Self Employed Australia

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“Everyone needs an Advocate”

Self-Employed Australia

Labor to deny self-employed access to protections

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protections-deniedThe Albanese government’s determination to legislate an ‘employee-like’ definition will introduce radical law that will deny protections to Australia’s self-employed people.

The government says that it doesn’t want to create any ‘unintended consequences.’ Whether the consequences of its actions are intended or unintended is irrelevant. Denial of protections is what will occur.

Self-employed people currently enjoy protections from:

Further, Australia has built a system of cheap, quick dispute resolution through the network of state and federal small business commissioners and ombudsmen.

This entire protection system will be thrown into chaos and confusion with the creation of an ‘employee-like’ definition.

This is because self-employed people are regulated and protected through commercial law which is entirely different to how employees are dealt with under employment law.

The government’s agenda will defy decisions of the global protector of workers’ rights, the International Labour Organisation. In 2006 the ILO declared principles which stated that it was necessary to:

  • protect the freedom of independent contractors to enter into services contracts;
  • recognise independent contracting as a legitimate form of work arrangement that is primarily commercial; and
  • prevent interference with the terms of genuine independent services contracts.

These principles are embedded in the Australian Independent Contractors Act.

And more.

On certainty

In February 2022, The Australian High Court made the most important decision on the definition of self-employment in more than 50 years. In its decision the Court stated that:

“…It is the task of the courts to promote certainty with respect to a relationship of such fundamental importance.” (at par 58)

The government’s ‘employee-like’ agenda will create uncertainty, the very opposite of what the High Court says needs to be achieved.

Legal relationship is not social/psychological

The High Court also said:

“The employment relationship with which the common law is concerned must be a legal relationship. It is not a social or psychological concept like friendship.”

The government wants to turn a social or psychological concept (‘employee-like’) into a legal form through legislation. This defies and erodes the common-law distinction between employment and self-employment which the High Court says must remain distinct.

Bad consultation

The government’s recently announced ‘consultation’ on the issue does not raise or seek to discuss any of these vital issues. This is not ‘consultation’. It is a process of seeking to ram through an agenda that is bad for self-employed, small business people.

We’d appreciate any support you can afford in our campaign to defend the right to be self-employed. It’s important.

Defending the self-employed: 2023 Campaign to counter the creeping attack!

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defendingThere is no doubt that, in the second half of this year, major legislation is going to be pushed through Federal Parliament that will do harm to self-employed people.

We know this because of the government’s stated agenda. In a significant speech to the National Press Club on 1 February 2023, the Workplace Relations Minister, Tony Burke, laid out the government’s wide-ranging agenda. There are four items on that agenda list that we must oppose.

These are:

  • The creation of ‘employee-like’ legal definitions for self-employed people.
  • Limiting the self-employed’s capacity/rights to engage in the gig economy.
  • Imposing business-crushing ‘employment’ regulations on owner-driver truck drivers.
  • Giving the Fair Work Commission power over self-employed people.

Each of these agenda items is presented by the government as a form of ‘protection’ for the self-employed. But in fact these items reduce the right of Australians to be their own boss. There’s the harm.

We have long fought for protections for self-employed people. But these protections can and must come through commercial law and regulation.

The government’s approach on the items listed above is instead a process of denying the full right of people to be self-employed and instead forcing people into employee-like situations. This approach stems from an ideological view that only employment regulation provides workers with protection. This is a wrong, narrow and harmful perspective. Wherever this is done, great harm is inflicted on self-employed workers. Think of the AB5 laws in California which harm truckers and many others. We must try to prevent such harm being done in Australia.

We’re not saying that the Albanese government is all bad on the self-employed front. In fact, we were and are full of praise for its speedy passing of the ‘beefed up’ unfair contract (protection) laws in October last year. This is exactly the model of protection laws that self-employed (own boss) workers need—namely, protections under commercial law. But where the government heads in the wrong direction we need to oppose it.

Today we’re announcing the start of our campaign. This means:

  • Writing submissions (even if not invited to do so).
  • Communicating directly with government advisers and MPs.
  • Seeking support from the Coalition opposition and Senate/House independents.

