Opposition slams Government over potential crackdown on contractors

The Federal Opposition has used Question Time in the Senate to grill the Government about its plans to change the way independent contractors are treated under the tax system, with Small Business spokesperson Bruce Billson claiming the Government has refused to rule out forcing contractors to become employees.

In a heated Question Time session yesterday, the Opposition asked Labor Senate leader Stephen Conroy whether the Government would rule out changing the tax rules for contractors, even if the Henry Tax Review recommends such changes.

Conroy said it would be irresponsible to speculate on the outcome of the Henry Review and said the Government would consider the recommendations of the independent tax review board, which recommended late last year that tax rules for independent contractors should be tightened.

These recommendations were passed on to the Henry Review by Assistant Treasurer Nick Sherry in late December, but not before Sherry delivered what has been seen in some quarters as a stinging rebuke to the sector.

“The use of sham contractors is a threat to the integrity of the taxation system and a threat to working conditions of employees – and the Rudd Government is determined to see an end to its inappropriate use.”

Sherry’s statement also appears to contradict the promise made by Labor in the run up to the 2007 election that it would not change the laws regarding independent contractors.

The Opposition has seized on this apparent backflip.

“These Government-sponsored recommendations will turn the current laws on its head and create extraordinary new red-tape burdens, reporting obligations and complex regulatory requirements, after unfairly labelling tens of thousands of legitimate self-employed and independent contractors as ‘shams,'” Billson said yesterday in a statement released just after Senate Question Time.

Unions have long fought against the growth in independent contractors, arguing that their power base has been eroded by the fact that many private contractors who are essentially employees have been allowed to set up sham arrangements in order to reduce their tax burden.

The independent review recommended the introduction of a range of measures to catch sham contractors, including a test that would decide whether a contract is working in an “employee-like” manner.

“It is clear why the union movement wants to drag small business in to its web by forcing more ‘direct employment’ arrangements, but the Rudd Government makes no case for the need for change and seems only interested in a tax gouge on the small business and independent contracting community to help paper over Labor’s huge Budget deficits,” Billson said.

The Government is yet to set a date for the release of the Henry review, although it has said it will be before the Federal Budget on May 11.