Self Employed Australia

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“Everyone needs an Advocate”

Self-Employed Australia

Could the ATO have attempted to ‘pervert the course of justice’? Judge asks

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We work hard to ensure that our criticism of the way the Australian Taxation Office treats self-employed people is based on facts. Our summary of the mistreatment of Rod Douglass we think demonstrates the facts.

And the fact is that what happened to Rod could happen to anyone. This includes consultants, IT and engineering professionals, tradies, even home-based small business people.

But what has just occurred is extraordinary.

Michael Shord happens to be a diver working on overseas oil rigs. He is arguing with the ATO over how much tax he owes. Fair enough! His situation is a bit complex. However, a Tribunal made an error in a ruling. The ATO knew this. But when Michael tried to get the error fixed, the ATO opposed this in higher Courts.

In a Full Federal Court judgment last week Justice Logan said: (brackets and emphasized words are ours)

the “…denial of procedural fairness to Mr Shord … is patent.”

and

“…the Commissioner (Tax) should not just have not opposed the amendment (fixing the error) but readily consented to it…”

Justice Logan then said of the ATO’s behaviour in opposing the fix,

“…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.”

This is arguably an extraordinary judicial criticism, almost a warning to the ATO.

However, Justice Logan then stated

“…it appears to me that the lack of a ready concession of the jurisdictional error was just the result of a lack of understanding…”

Prior to stating the above, Justice Logan demonstrated an acute understanding of history and the foundations upon which a just society sits. And further, how lack of integrity and honesty by tax authorities can crumble those foundations. His comments are thoughtful. Read them here.

Justice Logan’s analysis reminds us of the importance of our campaign for reform of the ATO. It’s not just about self-employed people but the very integrity of our society.

Here are links to a summary of last week’s judgment and the judgment itself. Also, here’s a quick YouTube summary.

Robert Gottliebsen in The Australian has also commented on the case: ‘Federal Court judge warns tax Commissioner’

Understanding both Rod’s case and Michael Shord’s will better prepare you when you’re faced with a Tax Audit.

We don’t usually praise a bank. But—well done NAB!

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Sunday, October 15, 2017

First we said that NAB had ‘trashed its own small business brand’. We said this in March this year because of NAB’s lie that it had made its small business finance contracts comply with the unfair contract laws.

Last week we expressed tentative praise for NAB after it had ditched its bad contracts and come up with new ones. NAB’s self-congratulatory PR seemed to indicate a major step forward. But we said we’d check its standard form contract first.

Well, we’ve obtained its new standard form small business contract and it looks pretty good. You’ll find here:

If you bank with NAB or expect to, we’d anticipate this would be the contract you would receive if obtaining small business finance from them.

What we like about the contract is the following.

a) It’s in ordinary person’s language. It’s pretty much removed the legal mumbo-jumbo that’s designed to confuse people and force you to get a lawyer to understand the contract. Tick!
b) It uses personal pronouns ‘you, we, us’ etc. That is, the contract says “we will do this”… “you will need to do that”. This wording makes for greater understanding and clarity. Tick!
c) It’s relatively short and to the point. Only 21 pages. Tick!
d) Nothing sneaky. We’ve looked hard but we can’t see any clauses that might suggest a meaning different to that which appears. Tick!
e) Obligations clarity. It states fairly clearly your obligations to the bank and its obligations to you. Tick!
f) No unfair clauses. Again, we’ve looked closely and we can’t find any clauses that might breach the new unfair contract laws. Tick!

Again, we’re delighted that our nearly 10-year campaign to achieve the unfair contract laws is having serious impact. But congrats to NAB! It has taken on board not just the specifics but also the spirit of the new laws and produced a sensible contract that people can understand.

We’ve said it before. What’s important is that as contracts are progressively cleaned up, the Australian economy will undergo major change. Small business people will have a fairer environment in which to operate. This will improve competition, entrepreneurship and make Australia a stronger, fairer society. NAB has taken an important lead in this.

Bank lawyer: “We’ll do what we’re made to do”. Now they’re doing it!

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Sunday, October 08, 2017

More good news on the unfair contract front! But first some background.