One thing that we have learnt over many years is that if we don’t go to Canberra and walk the halls of parliament knocking on doors, presenting our views, and raising awareness, then we will not get anywhere.

We’re asking for your $ support. This campaigning costs money. It requires effort, persistence and money. We will put in the effort and the persistence. But our only revenue is from you—our members/supporters.

You can contribute/Join here as a:

  • Full member ($44 a month)
  • Standard member ($22 a month)
  • Campaign member (you choose $)

More information will follow as our campaign unfolds.

PS: You can also follow Ken Phillips through his Self-Employed Aren’t Stupid, Substack postings.

We give evidence on Tax Fairness solution to UK Parliamentary committee/group

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UK-parliamentFor over a decade we’ve been campaigning for fairness and for rule of law principles to be applied when the ATO assesses and administers alleged tax debts, particularly those of self-employed, small business people.

We have found a template ‘solution’ based on how USA law requires tax administration fairness from the IRS. Here’s a video explanation and a one-page summary.

It transpires that the UK also has very similar problems with its tax administrator (HMRC) abusing self-employed people. We have a long-standing campaigning partnership with Contractor Calculator in the UK who, like us, campaigns for tax administration fairness. The UK problem is so severe that an all-party parliamentary group/committee has been formed to seek a solution to HMRC abuse. Some 250 UK MPs are in the group/committee.

Last month (on 21 February) we gave a joint presentation to the Taxpayer Fairness Group’s senior parliamentary members. We offered them a vision of a solution based on the USA model which we also recommend for Australia. Three of us gave presentations followed by Q&A (YouTube links below).

Ken-Phillips     Dave-Chaplin     Jason-Falinski

Jason made some strong points:

“At the core of this is whether governments exist to serve people or citizens exist to serve government … we have provided tax agencies in the Western world with extraordinary powers that are in breach of some pretty fundamental legal rights…”

We provided the UK parliamentary group with:

Almost exclusively, tax debates are about how much money is or should be taken out of which pockets of the people. But the way tax laws are administered cuts to the heart of the power of government over the people. And by ‘government’ we mean the faceless tax bureaucrats who administer the inevitable maze of tax laws.

Tax law administration must be subject to transparency, accountability and checks and balances so that the rule of (tax) law applies in a practical way. That is not the case in Australia nor, it seems, in the UK.

Our campaign is to secure that rule of law. The US model offers a practical template for reform.

 

They say there’s “trouble Down Under?”

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trouble-down-underThe speed with which Australia’s fundamental operational structures are being changed is quite breathtaking.

At the beginning of February, the Federal Treasurer, Jim Chalmers, released a ‘thought’ article where he announced “…the beginnings of a new economic model” by creating “…a new values-based capitalism for Australia”.  This embodies a surprisingly radical intent, even given the tradition of the labour movement’s ambitions over the last 50 years.

On my thesis, ‘The New Australian Socialist Experiment’  (also released in February), I saw Chalmers’ declaration as part that emerging experiment. What I hadn’t expected was the rapid rate at which this new agenda unfolded, became apparent and ignited a vigorous debate.

Gary Banks was the head of the Productivity Commission from 1998 to 2013. The Productivity Commission is the major government-funded ‘think tank’ that looks at, and reports on, how to make Australia efficient and productive. Normally any criticism by such government bodies directed at government (even by retired heads) is cautious, using toned-down bureaucratic language.  But this week Gary Banks came out swinging.

In a damning assessment of the current policy direction Banks referred to “…policies that have damaged our economy’s ability to cope with change, to be competitive and support economic growth.” He refers to “monumental bungling”, policies that are “…contrived to maximise the cost…” and “…we [Australia] have been busily eliminating our competitive advantage…”

Gary Banks’ criticism is directed at all governments, not just the current federal government. What is significant is not simply his criticism of specific policies, but the unexpected tone of his criticism. He is flagging an Australian structural, self-created, economic downslide.

