Self Employed Australia

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“Everyone needs an Advocate”

Self-Employed Australia

Some sensible facts in the ‘gig’ economy/small business debate

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Sunday, March 24, 2019

We recently discussed the re-emerging campaign against self-employment being cooked up principally by unions and the Labor ‘left’. We’ve seen this over many decades and this time the ‘evil’ is the gig economy.

  • And we’re witnessing the Victorian government conducting what we see as a cooked-up Inquiry. Frankly, we think they’ve written the conclusion before starting the Inquiry. In our detailed submission we’ve said that the discussion paper is littered with misinformation, plainly wrong on basic facts and implies a forbidding imaginary scenario. Yes, we have our bias (a big bias) in favour of self-employment.

But it’s really good to see some sensible, independent, factual analysis injected into the debate. Bernard Salt is one of Australia’s top demographers. He talks facts. In his most recent article in The Australian he supplies some illuminating information.

Sole trader numbers surged, he says, by 65,000 last financial year. And

  • “Further analysis revealed that many of these new businesses are connected to the gig economy…”

However, this article focuses on small businesses employing 1-19 workers. He says

  • There are “823,000 such businesses in Australia employing, by my estimates, six million workers or close to half the nation’s workforce.”
  • “Over the preceding decade … small business … expanded by 80,000 supporting about half a million jobs.”

But it’s the diversity that’s interesting. He says

  • “Non-standardised product or service delivery is where small employing businesses are expanding, delivering bespoke housing solutions and one-on-one medical advice.”

He points out where this is happening and where it needs to happen.

  • “There is evidence of a rising pool of small employing businesses—a kind of start-up culture if you like—emanating from the Sydney, Melbourne and even the Adelaide CBDs. But this is not the narrative in Perth or Hobart or Canberra or Darwin.”
  • “But if we are to cultivate a culture of entrepreneurship then we need stronger small-business hubs delivering measurable net new employing businesses in the smaller states and territories.”

Bernard urges politicians to get the policy settings right because it’s here where the big growth in jobs will come from.

We agree. That’s why over the decades we’ve fought for reforms to work safety laws, the Independent Contractors Act, small business unfair contract laws, Small Business Commissioners and more. These are the sort of policy settings that support small business and the creation of jobs. The anti-gig economy campaign is dangerously irrational in its non-factual attack against business systems that create small business opportunity.

But, on a big upside: We’re becoming quietly hopeful that we’re about to see a big advance from the ATO in its processes for dealing with self-employed small business people. We’ll keep you informed.

Powerful ‘anti’ forces need a bucket of icy-cold water poured over their heads

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Monday, March 04, 2019

According to demographer Bernard Salt, there’s a big cultural shift in Australia towards being your own boss. And it’s a lifestyle thing. In The Australian Bernard referred to:

… profound changes to the way we earn a living…Part … caused by the rise of the gig economy … but part is also due, I think, to the ageing of the population and to a cultural shift in attitudes to work.

Bernard said that there has been a six-fold increase in the sole-trader population since the end of the mining boom. He gives a break-up of the data by state, capital city and regions. He refers to entrepreneurial ‘hotspots’ such as the Melbourne CBD, but also regions such as Kings Meadows in Launceston with a 23 per cent increase. Bernard asks:

What could be better than living in a seachange idyll? Being your own boss in a seachange idyll like Victor Harbor, or Torquay, or Busselton, or Ulladulla, or the Gold Coast.

He concludes that:

A new be-your-own-boss narrative is driving the Australian obsession with lifestyle.

But there’s a problem. There’s a whole bunch of powerful groups who hate this Australian lifestyle urge.

The anti-gig economy thrust is simply an excuse to hit self-employed people, a decades-old agenda.

And a key indicator of what’s coming is the Victorian government’s inquiry into the gig economy intended, in our view, to build a false reason to clamp down. The inquiry’s discussion and approach, however, are full of misleading drivel. And we’ve said so in our lengthy detailed submission, In Search of Unicorns:

  • For more than a century, variants of the same gloomy fiction have been cycled and recycled, almost in clock-like manner. On-demand platform work is the latest variant of a moral fairy-tale that pits the ‘good employee’ against the ‘wicked independent contractor’.
  • …the (Victorian) Background Paper … assumes an air of suspicion about independent contractors.
  • So much of the discourse around both the platform economy and the independent workforce is inflated, overstated and alarmist … [with] … nightmare scenarios of Technological Armageddon and the End of Work.

Oh spare us the idiocy! And we appeal that please—

  • A good bucket of icy cold-water needs to be tipped over the protagonists of this hyperbole. That includes governments.

