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Payroll tax changes hit Canberra families and businesses

By 27 June 2014 19

brendan-smyth

Even with the government’s announcement on the 24th of June that it will extend the commencement date of the Payroll Tax Amendment Bill to the 1st of October 2014, there is still widespread confusion in the ACT market. Shadow Treasurer Brendan Smyth has called on the government to give greater certainty to affected businesses and workers.

“I continue to receive an overwhelming number of representations from ACT businesses and workers, with some alerting that client organisations will be proactively withholding 6.85 percent for the payroll tax changes come the 1st of July,” Mr Smyth said today.

“Contracts for the 2014-15 financial year have been finalised and have not factored in the 6.85 percent increase in cost to account for this legislative change. The government did not give prior warning that this was happening until the ACT Budget announcement earlier this month.

“It is unreasonable to expect businesses and contractors to renegotiate contractual arrangements. This is not how good business is conducted.

“Desperate to raise more money to pay for their spending, the government saw a $40 million opportunity to tax the contracting sector and rushed in without proper consultations and due diligence.

“So now, contract workers are faced with working at a financial loss and possible contractual penalties due to not being able to adequately carry out their obligations. This is a high handed way to implement tax policy and an unnecessary double hit to businesses and workers.

“Since announcing these changes, the phase in for this initiative has been the source of considerable disruption in the ACT market. The opposition is concerned that this will drive away vital in demand skills interstate.

“At a time when the economy is slowing down, the government should be initiating measures to give ACT families and businesses certainty and peace of mind. Not a $40 million tax that will leave them short changed and penalised,” Mr Smyth concluded.

(Brendan Smyth Media Release)

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19 Responses to Payroll tax changes hit Canberra families and businesses
#1
farout1:19 pm, 27 Jun 14

If the ACT Libs policy is to abolish or reduce payroll taxes, they’ll get my vote at the next ACT elections. There’s a fair few contractors, small businesses and employers that are annoyed at this fiasco.

#2
Foolgarah2:14 pm, 27 Jun 14

It will all be forgotten by the next election.

#3
VYBerlinaV8_is_back2:59 pm, 27 Jun 14

Foolgarah said :

It will all be forgotten by the next election.

Not by contractors it won’t. They’re just another group p%$#ed off by poor planning and consultation.

#4
davo1013:34 pm, 27 Jun 14

farout said :

If the ACT Libs policy is to abolish or reduce payroll taxes

Doubt it. When the current act was debated one of the only issues that the Liberals had was that they didn’t want an exemption for employment companies (see here)

#5
dungfungus4:35 pm, 27 Jun 14

davo101 said :

farout said :

If the ACT Libs policy is to abolish or reduce payroll taxes

Doubt it. When the current act was debated one of the only issues that the Liberals had was that they didn’t want an exemption for employment companies (see here)

I take your point and you are usually accurate but the Hansard report you are referring to is 3 years old.
I think the current issue is a totally new move by the ACT Labor minority government so the old comments may be no longer relevant.
At least you didn’t say “another Liberal election lie”.

#6
Foolgarah5:58 pm, 27 Jun 14

VYBerlinaV8_is_back said :

Foolgarah said :

It will all be forgotten by the next election.

Not by contractors it won’t. They’re just another group p%$#ed off by poor planning and consultation.

want to bet a dollar?

#7
aaa1236:05 pm, 27 Jun 14

davo101 said :

farout said :

If the ACT Libs policy is to abolish or reduce payroll taxes

Doubt it. When the current act was debated one of the only issues that the Liberals had was that they didn’t want an exemption for employment companies (see here)

What politician hasn’t changed his tune at some stage.

Fact is that contractors are facing a drop in take home pay of much greater than 6.85% and if Mr Smyth can restore some sort of reasonableness to this legislation then he’ll get my vote and probably the vote of many of the other thousands of contractors and small business who are affected by this.

Myself and colleagues have sent many emails and letters to various politicians on this issue. I do not know of one person who has had any form of response from Barr and co or Rattenbury, other than an automated we got your feedback email. Mr Smyth however contacts me promptly with meaningful responses.