Banks’ blunt warning comes just as many retirees are reeling in shock at unexpected significant changes to superannuation tax rates. While the proposed tax regime only appears to affect ‘rich’ people, those changes also signal that using superannuation for retirement is now much more risky. Is this the beginning of the end for superannuation?

To us (SEA), it’s not just what’s already happened that’s caught our attention, but what seems to be pending. There are tea leaves to be read!

  • There is broad media reporting of a rental crisis. But emerging policy seems to be pushing housing rental supply in a negative direction. One much-touted ‘solution’ is the imposition of rental price controls and rent freezes.
  • Influential, wealthy unions are supporting and calling for price controls—not only on energy but, seemingly, more broadly as well.
  • State workers’ compensation schemes are in financial crisis, unable to fund their obligations.

Our experience is that when this sort of media coverage starts happening it’s usually followed by new regulations to ‘solve’ such problems.

And we know that the policy knives are out to harm self-employed people. We reported in February on just one agenda item designed to kill off independent truck drivers.

Over the next few weeks we’ll try and put together analysis of these issues and more. Things are certainly moving at a rapid rate!

Trucking billionaires business boost

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big-truckingFederal Labor is set to bolster the businesses of trucking billionaires and corporations. Unsurprisingly, the billionaires are more than happy to have this happen.

Naturally, Labor’s billionaires business boost is not being promoted this way by Labor. Labor says that its plan is about making trucking rates ‘safe’. But anyway this is looked at, this is about eliminating independent truck drivers as competitors to the big trucking corporations and billionaire trucking empires.

We know this because Labor set up a ‘safe rates’ scheme in 2012. But it wasn’t until 2016 that the Road Safety Remuneration Tribunal (RSRT) started dictating trucking rates. It was a disaster for the 35,000 affected self-employed, long-haul truck drivers. Large numbers of these truckies were in the process of being bankrupted and several desperate truckies committed suicide. The Small Business Ombudsman released a report on how bad the laws were.

We campaigned hard against the laws to the extent of mounting a High Court challenge to them. In our hearing before the Chief Justice of Australia he stated that we “may have an arguable case.” However the Turnbull government passed legislation to close down the RSRT in 2016 and we didn’t need to proceed with the rest of the legal challenge.

This saved the livelihoods and businesses of these thousands of hard-working, self-employed Australians. What we know from the 2016 experience is that the ‘trucking safe rates’ argument has a theoretical claim about safety, but is in fact about putting small business people out of business to the benefit of big business. That’s the truth.

The argument about safety is heavily promoted by the Transport Workers Union (TWU) and goes something like this. The TWU says independent truck drivers work too hard. They drive long hours and the rates they charge are too low. These low rates mean that independent truck drivers have crashes. So, according to the TWU, the independent truckies need to be forced by legislation to charge more. Then the roads will be safe. That’s the TWU argument.

But look at the argument from a different angle—that is, from the viewpoint of competition.

Self-employed independent truck drivers are big competitors to the big trucking conglomerates (and they tend not to be union members!) By the nature of their businesses, independent truckies are able to be highly flexible. If, for example, an independent truckie is long-hauling between Perth and Brisbane and different jobs pop up along the way, they can respond in ways that the management bureaucracies of big companies cannot. This gives the independents big competitive advantages.

It’s this flexibility and fast responsiveness to customer needs that is key for the independents. But this does not suit the big transport bosses. And it does not suit the TWU which effectively enforces membership through the big transport bosses.

Now that Labor is in government and seems to have the support of the Greens in the Senate on labour issues, Albanese’s Labor is looking to target independent truck drivers again. Labor has announced that it intends to re-introduce a scheme of ‘safe’ rates for ‘employee-like’ independent truck drivers. They will do this in the second half of 2023.

Again, they are going to control the rates that independent truck drivers must charge. This will be a repeat of 2016. Independent truck drivers will be pushed into hardship, bankruptcies and suicide. Big trucking billionaires will get richer. This is Labor’s direct attack against Australian small business people.