Back around 2009, when we were talking to big businesses about having fair contracts, the chief legal counsel for one of the big banks said to us, “We’ll do what we’re made to do.” We realized then how difficult our campaign would be. But we succeeded. The new small business unfair contract laws we pushed for started at the end of 2016.

Well, now the banks are are doing what they’ve been made to do but, ‘butt’ has had to be kicked to achieve this. Look at NAB.

In March this year we exposed NAB lying (yes, lying) when it claimed that it had fixed its small business contracts to comply with the unfair contract laws. We said that the NAB had trashed its small business reputation. And the exposure of the NAB lie resulted in the banks being pushed into compliance by the regulators. In August the big four banks agreed to new, ‘fair’ small business contracts.

NAB has now taken an additional step. It has just announced simpler, shorter and plain English, ‘fair,’ standard form, small business contracts. Here’s its public relations blurb. The new contracts start on 16 October and don’t yet appear to be available. We’ve learnt to be careful and won’t comment until we study the new contracts. But if the contracts reflect NAB’s self-praising PR, they could deserve positive comment. We’ll let you know.

Do you rent a serviced office space?
Huge numbers of self-employed people rent serviced office space. One of the big players in the field is Servcorp. The ACCC is now taking Servcorp to Court over alleged unfair contract clauses. This will directly affect you if you use Servcorp’s services.

The ACCC alleges that clauses allowed Servcorp to, amongst other things:

  • automatically renew a contract, and increase the price, without prior notice to the customer;
  • unilaterally terminate a contract and impose penalty-type consequences on the customer;
  • unreasonably limit Servcorp’s liability or impose unreasonable liability on the customer;
  • unilaterally determine whether the contract had been breached; and
  • acquire the customer’s property without any notice.

Good on you ACCC! This is in addition to the litigation against the waste disposal company JJ Richards.

What’s important is that as contracts are progressively cleaned up (it’s going to take a long time), the Australian economy will undergo major change. Small business people will have a fairer environment in which to operate. This will improve competition, entrepreneurship and make Australia a stronger, fairer society.

Banks forced to change small business contracts. A huge win for fairness!

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Thursday, August 24, 2017

We’re mighty proud of the work we did, over close to a decade, to achieve the 2015 unfair contract laws protecting small business people. Here’s the tracking of our campaign from 2009. And it’s pretty fair to say that, without us, the laws would not have come into existence.

In that long struggle the banks consistently opposed the unfair contract laws. During that campaign one bank, NAB, was found by the courts to have engaged in ‘misleading and deceptive conduct’ in relation to a business mortgage. In our view NAB’s bank officers arguably behaved as they did because NAB’s small business finance contracts seemingly gave them unfair power.

Continuing with this deceptive theme, in December 2016 NAB issued a letter to its small business customers claiming it had changed their small business contracts to comply with the new unfair contract laws. Here’s NAB’s letter. But when we had the contracts studied, it was found that the contracts were worse, not better! Talk about NAB destroying its own brand!

Our exposure of NAB’s misleading conduct along with important work by The Australian journalist Robert Gottliebsen resulted in a chain reaction. The bank regulator, ASIC, and the Federal Small Business Ombudsman conducted a wide-ranging investigation into whether the banks’ small business contracts complied with the unfair contract laws.

After some nine months of haggling, the big four banks have agreed to change their small business contracts, removing unfair contract terms in loan facilities up to $3 million. According to a report in The Age yesterday, some of the changes include:

  • the banks will not be able to require customers to cover losses due to fraud by the bank; and
  • the banks’ ability to vary contracts will be limited.

It’s staggering that these sorts of clauses were ever in contracts. We’d wager that banks would not agree if such clauses were imposed on them in a contract.

Also making common sense, small business customers will be able to exit a contract if the banks change a contract. Isn’t that what a ‘contract’ should allow? Robert Gottliebsen gives a fuller explanation today in The Australian.

The fact that the banks had to be dragged to agree to such changes is also staggering. Frankly, they would have faced legal action if they hadn’t agreed.