It looks like we’re in for a long argument with these self-employed haters. But that’s what we’ve been doing for almost 20 years!

ATO Executive ‘Not Guilty’– Credible evidence that ATO audits are ‘wrong’

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Last week top ex-ATO official Michael Cranston was found not guilty of misusing his position to benefit his son who is on separate charges of alleged tax fraud.

In his defence Mr Cranston said that the actions he took in relation to his son were no more than what he had done for other taxpayers on hundreds of occasions. That is, that tax audits were often so bad that he had to intervene to stop injustice against taxpayers.

Mr Cranston’s evidence confirms what we have been saying for years—namely, that the ATO audit process, outcomes and appeals are systemically bad and flawed. Mr Cranston had to fix bad audits for high-wealth individuals. But our experience and other evidence (see Four Corners) strongly suggest that wrong audits are imposed on small business people and that the ATO has no internal ‘white knight’ to fix bad audits suffered by small business people.

In his evidence Mr Cranston stated that tax audits frequently treated taxpayers badly and that there was a cultural problem inside the ATO. Media quotes are as follows

  • “I was always looking out when my auditors went a bit too far which happened often.” (The Australian, 5 Feb 2019)
  • Mr Cranston said he was concerned about the correct application of tax law, and was “always looking out” for examples of when tax office employees were “too aggressive.” (SMH, 4 Feb 2019)
  • Cranston said he was concerned about “the culture (ATO) side of it” and wanted to know what area was treating taxpayers “like this.” (Goulburn Post, 4 Feb 2019)
  • Mr Cranston had referred to him “hundreds of times” where he feared the tax office had been too aggressive… (AFR, 8 Feb 2019)
  • Bruce Collins, who ran the ATO’s Technical and Case Leadership team handling complex tax matters until he retired in April 2017 told the court: “Michael’s job was to make sure that the wheels didn’t come off and embarrass the tax office” (The Australian, 18 Feb 2019)

Mr Cranston’s evidence is effectively that of a highly credible quasi-whistleblower who operated at the very top levels of the ATO and knew the truth about the bad audits inside the ATO.

This exposes as misleading the denials by the ATO of the existence of a problem—even denials under Senate questioning. Evidence from Mr Cranston’s trial is that the ATO’s concern is to avoid adverse publicity for the ATO. Where, we ask, is the ATO’s concern for truth and the correct application of tax law and treatment of ordinary taxpayers?

The government is moving to implement quickly a fix for the ATO’s mistreatment of small business. But this week we note that the draft design of the Small Business Tax Tribunal put forward by the Canberra bureaucracy will neuter its effectiveness and enable the ATO to continue its bad ways. (The Australian, 18 Feb 2019.) We will say more on this shortly.

Thank goodness. Morrison Government is DOING, rather than just promising, ATO reform

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Usually, in the lead-up to elections, governments make all sort of promises in the hope that this will give them favour with the electorate. But we’re delighted to report that with small business tax reform the Morrison government is delivering, not simply talking.

Today the government announced that the Small Business Tax Tribunal will start up on the 1 March 2019—just two weeks away. This is huge. We continue to see bad ATO small business audits and an ATO incapable of quickly fixing glaring audit errors. It’s an audit system of considerable incompetence, with small business people the victims.

It’s fabulous to see the government responding quickly and with a practical solution to start up immediately. In other words, this is not just an election stunt—it’s real reform.

The key features of the reform already known include:

1. Tax concierge service through the Small Business Ombudsman.

2. 10 tax clinics through Universities to assist small business people.

3. ****A dedicated Small Business Tax Tribunal (SBTT) operating within the AAT. The SBTT will:

    • Be totally separate from ATO.
    • Generally NOT involve lawyers.
    • Appoint a case manager to support the taxpayer.
    • Make decisions within 28 days of a hearing.
    • Require a payment of $500 from the taxpayer for each appeal.

Today’s announcement supplies some additional information:

  • ABN cancellations will be appealable to the SBTT. This gives us an independent review process for the first time.
  • If the ATO uses lawyers, the ATO must pay for the self-employed person to have ‘equivalent legal representation’. This is important because it balances the overriding power/resources of the ATO.

We entirely endorse and congratulate the Morrison Government on the decision to set up the Small Business Tax Tribunal immediately. This is a huge plus for self-employed, small business people.

Details of our campaigning and the history and issues related to the ATO’s treatment of small business people are here.

China and the ATO – Dictatorship vs the Rule of Law

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Yes, we have focused heavily on seeking reform of the Australian Taxation Office in recent times. But the issue is not simply about tax revenue. It’s much bigger. It’s about the rule of law. In this longer-than-normal communication we explain what motivates us by drawing some parallels between China and the ATO.