ATO breakthrough on worker classification

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worker-classificationOne of the most controversial and confusing issues for tax and labour law over the last 50 years is whether a worker is an employee or self-employed.

In February 2022, the Australian High Court released a ruling that establishes major clarity in the law on this issue. We referenced and summarised the ‘Personnel’ decision in August 2022. We included links for SEA members to:

New ATO rulings

Now the Australian Taxation Office has released new rulings (just before Christmas 2022) on the employee vs self-employed issue, based on the clarity established by the High Court in ‘Personnel.’ We consider the ATO rulings to be outstanding, providing explanation in clear lay language.

We think the ATO rulings are necessary reading for accountants, human resources and industrial relations managers, lawyers (yes!) and anyone needing clarity on worker status in Australia. This particularly includes self-employed people. There are two rulings:

The rulings we supply (for members) include highlights to assist understanding.

Employee or self-employed – Overview of ATO Ruling D3

We will provide a summary/commentary on the employee or self-employed (D3) ruling shortly. But in brief:

  • If a written contract is comprehensive and clear, it stands as the determinator of worker status.
  • If there is no written contract, or a contract is unclear etc., the standard ‘multifactorial’ test applies with the ‘totality’ of the relationship providing the answer.

Worker status – compliance with obligations – Overview of ATO Ruling D5

The ATO has a need to define worker status to ensure community compliance with:

  • PAYG – that is, determining who has responsibility to send income tax withholding payments to the ATO – the worker or the engaging entity?
  • Superannuation – that is, whether an engaging entity must make superannuation payments for a worker.

The ruling on this sets up a simple matrix which explains when the ATO will investigate. This depends on whether the compliance behaviour of the parties is deemed to be very low, low, medium or high-risk. These are explained clearly in the (D5) ruling.

Frankly, we think that anyone who allows their business to fall into the medium or high-risk areas is foolish and asking for trouble.

Non ATO tax issues – helpful but some caution needed

Even though the D3 ruling (employee or self-employed) is ATO-specific, it has strong practical application to other areas, such as definitions for workplace relations. (Note. The ATO is careful to state that the ruling is ATO/Tax/Super-specific only)

However, the law that the ATO must apply on PAYG/Superannuation is exactly the same law (at first instance) that applies to workplace relations—that is, the ‘standard’ or ‘common law’ definitions as declared by the High Court. Given that, in our view, the ATO ruling (D3) is so clearly written in layperson’s language, it is likely to prove very helpful for other areas such as workplace relations.

Even though the same helpfulness applies for workers’ compensation, OHS and payroll tax (all state issues), considerable care should be taken where these laws extend their reach to some types of independent contractors/self-employed. These ‘extension’ laws vary from state to state and are not the same as the ATO’s ‘extension’ laws.

Conclusion – Congratulations to the ATO

We consider these ATO rulings to be a major step forward. The best tax systems maximise voluntary compliance by taxpayers. This cannot occur where the rules are confused or badly explained. On this issue the ATO rulings generate considerable clarity. We recommend that our SEA members take the time to read these rulings. They are not onerous reading and quite clear.

The New Australian Socialist Experiment

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socialist-experimentJanuary was ‘thinking’ time.

Yes, we/I needed to absorb and contemplate the outcome of our Supreme Court action to require WorkSafe Victoria to do its job, that is to apply the law. We reported to you on this in mid-January.

But something else unfolded in late-2022 that made me think more deeply. The new Federal Labor government passed major labour laws that threw out the very laws that the ALP themselves made in 2009. And they went hard on regulations covering the gas industry. Some commentators referred to this as ‘quasi-nationalisation’. “What is going on?”, I had to ask. But a picture started to emerge—so fingers went to the keyboard.

Then on Monday last (30 January 2023) the Federal Treasurer, Jim Chalmers, released his own thought piece (6,000 words) called ‘My plan for the rebirth of Australian Capitalism.’

Goodness, the picture became stark. I’ve produced my own thesis called ‘The New Australian Socialist Experiment.’

Jim Chalmers talks of “…the beginnings of a new economic model” with “…a new values-based capitalism for Australia.”

