Self Employed Australia

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ATO abusing its powers – manipulating the law to abuse people

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Our campaign to reform the ATO continues. Good grief it’s an exhausting process! But the ATO keeps demonstrating why the reform is needed because the ATO keeps behaving badly.

Today we’re highlighting another case of ATO bad behaviour.

Many small businesses are structured as trusts. Most are family trusts. The ‘beneficiaries’ of such trusts are typically family members. A trust can distribute profits to the beneficiaries who then pay the tax.

In the ‘Carter case’ (see full details here) the ATO ‘assessed’ that the trust had made a profit. And here’s what then happened:

  • The ATO declared that Natalie Carter, a mother with two school-age children, had received profit from the trust as a beneficiary.
  • The problem was that no profit had been made. The ATO assessment was wrong. The ATO didn’t deduct expenses (interest etc) from the trust revenue. The trust had not sent any profit to Natalie because there was no profit.
  • But the ATO still said there was profit and forced Natalie to pay tax, even though she had no income.
  • Natalie then did what has been accepted as law for thirty years. She signed papers legally rejecting the (theoretical) profit. Sounds sensible. But no! The ATO refused to refund the tax already paid.
  • Natalie appealed to the Federal court where all three judges agreed with Natalie. She owed no tax! Natalie won. The  ATO lost.
  • But the ATO is now appealing to the High Court, arguing that even if someone has not received a profit they must still pay tax. Crazy!!!! It’s just stupid.

Here’s how this weird obsession by the ATO to win—even when they are wrong—would play out. Say this 30-year law were chucked out.

  • Take a divorce where the husband is a real b…. scam man. He has a business with a trust. He has the trust make a profit but then disappears overseas with all the money and his new mistress. He also makes a theoretical profit distribution to his ex-wife. The ATO says the ex-wife must pay the tax. But if the wife cannot legally declare that she doesn’t want the theoretical profit she is screwed. The ATO force her into poverty. Nice one ATO!

Sensible laws are there to protect people from scammers. What the ATO is seeking to do in the Carter case will enable the ATO to facilitate corrupt behaviour.

The Carter case is just another example of why the ATO must be reformed.

Let’s be clear. The reform of the ATO is needed in the audit and enforcement division where abuse of small business people is pretty much routine. That division is out of control.

Holding public officials to account takes time and persistence – Covid and more

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This is an update on developments with efforts to prosecute the Victorian Government for the 800-plus Covid deaths due to its massive mismanagement, or worse.

The following gives some context of the effort needed to make prosecution happen:

The point of these examples is that holding government and government officials accountable for their wrongdoings is always a long and hard journey. Governments routinely cover up—even in rule-of-law democracies.

In Victoria, the Coate Inquiry into the deaths is viewed by us and others as a cover-up. The inquiry report admits that it’s failed to identify who made the decisions that led to the botched quarantine and deaths.

In Victoria, the responsible prosecuting authority, WorkSafe, has not initiated prosecutions against the state government. We wrote to Worksafe in September 2020 providing a legal trigger requiring them to prosecute. Worksafe finally replied on 17 December saying, ‘we need more time!’ Ummm? Nine months since the disaster unfolded in March and they need more time?

We wrote back to WorkSafe on 18 December providing details on how hotel infection management should be handled. It’s not hard to discover what to do. The Hong Kong health authorities issued detailed infection control procedures in 2007. We provided WorkSafe the link. It’s not difficult to organise a Victorian prosecution. Compare the Hong Kong procedures with the failed Victorian management and there’s the prosecution evidence!

Given this failure to prosecute, we wrote to WorkSafe on 4 January 2021 asking for information about its investigation processes. We asked, for example:

  • How many witnesses have been contacted, interviewed and statements taken or witnesses refused to be interviewed?
  • How many statutory directions requiring information and documentation have been issued?

The response to this request so far is—you guessed it—stony silence!

But we are persisting. Our campaign will grind on, and on many levels. You may have seen some of our social media adverts seeking justice. Click on the images:

Who started the fire/put out the fire?

Show us your phone records

You haven’t seen the ads? That’s okay, because so far more than 113,000 people have viewed them since our launch in mid-December. More videos are in production. And we now have a dedicated website to the cause: www.notabovethelaw.com.au

If you want to be kept up to date on campaign activities, register here. And this section here gives details of our campaign including source links and so on.