My communications with Rattenbury have been very polite and I appealed to what I thought were some of his parties core values. Not any response from him not even an automated email. I guess he is showing his true colours, he is on a power trip controlling a green/labor dictatorship.

#8
aaa1236:16 pm, 27 Jun 14

Foolgarah said :

It will all be forgotten by the next election.

Would you forget a drop in your take home pay of around 10% that easily?

#9
davo1017:36 pm, 27 Jun 14

dungfungus said :

the Hansard report you are referring to is 3 years old.

Re-read Mr Smyth’s press release very carefully and note that it is only complaining about the transitional arrangements.

#10
dungfungus9:34 pm, 27 Jun 14

davo101 said :

dungfungus said :

the Hansard report you are referring to is 3 years old.

Re-read Mr Smyth’s press release very carefully and note that it is only complaining about the transitional arrangements.

Got it – thanks.

#11
Foolgarah12:27 pm, 28 Jun 14

aaa123 said :

Foolgarah said :

It will all be forgotten by the next election.

Would you forget a drop in your take home pay of around 10% that easily?

I’m not a contractor and I assume they won’t forget but are they a single issue voting block that will influence enough people to change their vote to make a difference? I used to be a contractor in Sydney many years ago and this is the same payroll tax regime they have there.

Besides, the Libs won’t give back any revenue.

#12
aaa1232:34 pm, 28 Jun 14

Foolgarah said :

I’m not a contractor and I assume they won’t forget but are they a single issue voting block that will influence enough people to change their vote to make a difference? I used to be a contractor in Sydney many years ago and this is the same payroll tax regime they have there.

Besides, the Libs won’t give back any revenue.

Well, there are thousands of contractors and their families affected just in IT. Outside of IT, I have no idea how many.

Barr has mentioned 1000 contractors in total affected, he pulled this out of his bum. In the same newspaper article he quoted this figure, just three recruitment agencies were mentioned (ones I’ve never heard of so probably not any of the big guys) and just those few accounted for hundreds of contractors. My small management company alone has another 100 contractors. A figure of about 300 payroll management companies were mentioned to be affected by Barr, I doubt those management companies only have 3 or 4 contractors each.

The staff and business owners of these 300 small businesses will all vote too. I have heard that one payroll management company has already closed it’s doors due to this. The payroll management company that I use has cut it’s fees back to the bone in order to try to stay afloat.

This payroll tax is a really hot topic in the workplace, people are angry. Tony Abbotts budget didn’t generate nearly as much discussion.

I firmly believe libs can win thousands of votes if they can restore some kind of sense, fairness and compassion to this proposed legislation.

Whilst contractors in other states have similar payroll tax arrangements already in place, the issues here in the ACT are:

The rate of payroll tax is the highest in the country at 6.85% vs the lowest at 4.75%

Applying the tax to existing contracts is very unfair, this will come directly out of the contractors pockets. None of the recruiters or clients are negotiating at all with contractors to share some of the pain, just telling us to suck it up

The notice period is far too short for such a major change. It should not start until 2015.

This tax comes at a time when jobs are already being lost and the economy isn’t great. Contractors may not be able to negotiate with the client regarding such a large increase in costs in their next contract renewal, or indeed any increase at all. The tax should be phased in at a couple of % per year as it is very harsh for a family to have to adjust to such a large and sudden drop in income.

It is not appropriate to introduce such a huge new tax at a time when consumers are already cutting back on spending and worrying about their jobs. The fact that Barr won’t see common sense and at least announce that the tax won’t apply to existing contracts, is causing even more fear and uncertainty. Thousands of consumers in the ACT are cutting back their spending as a result which will hurt retailers and other small business who are probably already suffering.

There are other issues of fairness with this tax too:

It is applied to gross payments before business expenses are paid, not to the value of the salary package as payroll tax is intended to be

The payroll tax free threshold is retained by the recruiter and therefore contractors are paying payroll tax on every dollar

The rate is just far too high

#13
Dondon4:56 pm, 28 Jun 14

Foolgarah said :

VYBerlinaV8_is_back said :

Foolgarah said :

It will all be forgotten by the next election.

