Page 6257 - Week 19 - Tuesday, 17 December 1991
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so-called contractors in lieu of employees. As with all tax cheating, the honest pay for the dishonest, and the service contract provisions address this simple fact of life.
In essence, the service contract provisions bring within the payroll tax net payments for labour when provided by contractors who are considered to be a mere substitute for direct employment of labour. The Act does not seek to catch genuine independent contractors and specifically exempts payments to contractors who provide services to the public generally. What Mr Collaery's Bill seeks to do is exempt certain categories of contract simply because the subcontractor is a partnership or, in the case of a sole trader, if he or she arranges with another person to work on the job.
The Bill is defective, Mr Speaker, in what it aims to do by excluding any reference to services provided by companies. It is surely apparent that, if the principals in a partnership are to be given an exemption as proposed in this Bill for providing labour, then the principals of a private company should similarly be exempted. By failing to provide for this, the Bill creates a serious anomaly which will cause severe inequities in the Act. Hopefully, however, this anomaly will not arise, because members, I trust, will agree with the Government that the Bill should be rejected.
Mr Speaker, the Bill is the answer to the tax cheat's prayers. Given that Mr Collaery has been informed of the avenue of tax evasion he is opening up, one can only question why he is so anxious to help the dishonest at the expense of the honest taxpayer. Anyone can enter into a partnership or other working relationship with another person or persons and, if there is an opportunity to reduce or eliminate tax, that is all the incentive that may be required. It is surely very plain to see that, if the principals in such a relationship actually provide the labour in a service contract, then that is no different to those same people providing the labour as individuals.
The Commissioner for ACT Revenue has closely studied the way these provisions are administered in New South Wales and Victoria. These were the first two States to introduce service contract provisions to curb tax avoidance. Both States have the same legislative provisions in relation to work done by the principals of a partnership, but they administer the provisions differently. Having seen the experience of other jurisdictions, the ACT has sensibly retained the primary test - whether the subcontractor is providing services to the public generally or, in other words, is a genuine independent contractor. This is consistent with the way the provisions are administered in Victoria. It quite obviously follows that a partnership or other relationship can readily fail this independence test by being solely or predominantly engaged on work for one person.
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