Page 2652 - Week 08 - Thursday, 14 August 2014
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The largest impact of this amendment will be on the IT industry in the ACT. That is certainly the feedback that I have received, as it seems a number of IT contractors have been creating companies or have been joining with other unrelated contractors to create companies for payroll tax purposes.
The current bill proposes retrospective commencement on 1 July this year, which is problematic to many contractors in this situation, as contracts and structures are already in place. Given the level of feedback on this issue, the government will tonight—and Mr Barr has indicated this in the debate on the estimates report—be tabling an amendment extending the commencement date to 1 January 2015 to give people and companies a longer period to adjust to this change in the laws.
I received contact from quite a few people about this issue. Unfortunately, I was only able to meet with a small proportion of those who contacted me. Overall, I believe that most people were not opposed to the removal of the clause relating to “genuine employer” per se, but rather to the proposed commencement date. After considering these representations and discussing the issue with the Treasurer, giving that feedback to him and seeking his views on that matter, I believe that this amendment is a good compromise in this situation. It is a compromise that addresses the policy issue that the government is seeking to address, while taking into account the feedback that more time was needed before the reforms come into place.
On that basis I will be supporting the bill today and the amendment brought forward by the Treasurer.
MR BARR (Molonglo—Deputy Chief Minister, Treasurer, Minister for Economic Development, Minister for Housing and Minister for Tourism and Events) (8.09), in reply: The government announced in the 2014-15 budget that we would be making changes to the Payroll Tax Act 2011. This bill introduces these changes and creates a more equitable payroll tax environment in the territory.
Payroll tax is payable on wages paid by employment agents to subcontractors who are engaged to perform work for a client. This approach is taken by all jurisdictions, with the ACT providing a number of payroll tax exemptions for employment agents in certain situations. The Payroll Tax Amendment Bill 2014 removes the “genuine employer” exemption from schedule 2 of the Payroll Tax Act. This exemption, which is only available in the ACT, exempts wages paid by employment agents to subcontractors if the subcontractor can demonstrate it is a genuine employee in its own right.
There are numerous issues in establishing a genuine employer relationship. This has led to complexities and confusion in the interpretation and administration of the exemption. Some people have not been able to structure their affairs in a way to avoid payroll tax and have been at a competitive disadvantage throughout this process. There is evidence suggesting that this exemption has been exploited by some in the employment agent and contractor community, creating an unequal playing field in the payroll tax environment.
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