Contractor tax law changes are a rip off
Issued 4 August 2010
The Liberal Democrats not only oppose Labor’s mooted changes to tax laws affecting independent contractors, they propose to make things easier for contractors.
“We challenge the Coalition to join us in supporting the most productive sector of society,” said Glenn Druery, NSW Senate candidate.
To be classed as a contractor for tax purposes you must pass the so called results test. If you fail that, there are a series of other tests, including whether 80 per cent of your business is with one client.
Assistant treasurer Nick Sherry has endorsed a series of radical proposals from the Board of Taxation, which would decimate contracting. Under the proposals, independent contractors such as plumbers will need to separate income from labour (e.g. digging ditches), with income from capital (e.g. using equipment such as shovels). Income from labour will be attributable to employees, and income from capital attributed to business owners.
“This is clearly absurd. What split does a plumber use when digging a hole – 30% shovel and 70% labor? What about a consultant – 90% brain labour and 10% computer equipment? Will the equipment usage change if the consultant emails or hand-delivers a printed report?” Mr Druery said.
“Every contractor will need to split all tasks into labour and capital. They will need ATO approved scales for allocations. Contractors will need two rates per task for accounting purposes. Tax agents and book-keepers will love it! The impact on productivity will be massive. This is government intervention writ-large across the economy.”
“This is another example of government that is simply too big and invasive. The Liberal Democrats believe in a free market for labour, with no minimum wage and anyone becoming a contractor if they choose. Combined with our tax policy of a high tax-free threshold, flat tax and negative income tax to replace welfare, the benefits to productivity and prosperity would be enormous,” he said.
NSW Senate Candidate
National Communications Officer