The banks like to portray themselves as ethical. But with this sort of behaviour it’s easy to understand why the banks’ reputations are in the gutter.

There’s a lot more work to be done on this issue. The ‘big end of town’ are avoiding fixing their unfair contracts. Our message to them is: ‘we’re watching’. And we’ll act and expose unfair contracts wherever we find them!

You open the mail. You owe us $422,030.64 says the ATO. What??

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Imagine this. You arrive home from work. You’re a freelance consultant; an engineer or maybe an IT specialist currently doing work for a bank. Even an aged care worker or a plumber! You’re one of the 2 million plus self-employed people in Australia, one of the new breed of entrepreneurial ‘gig’ economy workers, so the commentators say!

A month ago you had a phone chat with a couple of seemingly friendly ATO officers who had queries about how you work and your tax returns. You were open and honest. Nothing to hide! Pretty simple really?

There’s a letter. You open it. It’s 18 pages of confusing Tax Office bureaucratic blabbering. Somehow you’re accused of tax fraud/evasion. You struggle to understand. But one thing hits you. It’s a demand to pay $422,030.64 for taxes going back 10 years, with 50% penalties and interest!

This can happen to anyone. It happens constantly. It happened to Rod Douglass, 55, a consultant in Perth. You might remember we’ve been helping Rod defend himself.

Rod has given us permission to publish the letter he received in July 2015. Here it is.

We defy you to understand the accusations. We’re publishing this because it’s important to understand how the ATO behaves. We consider the processes used by the ATO against self-employed people amount to bullying and intimidation. There’s no fairness here!

In defending Rod, the matter went to the Federal Court in November 2016. Then the ATO withdrew, saying they’d made an error. You’re joking! Seventeen months of legal firepower for the ATO to admit an error!

Then there’s this. Another letter, this one in March 2017. This time it’s 12 pages of ATO blather. Here it is. It’s essentially ATO running the same issue, and ignoring its 2016 admission of error. This time we defy you to work out how much the ATO is demanding.

We’re helping Rod again.

To be clear. This is not a matter of Rod not paying his taxes. He has consistently declared all income and paid taxes. The issue is over highly technical interpretations of tax law relating to how income of self-employed people should be treated. The ATO ‘forms opinions’ which are legally suspect, then attacks aggressively.

Our position is that the ATO must comply with the law, just as taxpayers comply with the law. In this article by Robert Gottliebsen (published today in The Australian) he says:

…  in the Douglass process the Australian tax office is graphically showing it can pick out any professional in Australia who is operating in partnership and bankrupt them because they can’t afford to defend themselves.

We agree. That’s why we need an independent Tax Tribunal.

Good news: BIG review of Australian Taxation Office

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You’ll be aware of our ongoing heavy criticism of the Australian Taxation Office in their treatment of small business people.  In our view:

‘Mum and dad’ businesses are targeted by the ATO with unfair, even questionably legal, tactics.

And as just one example, we successfully defended Rod Douglass from baseless ATO accusations of fraud/evasion.

Further, with the recent resignation and investigation of a top Deputy-Commissioner over a massive tax fraud scandal, the administrative and investigative systems of the ATO are suspect.

We certainly have lost trust and faith in the fairness and impartial application of tax law by the ATO in relation to small business people.

Well, now the Inspector-General of Taxation (IGT) has announced a wide-ranging review into the practices of the ATO. We’re pleased to observe that, according to the IGT, the  “Review is being conducted at the request of the Commissioner of Taxation…” We congratulate the Commissioner, Chris Jordan, in taking this initiative. It’s necessary if the integrity of the tax administration system is to be assured.

We’ll be putting in a substantial submission drawing heavily on earlier submissions we have made as follows:

And adding our more recent learning experiences in undertaking the legal defence of self-employed people who found themselves under ATO attack.

To understand the scope of the Inquiry, here are some quotations from the IGT’s website:

  • …this review will focus on the future taking into account technological, social, policy and regulatory changes.
  • Products that transfer risk to third parties, such as taxpayer audit insurance and professional indemnity insurance, may be other areas for future development.
  • Work patterns are also changing as seen in the ‘gig’ economy where workers are engaged on a contractual or project-by-project basis rather than full-time employment, particularly impacting in-house corporate specialists.