We start with a story of an acquaintance who does business in China who lamented a recent bad experience. A disgruntled client wanted a refund and penalties to which the client was not entitled. The client had police raid our acquaintance’s office, seize computers, detain a director and scare the life out of staff. She is now unable to leave China.

Throughout this process there’s been no independent court involvement, no ‘rule of law’. This story should not surprise.

Ex-Premier of China Zhao Ziyang would aptly describe this as the ‘rule of man’ as opposed to the ‘rule of law.’

Zhao was the ‘make it happen’ economic reformer under paramount leader Deng Xiaoping’s opening up of China in the 1980s. Zhao, however, incurred Deng’s anger for not supporting the 1989 massacre of the Tiananmen Square pro-democracy protestors. Zhao spent the following years until his death under house arrest. He kept secret diaries revealing the inner workings of the Chinese Communist Party.

Nothing has changed in China since. It is ruled by dictatorship—largely the legacy of Deng Xiaoping. Economic development is pursued on the condition that dictatorship prevails. The story told above is indicative of such a regime. The rule of law does not operate.

Dictatorships operate through cascading patronage. The supreme ruler allocates power to those below through interpersonal relationships. Our business acquaintance was unfortunate enough to have a vindictive client who personally exercised the power of the state within this complex chain.

China has proven that massive economic growth can be achieved under a dictatorship. The downside is that business activity is fraught with major risk. If an individual falls foul of a powerful person or group, they are squashed. Zhao Ziyang’s ‘rule of man’ prevails over ‘rule of law.’

In Australia, we pride ourselves on a tradition which is founded on the operation of democracy and the rule of law. That is, ‘the people’ rule within defined and enforceable rules. Theoretically, all individual power is constrained. The rules-based system is supposed to prevent the abuse of power experienced by our acquaintance in China.

But Australians should not be smug. Democracy and the rule of law are not complete. Elements of dictatorship exist and do oppress individuals from time to time. Perhaps the starkest example is the Australian Taxation Office, whose power and behaviour received concentrated media exposure in 2018.

Under taxation law, the Tax Commissioner is effectively a ‘tax dictator’ exercising all power. The Commissioner’s power cascades under professional privilege to individuals in the ATO.

The ATO can and does raid people’s homes, takes computers and documents, takes money from their bank accounts, detains persons and stops them leaving Australia. This is done without the ATO having to prove that a debt is actually owed. The ATO only needs to form an opinion of a debt and that ‘opinion’ is enforceable.

Oversight of the ATO by the judiciary is strangely twisted. Take one example. Why would a court rule that the ATO did not have to produce a document in its possession which a taxpayer claimed proved their innocence? This happens because the judiciary reviews cases within the framework of the Tax Commissioner’s formidable powers. If legislation states that the ATO can behave this way, the judiciary simply confirm this.

To the ordinary person this is a perversion of the rule of law as ordinarily understood.

Major media coverage of the repeated abuse of small business people by the ATO has triggered political recognition of a problem. Small business people have effectively been bankrupted by the ATO—even where the ATO subsequently admitted no debt was owed.

But although moves are afoot to extend the ATO’s already extensive powers, both the Morrison Coalition government and the Shorten Labor opposition have said that change is needed. Labor says that change can occur within the ATO. The Government has announced that a separate, independent tribunal for small business people will provide checks against ATO abuse. It’s an effective reform step which the government plans to implement quickly.

What the ATO example reveals is that democracy and the rule of law can never be taken for granted. Even in Australia we must constantly work against those aspects of overbearing power within our systems.

Where the rule of law prevails over the ‘rule of man’, stronger, more resilient societies and economies should emerge. Where even ordinary persons can engage in business confident that the risk of abuse by powerful individuals is constrained, they will engage in more business. This creates social and economic strength. That’s what we’re campaigning for.

If you’re particularly interested in following through this issue, this 2001 speech by then-Chief Justice Murray Gleeson is worth reading.

In part, he says:


As an idea about government, the essence of the rule of law is that all authority is subject to, and constrained by, law. The opposing idea is of a state of affairs in which the will of an individual, or a group, (such as a Party), is the governing force in a society…

In Australian legal and political discourse, a governing authority could not satisfy the requirements of the rule of law merely by being able to point to a fundamental law which empowered it to act in an arbitrary manner….

Suppose legislation created an office of Tax Collector, and decreed that every person who derived income should pay to the Collector such percentage of that income as the Collector, in his or her absolute discretion, with uncontrolled power to discriminate, might think fit. That would be a tax. But would it be a law, within the meaning of a Constitution which assumes the rule of law?

