, the proposed changes have a short term impact of favouring multinational companies.

“At a time when we should be making it easier for ACT small businesses and contractors, this is yet again an ill-conceived and ill-timed proposal by the government simply to raise extra revenue to pay for the government’s addiction to spending,” Mr Smyth concluded.

(Media Release Jeremy Hanson)

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52 Responses to
Government payroll backflip
1
VYBerlinaV8_is_back 12:21 pm
17 Jun 14
#

It’s really just another example of ACT government meddling in the commercial world without any idea what they’re doing.

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2
watto23 12:35 pm
17 Jun 14
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That said I’m not opposed to the changes. Lets face it contractors get remunerated pretty well. It just needed to be planned better. I’ve been there and the payroll company is just another way to dodge tax and maximise your earnings, which is why the current federal government are so unloved. They are unwilling to close loopholes like this, but willing to take from the less well off in a so called budget emergency/crisis.

The ACT government to implement these changes ideally need to give at least a years notice such that contractors can make an informed decision. Whether you agree that its all fair that a contractor has the ability to dodge payroll tax, whereas someone employed for a company has that payroll tax paid and in reality deducted from your salary all for the apparent security of job is just rubbish. These days terminating a full time employee is easier than a contractor.

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3
Andrew Barr MLA 1:15 pm
17 Jun 14
#

The Government will be continuing with this Budget measure, as I made clear numerous times yesterday. We will, however, give consideration to amending the starting date of the change to the second quarter of the 2014-15 fiscal year in response to consultation with the sector in the past few weeks.

Never a good idea to rely upon Brendan Smyth press releases for factual content.

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4
dungfungus 1:42 pm
17 Jun 14
#

Andrew Barr MLA said :

The Government will be continuing with this Budget measure, as I made clear numerous times yesterday. We will, however, give consideration to amending the starting date of the change to the second quarter of the 2014-15 fiscal year in response to consultation with the sector in the past few weeks.

Never a good idea to rely upon Brendan Smyth press releases for factual content.

Can’t help feeling this “budget measure” is the ACT’s version of the MRRT and we all know what a success that was.

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5
dailyfauxpas 1:48 pm
17 Jun 14
#

How gracious of you Andrew.

Considering the majority of contractors would have already signed contracts for the next financial year.

A decision like this, if implemented, should be done in FY15/16 when contractors have the capability of cancelling contracts, modifying their terms or juggling other finances commitments during this hard time. Not half way through a fiscal year or 1 month from the new financial year.

Thanks for the tax hike, which essentially means some will be paying a rate of 51.85%. Recruitment agencies aren’t going to wear these costs.

What a disgrace!

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6
CUNNINGSTUNTS 2:51 pm
17 Jun 14
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dailyfauxpas said :

How gracious of you Andrew.

Considering the majority of contractors would have already signed contracts for the next financial year.

A decision like this, if implemented, should be done in FY15/16 when contractors have the capability of cancelling contracts, modifying their terms or juggling other finances commitments during this hard time. Not half way through a fiscal year or 1 month from the new financial year.

Thanks for the tax hike, which essentially means some will be paying a rate of 51.85%. Recruitment agencies aren’t going to wear these costs.

What a disgrace!

+1 you nailed it dailyfauxpas

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7
farout 3:00 pm
17 Jun 14
#

Has the ACT Government considered the legal issues with contracts having to be broken and re-signed? Given the timing of this move, most contractors already have contracts saying they will get paid $x per hour till the end of June 2015. Now, someone needs to pay almost 7% tax, and the options are:
– Recruitment agencies pay it from their pocket – not likely to happen.
– Recruitment agencies violate their contracts to withhold a further 6.85%, so that the contractor gets $x – 6.85% of x, which is in violation of the signed contracts.

Couldn’t the ACT Government could have avoided this unpleasantness by giving adequate notice or timing the new measure to start from the 2015-16 FY? Or will the legislation change include a clause stating that the tax shall not be passed on to contractors?

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8
giulia 3:04 pm
17 Jun 14
#

Yes, this is a disgrace.

The ACT has the highest payroll tax rate in the country at 6.85%. Why not align this with other states and territories, say Queensland at 4.75%?

What this amendment actually means is that*:
– many contractors will get a very big pay cut, ~$12,000 a year;
– some contractors will leave Canberra;
– many of those who stay will not vote for the ACT Labor Party in the next election;

Those who benefit from this change are big companies on government panels such as IBM, CSC, Accenture, Oakton. Are these the agencies with whom the government consulted on this over the past year?

*This was taken from a sample of 46.

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9
VYBerlinaV8_is_back 3:10 pm
17 Jun 14
#

The timing of this makes it quite clear that either deals with mates in business or incompetence are to blame.