Under the Terms of Reference the IGT will look at:

3. How the ATO and the TPB can seize the opportunities presented by technological, social, policy and regulatory developments to:

a.    work with the tax profession in providing contemporary, reliable, accessible and secure services that foster voluntary compliance by meeting the increasing expectations of taxpayers and tax professionals and improving their productivity;

Note that we’ve emphasized the words ‘voluntary compliance’. This is because the ATO’s systems are so dysfunctional and impossible for ordinary people to understand or work with, that ‘voluntary compliance’ by ordinary people is uncertain, presenting significant risk.

Like naughty schoolchildren, banks now complying with unfair contract laws

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Thursday, June 01, 2017

Readers might recall our news alert headline, “we’ll only do what we’re made to do!” This was a senior counsel from one of the banks responding to our efforts about eight years ago asking them to support the unfair contract laws.

Then in March this year we said that NAB was trashing its own small business brand because it had, in our view, lied about changing its small business contracts to comply with the now operational unfair contract laws.

The huge news, however, is that last week the big four banks changed their small business overdraft contracts to comply with the laws. Robert Gottliebsen reports that the banks have:

  • Removed terms that absolve the bank from responsibility for their conduct.
  • Removed terms that gave banks total power to call a default when the value of secured property falls.
  • Removed terms that gave banks the power to call a default for an unspecified negative change in the circumstances of the small business customer.
  • Significantly limited terms that protect banks against losses outside the control of the small business borrower.
  • Significantly limited terms which gave the bank the ability to change the contract at will and without permission of the small enterprise.

But did the banks do this because they wanted to comply with the law? Well, the fact is that the head regulator, ASIC, forced them to comply. Robert Gottliebsen also recognizes the important role of Small Business Ombudsman, Kate Carnell and us, Independent Contractors Australia in achieving the outcome.

But now, according to the AFR, the banks are complaining that Federal Treasurer Scott Morrison is being too aggressive toward them. Um! As Morrison has said of the banks, ‘cry me a river!’ The banks have been like bullies in the schoolyard throwing sand at the little kids. The school principal has made them behave. So the banks have gone to their mommas on the school parents’ committee complaining that their little (bully) boys are being picked on! Spare us all!

The banks need to grow up! It’s their behaviour that is damaging themselves. But we also agree that there’s danger of political overreaction. The banks need to focus on a well functioning market economy and not their obsession with securing rorted advantage for themselves. If the banks do this, we might achieve important economic reforms!

Postscript: In November last year we said on ABC TV, The Business, “this is not something they (big business) can ignore!”

Tax scams and others. If it’s too good to be true, it usually is!

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If you’ve followed the revelations of the $165 million tax fraud, you’ll know that one of the ATO’s top enforcement officers allegedly sought to cut a deal for his son, one of the ringleaders of the fraud.

This case, of which we’ll hear lots more, highlights how self-employed people can get caught up in scams quite quickly. The ACCC is always warning us about scams and it pays to keep watch on the ACCC scam websites: here and here.

But there’s also a simple guide to stay alert about scams. If it looks too good to be true, it usually is! Take the following tax fraud.

The fraud involved the payroll-processing company Plutus Payroll not paying PAYG withholding tax to the ATO. Plutus apparently processed payrolls for some 2,000 self-employed contractors, mainly in the IT sector. In an online forum from 2014-15, contractors were querying the legitimacy of Plutus.

Look at these comments:

  • Hi … anyone using them? They sound too good to be true.
  • They have a meet and greet event in a couple of weeks…meet Miss World. This is looking a bit too flashy. We shall see.
  • …we provide all necessary insurance …at no additional charge … unbelievable
  • I’ve read all their website and it appears to be free. Do they guarantee payday?
  • I am currently paying 1% of my hourly rare to my agent. I’m not sure how they can do it for free.  So how do they make any money?

And on the forum discussion goes!

Plutus appeared to be providing services at no cost to contractors. This is not the industry norm. People were ringing alarm bells. Plutus looked too good to be true and it proved to be too good to be true!