He says that “…2023 will be the year we build a better capitalism, uniquely Australian” where “…we will create a new, sustainable finance architecture…”

The Australian reports that the Treasurer says he is “Foreshadowing a seismic policy shift …(where) Labor will ditch the free-market policy consensus that has steered rich countries over two generations.” In short, this is BIG. And the thinking over January has been worthwhile.

I offer you, then, a perspective on what’s going on. It’s not just what Treasurer Chalmers says that’s important, but what has already been put in place. This is a new socialism with Australian characteristics. And counter to the usual ‘reds under the beds’ narrative, socialism does not mean poverty. It depends. Hence I’m not seeking to debate the rights or wrongs but to understand the thinking.

My analysis is as long as the Treasurer’s (6,000 words) so I’ve broken it up into sections. And I’ve taken an additional step in opening an account with Substack, a platform for writers where you can access my analysis.

  • I provide an Introduction and overview here.

And the detail covering:

The scale of what is occurring is major.

It’s important to understand, particularly if you are self-employed, your own boss, running your own business. I hope that my analysis and facts paint a helpful picture.

Outcome: Victorian Supreme Court Action

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supreme-courtThis is a special email to update you on the outcome of our mandamus application to the Victorian Supreme Court over WorkSafe Victoria’s failure to prosecute individuals and entities over the 2020 Hotel Quarantine disaster.

On 2 December 2022, we informed you of the Court’s ruling (delivered that day) which declared that we had not lodged our application ‘on time’. That is, our application was dismissed on a technicality. We disagree with and reject this decision.

For fuller details on the case:

  • This link is to the ruling of 2 December. We’ve highlighted some sections.
  • This link gives an overview of the 3-year campaign, plus some commentary on the ruling.
  • We have made available a full commentary on the ruling to SEA members.

Here’s a summary

Supreme Court rules require that lodgement needs to occur within 60 days of when the named government department failed to do what that department is required to do by law. The issue was: what was that date?

WorkSafe refused to answer whether they had investigated those named entities as required.  But the ruling states that, as of 29 September 2021, we should have inferred, concluded or assumed that WorkSafe had investigated all the 26 entities/individuals that we named (the Victorian Premier, etc). (Our application was lodged on 14 February 2022.)

We say that that conclusion is wrong and that we did not and could not have known. The Court’s ruling was based on interpreting drawn-out correspondence spanning many months about who said what to whom and what we should have inferred by what was said/written.

The ruling then does two curious things in our view.

  1. It spends considerable time rebutting many of our published allegations/assessments we made as to why individuals/entities should be prosecuted. Why bother to do that when the dismissal of our application on technical grounds was all that was needed? The ruling reads as a defence of the government individuals and entities we named.
  2. The ruling then says that if the court allow SEA’s application that this would put the individuals we named under ‘stress’ and this should not occur.

It seems that the Court is saying that an individual should not be prosecuted for alleged offences if the prosecution were to cause the individual ‘stress’. We ask: Would this principle apply to an accused murderer? That is, should an accused not be prosecuted because they would feel ‘stressed’? We find this a disturbing concept. We will have more to say on this issue.

SEA is committed to continuing our ‘Not Above the Law’ campaign, along with our other campaigns on public policy issues affecting self-employed people and more.

I’m available to chat should you want more information or explanation.

Ken Phillips
Executive Director, Self-Employed Australia
0412 393 692

 

ATO watchdog to be closed down/neutered?

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ATO-watchdog-robodebtIf there are two things to be learnt from the current Royal Commission into the Robodebt scandal, it’s that governments can and do ‘get it wrong’ and that governments can and do inflict massive harm on individuals.

In the Robdebt affair the Australian Taxation Office supplied the income data of tens of thousands of welfare recipients to Services Australia, the federal government’s welfare department. The data was misused by Services Australia resulting in up to 200,000 people who didn’t owe the government anything being hounded by the department over incorrectly assessed debts. The scheme was illegal but the department pushed ahead anyway.