We don’t expect fast results in our campaign. WorkSafe’s lack of action so far is concerning. But look at Michigan. It’s taken 6 years for the 42 criminal charges to be launched. People being charged include the state of Michigan’s former Governor, its health director, medical executive, emergency manager and communications director. Charges include extortion, perjury, obstruction of justice, wilful neglect of duty and manslaughter. The parallels to Victoria seem striking.

California Attacks Santa Claus – A Victorian Agenda?

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Tuesday, December 22, 2020

We’ve covered before the weird laws in California (called AB5) that have made self-employment illegal. On the evidence, it seems that these laws have pushed California’s unemployment rate to 50 per cent higher than the US average. The laws came into force on 1 January this year. But it’s now impacting on Christmas.

Patrick Turnbull has been a Californian Santa for 20 years. He doesn’t work as Santa all year round. That’s logical. Not much Santa work outside Christmas! So, he’s worked as an independent contractor Santa. Now the Californian AB5 law say that’s wrong. In this 4-minute video, Patrick (Santa) Turnbull explains why denying him his Santa ‘rights’ is so bad.

You tell ’em Santa! (click the image for the YouTube video):

What’s worrying is that Dan Andrews’ Victorian government also has an anti-Santa (independent contractor) agenda. We’ve told the government in very blunt terms, ‘leave us alone … we have a right to be self-employed.’ We ‘demand’ the right to be Santa if we want!! Viva la Santa revolution!

Oh yeh. And Merry Christmas! We all deserve it this year.

800 deaths – The facts are clear. The Vic government must be prosecuted

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It would be dangerous to forget or ignore that 800 people died due to the Victorian government’s hotel quarantine disaster. We cannot simply ‘move on’ and pretend that 800 people did not die. That’s dangerous. That’s unsafe.

That’s why today we’re launching the next phase of our campaign to push for the prosecution of the Victorian government under work safety laws.

We write to WorkSafe
Here’s our letter, sent today, to the Victorian WorkSafe Authority, the prosecuting body. We provide them evidence that hotel quarantine plans should have been in place when they were not.

Hong Kong had clear plans that could have been used.

We remind WorkSafe of evidence from one officer who said

“Each outbreak was treated like a secret and nothing seemed to change…”

And a doctor who warned of bad procedures saying

“This is placing individuals at risk”

The pandemic was NOT unprecedented
In separate facts we explain why the Covid pandemic was not unprecedented and was fully expected and planned for, BUT the Victorian government forgot(?) to do a hotel quarantine plan!

And here we explain how the work safety laws apply.

Into and during 2021
This next phase of our campaign will continue through all of 2021. This is just the start. We have a research and legal team. We are preparing more evidence of why prosecution must occur. We will make this public and deliver it to WorkSafe.

Join/support our campaign. You can contribute $s here if you can.

Register your details here for information and updates.

Bad things happen if good people do nothing!

800 Deaths – Social media campaign to prosecute Victorian Government

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Today (18 December) we launch our social media campaign to ‘encourage’ WorkSafe Victoria to prosecute the Victorian government over the hotel quarantine disaster. Prosecution must occur.

800 deaths must not be ignored or forgotten.

No one must be above the law.

Here’s our ad. Click on the image for the YouTube video (43 secs):

Get the word out. Spread the message.

Share this ad. Share the link.

Support our social media advertising campaign. Contribute $s here to our campaign.

Just $10 will enable around another 50 people to hear/see the message.

Stay up to date with the campaign. Register your details here for information and updates.

Scary! Victoria’s second attempt at hotel quarantine starts today. Will it be safe????

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Today, Monday 7 December, is a rather scary day for Victorians and all Australians. Today is the day that the Victorian government restarts the hotel quarantine program for overseas travellers. The big question is: How safe will this quarantine program be?

The three hotels to open immediately include the Park Royal Airport, Transit Sunshine and Airport T2. Another six hotels are planned to be opened over the next two weeks leading into Christmas. In addition, The Alfred is running two ‘MediHotels, the Novotel Southwharf for complex care and Holiday Inn Flinders Lane for Covid-positive people. One hundred and sixty travellers are expected to arrive daily.

We can only hope that, in restarting, the government has detailed plans for the nitty-gritty of hotel quarantine management. It would be good to have such detailed plans publicly released. Why? Because without proper plans, Victorians run a grave risk of another Covid ‘fire’ outbreak.