Labor takes bold move on unfair contracts

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Tuesday, January 29, 2019

Bill Shorten’s Labor has announced that it will make unfair contract terms illegal and impose major fines for breaches. This is a position that we totally endorse.

Unfair contract laws protecting small business people were created in November 2015. Big businesses had 12 months to fix their contracts before the laws took effect. But big businesses did nothing. The ACCC has worked hard to enforce the laws but the task is huge when large businesses won’t voluntarily comply. (Idiots! Big business, that is!)

The government is conducting a review. Here’s the Treasury discussion paper.  In our submission we support

  • Making non-compliance illegal.
  • The imposition of fines.
  • No limit on the value of a contract that can be declared unfair.

***Further, we ask that government be subject to the unfair contract laws which, surprisingly, is not currently the case. It’s absurd that government makes one rule for the community but won’t apply the same rule to itself. Talk about double standards!

It’s excellent that Labor has declared its position supporting making non-compliance illegal. Labor’s policy is comprehensive. This includes increasing the number of small businesses and contracts that will have unfair contract protections. That is:

  • Businesses with a turnover of up to $10 milllion will be eligible.
  • The contract threshold will increase to $1 million (up from $300,000).

We’re particularly happy with this.

We ask that Labor also supports applying the laws to government.

We hope that the Morrision government finishes its review quickly, decides to beef up the laws and makes the needed changes quickly.

ATO refuses internal corruption probe. Anti-Corruption Commission needed

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This week ex-Deputy ATO Commissioner Michael Cranston arrived at court for the start of his trial for allegedly using his office with the intention of dishonestly obtaining a benefit for his son.  Cranston was the top tax official in charge of high-wealth individuals. His trial forms a backdrop to questions about the integrity of the Australian Taxation Office.

We’ve raised questions as to whether the ATO suffers from internal corruption. In September last year we released a major report on a special deal handed to high-wealth individuals in 2013. The deal was organised by then-Deputy Commissioner Michael Cranston, with a loss of tax revenue estimated as high as $4.3 billion. There are calls for a high level inquiry.

We’ve tried to work ‘inside the system’ for an inquiry to occur.

  • First, we wrote to the Australian Commission for Law Enforcement Integrity. This Federal Authority is supposed to hunt for potential corruption in the Federal Public Service. The Commission wrote back to us saying they don’t have the power to investigate the ATO. They suggested we contact the ATO’s internal anti-corruption unit.
  • On 5 November last year we lodged a request with the ATO’s internal fraud unit to conduct an investigation.

For the first time, we can now reveal the response we received on 20 December 2018. The response was from the Director of the Fraud Prevention & Internal Investigations, ATO Corporate and reads as follows:

“It is acknowledged that these issues have been aired with the ATO on previous occasions and it is understood the ATO has provided a response to yourself in relation to these matters.

On this basis, the FPII has concluded that it will not be investigating these matters that have been the subject of previous correspondence with your organisation and yourself personally.”

We replied the same day:

“These matters have NOT been aired between ourselves and the ATO and they have NOT provided a response in any form…. These matters cannot be dismissed lightly.”

Our conclusion is that the ATO cannot be trusted to conduct a proper, or even any, inquiry into serious matters of potential corruption within the organization. This is an extraordinary situation that cannot continue.

Fortunately, the Federal Government has announced that a new Commonwealth Integrity Commission will be established. This will be able to investigate potential corruption within the ATO. We urge that this new Commission be established quickly. We will refer our report on the ATO to the Commission as soon as it is established.

HUGE breakthrough for small business – ATO reform

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Late last night the news broke of the Morrison government’s decision to create a Small Business Tax Tribunal. Robert Gottliebsen in The Australian has scooped the story.

We launched a campaign in February last year for a Small Business Tax Tribunal. Obviously, we are hugely pleased to see the Morrison government take this initiative for fair treatment of small businesses.

If small business and self-employed people are to thrive and contribute to our society, the tax collection system must not only be fair but be seen to be fair. Unfortunately, the evidence is overwhelming that the Australian Taxation Office has been abusing its massive powers. It’s a bureaucracy out of control. This is bad for the rule of law, bad for democracy and bad for justice. The public service exists to serve the people, not abuse the people!

It is fair to guess that the dysfunctional politics of the last decade has enabled the federal bureaucracy at the ATO to push a self-interested power agenda. This is to be expected when ‘the people’, through their political representatives, are not directing the bureaucracy closely.

But the Morrison government has stepped up and in this initiative is acting as a government should. The PM is introducing a sensible first-level ‘check and balance’ against the ATO’s unrestrained powers. This is not about reducing tax collection capacity. Rather, it is about creating better efficiency and limiting abuse. In order for tax collection to operate well ‘the people’ must have faith that the system is administered fairly!