Not by contractors it won’t. They’re just another group p%$#ed off by poor planning and consultation.

want to bet a dollar?

I won’t forget. The change is costing me more than a dollar.

#14
Dondon5:00 pm, 28 Jun 14

Foolgarah said :

I used to be a contractor in Sydney many years ago and this is the same payroll tax regime they have there.
.

The difference is you new about the need to pay the tax when contracting then and it could be factored into the rates charged.

The problem here in ACT is that the announcement and implementation was so poor that it has had no transitional period for contractors or agencies to prepare correctly. The end result is the contractor taking a 7% pay drop. This is also compounded with the fact (from the contractors in my peer group) have extended at the same rate as last financial year, so their rate has already copped a pay decrease due to inflation.

#15
Dondon7:46 pm, 28 Jun 14

Dondon said :

Foolgarah said :

I used to be a contractor in Sydney many years ago and this is the same payroll tax regime they have there.
.

The difference is you knew about the need to pay the tax when contracting then and it could be factored into the rates charged.

The problem here in ACT is that the announcement and implementation was so poor that it has had no transitional period for contractors or agencies to prepare correctly. The end result is the contractor taking a 7% pay drop. This is also compounded with the fact (from the contractors in my peer group) have extended at the same rate as last financial year, so their rate has already copped a pay decrease due to inflation.

#16
rommeldog5610:41 pm, 28 Jun 14

Foolgarah said :

aaa123 said :

Foolgarah said :

It will all be forgotten by the next election.

Would you forget a drop in your take home pay of around 10% that easily?

I’m not a contractor and I assume they won’t forget but are they a single issue voting block that will influence enough people to change their vote to make a difference? I used to be a contractor in Sydney many years ago and this is the same payroll tax regime they have there.

Besides, the Libs won’t give back any revenue.

You are probably right about the Libs.

But, if it is some sort of “consistency” in application of payroll tax on those ACT companies to that which applies in NSW, I hope that the ACT Gov’t will also apply that concept to Annual Rates, Petrol pricing, car registration fees, etc.

#17
anton9164:25 pm, 01 Jul 14

I received notice today that my recruitment wants to start withholding 6.85% of my pay from the 1st July. I thought this wasn’t coming into effect until the 1st October.

Can they do that?

#18
TaxedContractor7:47 pm, 01 Jul 14

anton916 said :

I received notice today that my recruitment wants to start withholding 6.85% of my pay from the 1st July. I thought this wasn’t coming into effect until the 1st October.

Can they do that?

No they can’t. The tax has not yet been legislated, even based on the proposal it is widespread knowledge that the tax will (now) not be levied until 1st October, therefore your recruitment agency has no legal right to make deductions, especially for a non-existent tax.

First point of call – inform said agency that they are now in breach of contract and give them time (1 week) to rectify their “mistake”

Step 2 – ACT Dept of Fair Trading – said breach of contract should be handled through this body.

I have read my existing contract (signed last year) and note that it refers to passing on gov’t levied charges – eg payroll tax. I would be rather surprised if that actually stood up in court. It is not legally supported to contract a reduction to legal rights by an entity, regardless of the wording…

#19
JC8:40 pm, 01 Jul 14

From my understanding contractors use payroll companies, lets call them pimps to act as the middle man for payroll purposes. If said company has under x number of employees they don’t pay payroll tax, but over what ever the amount is they do.

In my experience working with contractors is these payroll companies set-up multiple companies that only ‘employ’ under the threshold as a way of getting around payroll tax. So in other words the pimping companies are using a loop hole to avoid paying tax and the government is closing it.

I would have though the issue here is why the pimp companies are not taking the hit and why they are passing this onto their ‘employees’ read government contractors?

From a resident of the ACT perspective I reckon anything that closes tax loop holes can only be good for the Territory as a whole.

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