Fewer APS consultants means less revenue for ACT Government

Perhaps the hit to the ACT budget is not as large as the article suggests. Or more correctly, perhaps the hit should have been much higher.

In my day as an IT contractor, many of my fellow contractors used the services of payroll companies. These companies exist solely to get around the payroll tax provisions – they provide no value add service to the ACT economy whatsoever.

How the ‘scam’ works is simple.
Normally a contractor will be “employed” through a recruitment agency, e.g. Paxus. Paxus will find the contractor work and negotiate the contract with the agency needing the contractor’s services. Paxus will pay the contractor – plus pay the (current) 6.85% payroll tax, as their total payroll bill will be well above the $2m per annum threshold.
Enter a third-party payroll company (let’s call them PayRoll Pty Ltd). PayRoll Pty Ltd will have access to a number of small registered companies which have an annual payroll bill below the threshold – typically single (or maybe 2 or 3) employee companies and there are many of them. For a nominal fee (maybe $2,000 pa), PayRoll Pty Ltd will use the small registered company (let’s call them SmallCo Pty Ltd) as the ’employer’ of the contractor. So now Paxus doesn’t employ the contractor – they have a contract with SmallCo Pty Ltd who “provides” the contractor’s services which they “on sell” to the agency where the contractor will work.
The critical thing is that SmallCo Pty Ltd is under the payroll tax threshold so there’s a tax saving of 6.85%. Typically, PayRoll Pty Ltd and the contractor will spilt the “spoils” say 3.85%/3.0%. For doing absolutely nothing other than finding ScallCo Pty Ltd (who receives $2,000 for nothing other than signing a contract) to use them as a ‘faux employer’, PayRoll Pty Ltd gets a tidy 3.85% windfall. Paxus is happy as they are still getting their ‘admin fee’ for providing the contractor’s services to the agency.
Everybody wins.
Well NO! Through this clever payroll tax chicanery the ACT public purse is being dudded to the tune of many multiples of 6.85% of revenue.
Remember, every dollar that someone avoids in paying tax will have to be offset – either by a reduction in service or further tax impost on others. The government will still need to exact it’s ‘pound of flesh’.

I didn’t use such companies as I factored in payroll tax, into the rate I wanted to receive when undertaking a contract, but it’s easy to see how this “payroll industry” survives. After all it’s only reducing the ‘unreasonable payroll tax burden’ facing Australian companies.

Is the “Opportunities for Closer Collaboration on Economic Engagement with India” is a euphemism for let’s outsource to India?

Replacing one bad way of doing things with another bad way of doing things is not a solution.

I’d like to know where this info comes from, as there is squiddly-do on the new agency’s website agc.gov.au.

Sus.

Considering how rampant consulting profit shifting and paying “partners” from offshore to dodge tax, this is a net benefit to the Australian economy meaning, ironically, more money for contractors who do actually useful things.

Australia 1 / Cayman Islands 0

The ACT bottom line is helped and hindered by the Feds. They are chipping in huge amounts for light rail without any business case or ROI. Yet absent is a few hundred million from payroll. Aren’t we glad the Feds didn’t spent that extra cash and Australia benefited from lower government spending.

Maybe Barr is a believer in the broken window fallacy. Where money is made from inefficiency…

The work of consultants can now be done by Chat GPT. 😉

Here is an example. I asked Chat GPR to write a report on “Opportunities for Closer Collaboration on Economic Engagement with India”:

“Executive Summary:

In an era of increasing globalization, Australia’s economic engagement with India presents immense opportunities for growth and mutual benefit. This report, commissioned by the Australian federal government, explores the potential for closer collaboration between federal, state, and territory governments in enhancing economic ties with India. Leveraging the synergies between these entities is crucial to unlocking the full potential of the Australia-India economic relationship.

Introduction:

Australia and India share a strong diplomatic relationship, with deep historical ties. However, there is untapped potential in economic collaboration. As both nations seek to diversify and strengthen their economies, it is imperative for the Australian federal, state, and territory governments to work cohesively to seize emerging opportunities in the Indian market.

Current Landscape:

Australia’s current economic engagement with India is primarily driven by the federal government. However, there is room for increased involvement at the state and territory levels. India’s diverse markets and industries provide avenues for collaboration in sectors such as agriculture, technology, education, and renewable energy.

Opportunities for Collaboration:

Industry-Specific Partnerships:

Facilitate collaboration between federal agencies, state governments, and Indian counterparts in identifying and promoting industry-specific opportunities.
Develop joint initiatives to support Australian businesses in navigating Indian regulatory landscapes.
Education and Skill Development:

Foster collaboration between Australian states and Indian states to promote student exchange programs and skill development initiatives.
Establish partnerships between Australian universities and Indian educational institutions to enhance research and innovation.
Infrastructure Development:

Coordinate efforts in infrastructure development, aligning with India’s ambitious projects such as Smart Cities and Make in India.
Create joint task forces to explore investment opportunities in key infrastructure projects.
Trade Missions and Cultural Exchanges:

Organize joint trade missions involving federal, state, and territory representatives to India.
Promote cultural exchanges to enhance understanding and strengthen ties at various levels.
Challenges and Mitigation:

Coordination Challenges:

Implement a centralized coordination mechanism to ensure effective communication and collaboration among federal, state, and territory governments.
Regulatory Harmonization:

Establish a task force to identify regulatory barriers and work towards harmonizing regulations between Australia and India.
Capacity Building:

Invest in training programs for government officials at all levels to enhance their understanding of India’s business environment and culture.
Conclusion:

Closer collaboration between the Australian federal, state, and territory governments is pivotal in maximizing the economic engagement with India. By aligning strategies, sharing resources, and fostering partnerships, Australia can position itself as a key player in the dynamic Indian market. The recommendations outlined in this report provide a roadmap for policymakers to navigate the complexities and harness the vast opportunities presented by the Australia-India economic relationship. …”