Page 189 - Week 01 - Wednesday, 17 February 1993
Next page . . . . Previous page . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .
By the amendment, the Opposition is attempting to insert into the Act totally unnecessary and inflexible tests to artificially define what an independent contractor is and, by so doing, make it easier to avoid payroll tax. Madam Speaker, the Act excludes from payroll tax services provided by a person who ordinarily renders services of that kind to the public generally - that is, a genuine independent contractor. That has to continue to be the primary test if the legislation is to be effective, and the commissioner has to be given adequate discretion to set aside sham arrangements which do not satisfy this primary test.
The Government's Bill, as it currently stands, will adopt the same test for employment agents as those existing for subcontractors. The amendment proposed by the Opposition sets out to limit the commissioner's ability to attack sham arrangements. Some of the tests included in the Opposition amendment are useful as guidelines or broad indications of what might generally be regarded as an independent contractor, but they cannot supplant the primary test. Other State jurisdictions which have included the definitions proposed in the amendment have advised that they either are not used or present considerable difficulties for revenue authorities. So much so, Madam Speaker, that a working party of State and Territory revenue officials is currently examining the problems that this causes, with a view to putting a uniform proposal to their prospective governments to overcome these problems. Madam Speaker, the ACT does not have problems from not including these restrictive tests. Why would we want to introduce them when other jurisdictions are seeking to overcome the problems arising from including in their respective payroll tax Acts the tests now blindly proposed by the Opposition?
Madam Speaker, to make my point, let me now briefly refer to three specific tests contained in the amendment. I refer first to proposed new subparagraph 3(b)(ii). This test tries to take into account the fact that businesses require various ad hoc services allied to the mainstream of the work of the business, but so infrequently that permanent employees are not engaged to perform such services. Arbitrarily, this is set at less than 180 days in a financial year. If Mr De Domenico were really serious about these proposals he would have discovered, as did the Revenue Office in its research, before the introduction of these provisions that both New South Wales and Victorian revenue authorities do not use this test as other provisions are more appropriate if there is an entitlement to an exemption. There is piffle to his first proposal.
Subparagraph 3(b)(iii) is a relatively simple test and in genuine cases is easy for taxpayers and the Revenue Office to implement. It has, in fact, been described by the commissioner in a revenue circular as an acceptable prima facie test for determining whether a contractor is independent or not. Avoidance schemes are, of course, possible where this test is enshrined in legislation, but not so in the ACT, where the commissioner can rely on the primary test of independence. In other words, he can look at the substance of the arrangements. Genuine contractor arrangements will get no greater benefit from including this test in the legislation. On the other hand, the revenue will suffer if it is included.
Subparagraph 3(b)(iv) also proposes a test found useless in those jurisdictions where it exists in legislation. Whether a payment or payments under a contract exceed $500,000 in a year is absolutely meaningless if one is trying to decide whether the payee is an independent contractor or not. I will repeat that, Madam Speaker.
Next page . . . . Previous page . . . . Contents . . . . Debates(HTML) . . . . PDF . . . .