It’s unknown at this stage if the ATO will try to recover unpaid tax from the 2,000-or-so IT contractors. And hindsight is cheap. But it does offer a reminder to us all. Nothing is for nothing. If alarm bells ring, be very cautious!

‘We’ll only do what we’re made to do!’ says bank’s legal counsel

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Tuesday, May 16, 2017

Around 8 years ago, we (ICA) were approaching the banks about supporting the introduction of unfair contract laws for small business people. One of the big bank’s chief legal counsel said to us “We’ll only do what we’re made to do!” What a sad attitude. But, unfortunately, in our dealings with many at the ‘big end of town’, that’s our experience with them.

Unfair contract protections

It took us ten years of hard advocacy, but late last year the small business unfair contract laws took effect. Now the change is happening. In The Australian yesterday Robert Gottliebsen detailed how the ACCC has forced Sensis to fix unfair contract clauses. Sensis had concealed clauses that renewed contracts without the small businessperson agreeing. Sensis could cancel contracts but the small businessperson could not. Sensis has agreed to make refunds.

Vulnerable Workers Bill

Yesterday we released our detailed analysis of core clauses in the Vulnerable Workers Bill. Again, the big end of town—this time the Franchise Council of Australia—wants to ‘kill the bill’.  Our view is that the FCA is trying to exclude franchisors from being responsible. We strongly support the Bill and we’re asking Senators to vote for it with the current wording.

Yesterday in the Australian Financial Review, Adele Ferguson detailed the legal case being conducted by bankrupt Pizza Hut franchisees against Pizza Hut. The claim is that Pizza Hut required the franchisees to conduct a price war that resulted in the franchisees going broke. The case highlights how franchisor behaviour can create franchisee disaster.

The Vulnerable Workers Bill is about preventing underpayment of franchise workers. But the structure of the Bill is really about the 1,100 franchisors exercising their proper responsibilities towards their 79,000 small business franchisees.

Pay on time!

We’re pleased to see the campaign being conducted by the Federal Small Business Ombudsman, Kate Carnell, to get big businesses to pay small businesses on time. She’s calling for legislation and has given the example of New York’s ‘pay on time laws’ as a model. We agree with Kate that legislation is needed. Our experience is that big business will use voluntary codes to appear to do something, but in reality do nothing.

Will franchisors get away with it? Vulnerable Workers Bill

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Sunday, May 14, 2017

It’s getting close to decision time in the Senate! Remember the 7-Eleven wages fraud scandal exposed by 4Corners/Fairfax late 2015? The scandal has spread since then with Pizza Hut, Domino’s Pizza, Caltex and United Petroleum being caught out underpaying workers.

The Federal government has put forward legislation (The Vulnerable Workers Bill) that will require franchisors to be at least partly responsible if underpayment occurs. We strongly support the Bill. It will force franchisors to properly support the 79,000 small business franchisees to prevent underpayment.

We’ve talked about the Franchise Council of Australia before. When the current FCA chair Bruce Billson was Shadow Small Business Minister, he said of the franchisors’ body: “The FCA’s advice … is quite unconscionable in its intentional omissions and misrepresentations.” This should raise ‘red flags’ about the FCA’s current opposition to the new law.

We have completed a careful analysis of the core changes the FCA is lobbying to have made to the Bill. We look at the implications of key words and how the FCA changes would neuter the Bill.

Here’s our analysis.

In summary we say:

  • The current wording of the Vulnerable Workers Bill has the practical effect of requiring franchisors to exercise their responsibility to franchisees.
  • The wording of the Bill desired by the Franchise Council of Australia would enable franchisors to avoid their responsibility to franchisees.
  • This FCA version would ‘dump’ all responsibility onto franchisees and remove franchisors from responsibility. It would weaken the Australian franchise system because it weakens the support that franchisors are supposed to supply to franchisees.
  • The FCA’s version is harmful not only to the 79,000 small business franchisees in Australia but to their thousands of workers as well.

We are putting in a strong effort asking Senators to pass the Bill substantially as is.