Page 184 - Week 01 - Wednesday, 17 February 1993
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MS FOLLETT (Chief Minister and Treasurer) (4.17): The Government will be opposing Mr De Domenico's amendment, and I would like to go into some detail on that. The amendment will provide a different set of exemption criteria for employment agents compared with other employers under the service contract provisions. This would clearly, in my view, defeat the purpose of the Government's amendments, which is to provide the same benefits to agencies as are available to other businesses in relation to contract labour.
The amendment Mr De Domenico wishes to introduce in relation to employment agents is identical to that in his private members Bill, and for that reason it is worthwhile having a very close look at what this amendment would mean. I believe that the provisions Mr De Domenico seeks to introduce are both unnecessary and dangerous. They are unnecessary because the ACT Payroll Tax Act already contains sufficient relevant tests to exempt independent contractors.
The additional tests proposed by Mr De Domenico add nothing, other than to confuse the otherwise quite straightforward task of the commissioner of exempting truly independent contractors and imposing liability on contractual arrangements where subcontracts are an integral part of that organisation's work force. They are dangerous because the exemption of all partnerships, without exception, which is what Mr De Domenico is proposing, ignores any ongoing relationship between the partners and the contractor, which is the crux of the service contract provisions. Exempting partnerships and other loose arrangements will provide a gaping hole in the legislation which will enable businesses engaging so-called subcontractors who are in reality employees to escape their payroll tax obligations.
I would like to address some of the detail of Mr De Domenico's amendment, which is an attempt to reduce payroll tax revenue by increasing the opportunities for tax avoidance and evasion by those few people, and it is a very few, who seek to avoid such obligations. First of all, the operation of the 180-day rule, which Mr De Domenico has addressed, was examined when the service contract legislation was being drafted. It was excluded because it was considered that it added nothing to those provisions.
The aim of the 180-day rule is to attempt to take into account the fact that businesses require various ad hoc services which are allied to the mainstream of their work but so infrequently that permanent employees are not engaged to perform such services. This concept is already quite adequately covered in the existing test for subcontractors and is also to be applied under the Act to employment agents to exempt those services not ordinarily required by an employer if they are provided by a subcontractor who renders those services to the public generally. That is a very important test. Both New South Wales and Victoria have advised that this provision, although it is contained in their legislation in relation to service contracts, is never used because other provisions are more appropriate if there is an entitlement to exemption. I realise that it is in other legislation but it is not in use.
Mr De Domenico has also referred to the 90-day rule. This criterion is currently used by the Revenue Office as an acceptable prima facie test for determining whether a contractor is independent or not. Were the 90-day rule to be enshrined in legislation, as Mr De Domenico proposes, the commissioner would be unable to rely on the primary test of independence; that is, looking at the substance of the arrangements, he may instead be forced to exempt some sham arrangements, and I think that is not a fair regime.
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