Think back eight months.

The first Victorian Covid experience was as if a large factory in the centre of Melbourne exploded, igniting a fire that raged for months. While it was burning, the factory spewed toxic chemicals into the atmosphere poisoning tens of thousands and killing hundreds of people. Millions had to be forced into home isolation to avoid the poisonous clouds.

Now, the very managers (the Andrews government) responsible for the (Covid) factory fire are still in charge and reopening the factory. Should this make everyone nervous? You betcha! Very nervous!

What’s gobsmacking is that when the first Victorian hotel quarantine program started on 27 March there was no ‘plan’ for how to manage the program.

There was no ‘plan’ about how to modify hotels, not designed to handle medical situations, to cope with this highly infectious Covid flu pandemic. There was no ‘plan’ to train staff. No ‘plan’ to provide PPE. No ‘plan’ for medical personnel support. No ‘plan’ to manage travellers suffering mental, or other health problems, or drug addictions. No ‘plan’ for the supply of fresh food or clean clothing. No ‘plan’ for clinical software provision to track people’s health. And no ‘plan’ about what do with people who tested Covid-positive.

This ‘no plan’ was stated under oath to the Coate Inquiry by the then Secretary of the Victorian Department of Health.

The excuse from the Andrews government for its ‘no plan’ policy is that the Covid pandemic was ‘unprecedented’! Unfortunately for the Premier, his Cabinet, responsible departments and department bosses, ‘unprecedented’ is a lie proven as such by the facts.

A flu pandemic was expected. The Andrews government had an international legal obligation to be prepared.

As early as 2005, the World Health Organisation issued a global alert that a flu pandemic was inevitable and that countries had to be prepared. The last great flu pandemics were in 1918, 1957 and 1968. The timing and type of the next pandemic was the unknown.

In 2006 the Australian government developed detailed plans for pandemic management in conjunction with all the states. This included the October 2006 Exercise Cumpston involving all Australian governments testing the plans. The WHO pandemic alert was further upgraded following the 2009 H1N1 flu pandemic that was comparatively contained.

In 2014 the Victorian government released its flu pandemic plans aligned with the national plans. Each state government has the ‘on the ground’ management authority and responsibility for pandemic management. That responsibility is legally binding on each government under WHO-administered health regulations.

The Covid pandemic was declared by the WHO on 30 January 2020. On 18 February the Australian government released its Covid-specific pandemic plan. Each state in turn updated its plans and preparations. The Victorian government released its Covid plan on 10 March.

That is, the pandemic was predicted, expected and response plans highly developed. The Victorian Chief Health Officer stated in Parliamentary evidence that several pandemic simulations had been conducted in the 12 months prior to Covid.

The Andrews government did have some plans. They had plans for the transiting of travellers at Melbourne airport, placing these people onto buses and then delivering them to hotels. But there were no plans for what to do then.

Travellers were ‘dumped’ into chaos. The Victorian Hotel quarantine program was being managed, or rather mismanaged, on the run. That’s the evidence and admissions by the Andrews government to the Coate Inquiry. Gobsmacking but true.

Here now is attempt number two. The same people, the Andrews government, are having another go. Do they have a ‘plan’ this time for the nitty-gritty of running the hotel quarantine program? Goodness let’s hope so. And let’s hope it’s an effective plan!

There’s a small business reform ‘steam train’ happening with the federal government

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There’s considerable reform occurring at the federal level affecting self-employed, small business people. This is all positive ‘stuff’.

Paying Small Business on time
From 1 January 2021, businesses with more than $100 million in turnover must report to a central government database their small business supplier payment terms and practices. We understand that the information will be publicly available. Next year we expect to see legislation where if a large business does not pay small business on time, the large business will lose access to government contracts. The reporting scheme is important for this. These are major moves to stop large businesses using small businesses as ‘banks’.

Beefing up unfair contract laws
In 2016 large businesses were required to have ‘fair’ contracts with small businesses. What is ‘unfair’ under the law is common sense. See here. But the laws were weak on enforcement and now the federal government has achieved agreement from all the state and territory governments to ‘beef up’ the laws. This is a significant development.

  • Currently, unfair terms are ‘null and void’. Now unfair terms will be ‘unlawful’.
  • Financial penalties will now apply.
  • The definition of small business is expanded.
  • Clarifying what is a standard form contract.
  • Currently, the law only applies to contract up to $300,000. Now there will be no limit.