The Small Business Tax Tribunal will enable small business and self-employed people (that is, individuals) in dispute with the ATO to:

  • Go to the Small Business Ombudsman for practical help, then
  • Lodge an appeal with the new Small Business Tax Tribunal. It will be outside the ATO and part of the Administrative Appeals Tribunal system. That is clearly independent!
  • *No lawyers will be allowed, including ATO lawyers. This is the important bit. At the moment the ATO plays a very hard ‘lawyer game’ in disputes. This puts the ordinary person at a massive disadvantage. With no lawyers involved, the focus can be on the facts.
  • A small lodgement fee will be required (around $500).

There’s a lot of detail still to be sorted. We will be following this closely and will seek to make active input on the detail. We hope the government will establish the new Tribunal before the next election.

Just a note: If you think that there aren’t many tax disputes, in just one year, 2012-13 for example, the ATO issued 85,000 garnishee notices (that is, forced payment of alleged debts).

The gig economy is under attack—from people who seemingly don’t care about the harm they do

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Wednesday, October 17, 2018

I was in an Uber the other day and got talking to my driver. He was a Sikh. We had quite a conversation about his religion and the importance of it to his everyday life. I’ve never met a Sikh before! He was most interesting. I asked him why he drives Uber. His response was quick. He loves being his own boss. He can make his work fit around his family commitments.

My Sikh driver reminded me of why we at Self-Employed Australia have been doing what we do for almost 20 years. We’ve been defending the right of people to be self-employed. We’ve seen attacks from many directions. The attackers always seem to argue that somehow ‘we’ are being exploited. They can’t seem to contemplate that in self-employment there is economic liberty and freedom! My Sikh driver knows and lives that reality.

Now we are witnessing a renewed attack. This time the new ‘evil’ is the gig economy. We first discussed this in August this year. This ‘gig’ attack is just another of many attacks we have seen that ‘squeezes’ self-employed people through regulation.

On the basis of our experience and analysis, the outcomes sought in these current attacks are clear. The ‘anti-self-employed’ antagonists want to impose ‘sham employment’.

It looks like we have another long and hard counter-campaign on our hands!

Join us in the campaign. Your membership contributions help us maintain the fight. Join here.

ALP takes first step to make the ATO behave. But much more is needed

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Breaking news is that the Australian Labor Party will, if they win government at the next election, restructure the ATO so that it is forced to use fairer processes in its handling of tax disputes. The ALP media release is here.

We are delighted with this first step by the ALP, but it doesn’t go far enough.

We have made it clear (and very public) that our faith in the ATO to operate fairly, even legally, has totally collapsed. We explained this in evidence to a Senate Inquiry in late June. We also provided a detailed submission.

We made reference to one judge who, late last year, said in relation to the ATO:

“…Departures from model litigant behaviour can, in particular circumstances, constitute professional misconduct, a contempt of court or an attempt, contrary to s 43 of the Crimes Act 1914 (Cth), to pervert the course of justice.”

The situation is serious. The collapse of trust in the ATO is well justified on the mountains of evidence that we have documented. Remember the Four Corners’ program ‘Mongrel Bunch of Bastards’?

The ALP Policy

At least the ALP recognises the problem in a tangible way. Its policy is to:

“…legislate to establish a new position of Second Commissioner – Appeals within the Tax Office, reporting to the Commissioner of Taxation, to head up a new Appeals area within the Australian Taxation Office.”

This would be an improvement on the shoddy, incompetent, bullying processes the ATO currently applies.

But the problem with the ALP policy, however well-intentioned and even though it marks an improvement on the status quo, is that it leaves the process inside the ATO.

The Needed Reform

The only solution that can restore trust in Australia’s tax administration is to take appeals and prosecutions outside of the ATO.

In other words, the principles of good policing should apply, namely:

  • The ATO should only be a collection and auditing body.
  • A totally separate body, under the Attorney-General’s Department, should handle disputes and prosecutions. We suggest that it might be called the Department of Tax Prosecutions (DTP).

In line with good policing practices elsewhere, the ATO would recommend cases to the DTP. If the ATO conducted a bad or illegal assessment, the DTP would tell the ATO to do its job again. We’ve summarized the needed reform here. And we’ve detailed the reform in our position paper, The Power to Audit is the Power to Destroy.

Fundamental ATO reform also requires the creation of a Small Business Tax Tribunal, external to the ATO, with no lawyers allowed to participate.

Nonetheless, the ALP is at least taking a first step in the right direction.