Payroll tax changes hit Canberra families and businesses

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.

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…

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?

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.

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.

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.

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.

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

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.

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.