Big businesses have bought these tougher laws on themselves. Too many large businesses have ignored the laws. Now the laws will have real teeth.

Small business insolvency
Following the Covid disaster, many small businesses will collapse or have collapsed. The federal government is changing insolvency laws for small business. This will give small business people a better chance to turn their businesses around or to retain some control of the situation during the insolvency process. For too long some insolvency practitioners have simply ripped out the value of a failed business to fund the insolvency practitioner’s business. The new laws are broadly designed around the US ‘Chapter 11’ insolvency laws.

These individual reforms are important but as a package are hugely important. If small businesses and self-employed people are to rebuild after the Covid-induced huge downturn, these reforms are doubly important. We congratulate the government on these moves.

There is more reform in the pipeline and we’ll talk about it in the coming weeks.

A gold-lined ATO stuff-up blows up in the ATO’s face

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Here’s an ATO story that might interest you.

On Friday last, 6 November, the Australian Taxation Office had a serious legal bomb blow up in its face. It’s so serious that the full bench of the Federal Court has put a ten-day embargo on the publication of the judgment that went against the ATO. We can only guess why. However, the case, the facts and the implications are known.

In essence, about four years ago the ATO destroyed the Australian private-sector gold-refining industry. It did this after international criminals ripped off up to a billion dollars in GST through trading gold. The gold refiners were unwitting conduits in the massive scam. Instead of chasing the criminals, the ATO attacked the refiners, most of whom were small businesses, effectively bankrupting many in the sector.

The scandal for the ATO strikes at the core of its competency or rather its incompetency. The criminal scam was possible because of a known loophole in the GST legislation. In the early 2000s, international criminals had pulled off the same scam in the UK and other jurisdictions. Those countries amended their VAT (GST) laws around 2004 thereby closing the loophole.

The ATO knew about the VAT (GST) scam and how to stop it. If it didn’t, it was stupid. It did nothing. In 2012 the criminals moved into Australia. ISIS operatives are believed to have been involved. The scam was slick in its simplicity.

The criminals sold impure gold to the Australian refiners. The refiners processed the gold to a purity suitable for bullion. The refiners paid GST on their purchases as is normal. The criminals didn’t forward the GST to the ATO and disappeared. This went on for four years until April 2017 when the ATO finally moved to have the legal loophole closed.

It’s a reasonable assumption that some refiners acted in collusion with the criminals. But it is clear from internal ATO documents that it pursued a deliberate strategy not to target the GST thieves but instead to pursue what it called its “refiner retention strategy” to hamstring the refining industry.

The ATO took a blanket ‘kill the industry’ approach. It can only be speculated as to the ATO’s motivation. Perhaps the ATO was seeking to cover up its gross incompetence by not stopping the scam before it started and then allowing it to continue for four years before acting.

The ATO instigated standover tactics against the refiners and refused to refund GST credits. This quickly sent refiners to the wall. The ATO followed up by issuing fines and penalties. Significantly the ATO did not move against the only government-owned refiner, the Perth Mint. Why?

But a feisty liquidator stood up to the ATO. The ATO issued a debt against a company for around $200 million. The case went to the Administrative Appeals Tribunal with the ATO winning. The liquidator appealed to the Full Bench of the Federal Court. That’s the decision announced on Friday. The ATO lost 3-0 after spending (on some estimates) $40 million in legal fees.

We don’t yet know the details of the Court’s ruling, but we do know the argument mounted by the ATO.

The ATO admitted in evidence that the targeted company was not involved in the criminal activity. But to justify its stance the ATO ran what to this layperson is an eye-wateringly technical and bizarre argument.

The ATO asserted that the refiners were not ‘refining’ the gold they had purchased from the criminals. The ATO used an ‘expert’ to run this argument. Then it conducted an ‘independent’ review. The ATO’s expert headed the review which found that his assessment was correct. Pardon me but, surprise, surprise!

The ATO has now lost in the Federal Court. The immediate implications seem to be that the Federal government now arguably owes the states around $1 billion in GST. Further, that the refiners are owed the (withheld) GST refunds which presumably run into the hundreds of millions of dollars. And refiners attacked by the ATO should be entitled to large scale compensation.

This case goes to the core of the ATO’s approach to auditing and enforcement. In this gold-refining case the ATO ‘stuffed up’ on a massive scale. It failed to move against a known criminal scam with years of notice. It failed to close the scam down during its four years of operation.