Some might say that the Royal Commission is political payback by the Albanese government against the Morrison government. That’s nonsense. The inquiry is an important investigation into how government can ‘stuff up’ even while claiming to be acting in the public interest. Lessons must be learnt, and remedies implemented to limit the misuse of government power over individuals.

That’s why we are deeply concerned to read media reports of a push to dismantle the independent ATO watchdog, the Inspector-General of Taxation and Taxation Ombudsman. The Tax Ombudsman is a small federal government department that is legislatively charged with investigating complaints against, and reporting on the performance of, the ATO.

In our view the ATO hates this oversight because it creates some measure of transparency. The ATO has a powerful media unit that pumps out stories about how perfect the ATO is. But we know that the ATO gets things wrong on too many occasions. Take this one example.

In the Robodebt Royal Commission the ATO has given evidence that the ATO remained silent about the illegality of the Robodebt program in order to protect the Human Services Department (Services Australia) from adverse publicity. The ATO wanted to show solidarity with other government departments. In fact, the ATO should have spoken up, but they didn’t. This is what happens in governments.

Good public servants will often see the protection of the institution as more important than the protection of ‘the people’, even when government inflicts harm on the people. On the other hand, public servants can have their lives destroyed if they tell the truth. Look at the treatment of ATO whistleblower Richard Boyle.

Governments need to have strong internal watchdog departments. This is what the Taxation Ombudsman does. The Ombudsman has a legislative charter to watch the ATO. Such internal watchdogs act as early warning radar systems. They make for better, more transparent government. They reduce the ability of government to harm ‘the people’. Who knows? A Services Australia watchdog might have prevented the Robodebt scandal.

We’re writing to the Prime Minister and others to ask for commitments to retain the Taxation Ombudsman. In fact, we’re asking for reform and an increase in the Ombudsman’s powers. A parliamentary committee last year recommended just this. Read our summary ‘One Giant Step for Taxpayers – ‘Taxpayer Rights’.

ATO Small Business Debt: Patience Needed

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patienceThe Australian Taxation Office views small business tax debt as a major problem. The ATO says that small business debt is two-thirds of the $37 billion owed to the ATO—in other words, $24 billion.

Fortunately, the ATO does recognise that much of existing small business debt is the direct result of huge losses small business people suffered due to Covid lockdowns and restrictions. The ATO is showing some understanding. But we hope that the understanding is sufficient and that it will ‘stay the course’. Here’s one story that demonstrates the ‘Covid business disaster’ experienced by (at least) tens of thousands of self-employed people.

I had a chat the other day with a single mum who’s been running her own small business for about six years. She rents a commercial space that’s critical for her particular business. Things were going reasonably well and in 2019 she needed to move from one premises to another. She spent quite a bit of money upgrading the new premises, moved in and business was looking up. Then Covid hit in early 2020.

During the entire Covid lockdowns of 2020–21 the rules meant that she was prohibited from operating at all. Income dropped to zero. Yes, zero! She’d signed a five-year lease and had a bank mortgage. In early 2022 she could start operating again. But the loyal customers she had built up had drifted away. She’s had to rebuild, and although things are looking better, they are not yet back to pre-Covid (2019) levels.

She owes money to the ATO related to her pre-Covid trading. The ATO (fortunately) has her on a payment plan. She’s been very upfront with the ATO. But she’s still needing to cover her mortgage payments plus pay the rent on her premises. If she loses the premises, she’s out of business.

She talked to me about the struggle. I really don’t know if she can survive. She’s a self-motivated, positive, ‘go getter’. But my words of encouragement and support are just words and don’t cover the bills. She’s the sort of person who is most likely to battle through and, give her several years, get on top of the mess and start to make a profit again.

This lady is just one typical story. The economic pain of Covid has impacted the most vulnerable in our community—the ‘go getter’ small business individuals.

We hope that the ATO maintains its small business patience and support. But this needs to happen on a case-by-case basis, with high quality ATO communication and realistic assessments of individuals’ circumstances. It will be a long haul over several years. This is the economic ‘long Covid’.