I’m guessing the latter. Where the hell was the consultation?

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10
giulia 3:15 pm
17 Jun 14
#

Don’t forget that the contractors who work for the federal government through small agencies, actually cost the government much less (on the order of 3 times) than those who are employees of big companies like IBM, CSC, etc.
This amendment will mean that the government will end up spending much more money for the same amount as work, as they will now pay IBM $300/hour for a contractor who currently costs the government $100/hour.

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11
Mark of Sydney 3:23 pm
17 Jun 14
#

Oh yes, what a disgrace that contractors will now be put on an equal footing with employees.

Yet not one of the outraged posters has bothered to respond to the following points that I posted on the other thread:

“If you’re operating a genuine business why would you be engaged through an employment agency? Sounds like employment to me.

As I understand it, the payroll tax exemption for small businesses is designed to encourage business activities. I’m not making a judgement on the OP’s specific arrangements, but how many of the arrangements caught out by the new rules involve people working full-time on a client’s premises, using the client’s systems and equipment, and not really taking on any additional risks than an employee doing similar work, other than the lack of security associated with a fixed-term contract? How would this be any more a business activity than working as a casual employee whose pay rate reflects the fact that their employer is liable for payroll tax?”

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12
VYBerlinaV8_is_back 3:44 pm
17 Jun 14
#

Mark of Sydney said :

Oh yes, what a disgrace that contractors will now be put on an equal footing with employees.

Holiday pay
Sick leave
Training
Administrative support
Support of professional memberships
Long service leave
Access to corporate knowledge
etc etc etc

Yeah, they’ll be exactly the same.

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13
spoonalious 3:49 pm
17 Jun 14
#

Mark of Sydney said :

Oh yes, what a disgrace that contractors will now be put on an equal footing with employees.

Mark, the difference here is that contractors negotiate a rate directly with the employment agency – say, $60/hour. This has been factored as a comparison to full time work – for instance, a contractor on $60/hour is on equivalent of $87,000 permanent factoring in leave, superannuation liabilities, personal indemnity insurance etc. So that’s all built into at contract renegotiation time to ensure a suitable rate is there for the contractor equivalent to a permanent staff member.

It’s not really a gravy train when you consider a lot of contracts have hard caps at approx 44 weeks a year, forcing the contractor to take off 8 weeks unpaid (14 days p/h, 10 days sick, 20 days holiday pay is generally the rule). Consider this in conjunction with the uncertainty that contracts will be renewed and the increased risk factor of being a contractor means that the hourly rate is definitely in line with what you could expect as a APS6/EL1 technical (in the ICT stream). It is more that some people prefer to be a contractor because it allows them to rapidly shift roles, departments etc to achieve whatever their career goals are.

Lastly, and to directly reply to your comment, it’s not putting them on equal footing with employees as payroll tax changes affect the employer. That tax isn’t factored into salary negotiations whatsoever whereas these rapid changes affect contractors after their rates for FY13/14 have already been negotiated.

If it was proposed for FY15/16 then it would be much easier to wear as a lot of contractors would figure the additional payroll tax liability into their negotiations for the contract.

It is a kick in the teeth to get a surprise reduction of almost 7% of your wage, no matter what language you speak, contractor or salaried. Especially considering most contractors wouldn’t have had a rise in 3 years at a lot of agencies out there.

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14
justsomeaussie 3:51 pm
17 Jun 14
#

Mark of Sydney said :

Oh yes, what a disgrace that contractors will now be put on an equal footing with employees.

You seem to be under the common misperception that contractors cost more than a salaried government employee. I’ve personally had to do the numbers and once you factor in pay, benefits, annual leave, sick leave, parental leave, education, increased super, training courses and promotions and of course redundancy payouts, it turns out that contractors can be a lot cheaper than employees.
For those people that don’t get sick, are already educated, don’t require promotions, recognition or time off work contracting can and does pay better than an average salary. With a win-win for both parties.

Of course contractors are also commonly the sole ones left in the departments past 4:30 grinding out paperwork that no one else wants to do.

As always contractors should be engaged for set projects with allocated funds, where at the end of the engagement they can be let go or kept for other projects UNLIKE the public service where it can take months to redeploy people after projects have finished let along months to years to fire someone.

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15
GetRealPlease 3:53 pm
17 Jun 14
#

Can anyone find the a link to Jeremy Hanson Media Release?

What is the Liberal Postion on the payrol tax changes?

Mr Barr can you please correct your Budget Media release

“We have also raised the threshold for payroll tax, meaning businesses will pay less, with around 40 businesses removed from the system altogether”

http://apps.treasury.act.gov.au/budget/budget-2014-2015/budget-paper-2/growing-the-economy

Thousands have now been added to the system not 40 removed.

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