In response to its huge failure the ATO sought scapegoats. It targeted innocent refiners who were unwitting tools in the criminal scam. It used its unrestrained powers to bludgeon businesses, regardless of the facts. We see this constantly, particularly with small businesses who either collapse or give in to the ATO because they don’t have the resources to fight back.

This time, after some six years, a liquidator with the resources has proven the ATO wrong.

Lessons must be heeded. The ATO enforcement division is out of control. It’s a wrecking ball in the economy whenever it targets individual businesses or sectors. It wrecked the research and development policies of the government through the same sort of incompetence and vindictiveness demonstrated in the gold-refining case.

The ATO has proven that it cannot reform itself. Reform must be imposed by legislation. A template for such reforms is available based on successful reforms in the USA to its tax authority. Coincidentally I discussed this in an article last week.

Australia cannot afford an ATO that continues to operate as it currently does.

Dan Andrews (Victoria) declares war on small business – ‘destroy em’ they say!

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Thursday, July 16, 2020

Yesterday the Victorian Labor government released its report into the ‘gig economy.’ The 228-page report should be read as a declaration of war against self-employed, small business people across Victoria, and Australia. This is so because a key recommendation calls for laws that would effectively make self-employment illegal.

The recommendation (page 193 of the report) reads:

Recommendation 6
The Inquiry recommends that the FW Act be amended to
(a) codify work status on the face of relevant legislation (rather than relying on indistinct common law tests)
(b) clarify the work status test including by adopting the ‘entrepreneurial worker’ approach, so that those who work as part of another’s enterprise or business are ‘employees’ and autonomous, ’self-employed’ small business workers are covered by commercial laws.

This dumping of the common law definition of self-employment with the creation of a new test (called the ‘entrepreneurial test’) would smash small businesses in Victoria.

We know this because we’ve been following in detail exactly the same laws in California that came into operation on 1 January this year, just before Covid-19 hit. We can confirm reports out of California this week that this ‘kill self-employment law’ has smashed 4.5 million Californian jobs on top of the Covid-19 damage. The Californian law explains why 27.7 per cent of California’s workers are on the dole compared to the national US average of 15.7 per cent under Covid-19.

This is the damage that Premier Dan Andrews and his government now seek to inflict on Victorians. The reports calls for the Federal Government to change the law and, if not changed Federally, for the Victorian government to do this in Victoria.

This is vindictive madness. It displays a distinct hatred of self-employed people, that we are worthless, and of no value to society or the economy. That we must be supressed and eliminated in Victoria.

And to set a course in this direction just as everyone is being smashed by Covid-19 displays an ideological disconnect from reality.

We’ll be preparing a full analysis of the report, but here is our submission to the inquiry in 2019 and our statistical analysis of the gig economy.

We’ll be calling on the Morrison Government to defend self-employed small business people from the Dan Andrews’ attack. But first we’ll get our full analysis done.

Frankly. Good Grief!!!!

Anti-Trump Democrats get political black eye from small business

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Thursday, May 28, 2020

The anti-Trump forces in the USA have just suffered a surprise defeat in a Californian bye-election that has likely implications for the November US Presidential election.

The Democrats suffered a massive backlash against them because of vicious anti-small business laws that have crushed the self-employed small business sector in California.

The law (AB5) started on 1 January this year and essentially outlawed self-employment in California. It’s caused havoc with huge job losses, large numbers leaving the state and economic collapse in independent contractor industry sectors. This bad job wave swept across California just before the Covid-19 disaster.

The Democrats who control the California legislature and created the anti-self-employed laws have responded with arrogance. Go get a union ‘employment’ job they say! Self-employment’s not a ‘real’ job the Democrats claim. Voters have thought differently.

The political power cards play out as follows.

In the US Federal Congress (parliament) the Trump Republicans control the Senate (upper house). But the anti-Trump Democrats control the (lower) House of Representatives with 235 seats to the Republicans’ 197 seats. This Democrat control of the House of Representatives frustrates and limits the Trump agenda. California is the key state giving Democrats their control.

Of the 435 seats in the House, 53 come from California. The Democrats have 46 of those seats. If the Trump Republicans were to win 20 seats from the Democrats and Trump remained President, Trump would control the US Congress. The Californian Democrats’ hatred of small business raises just that scenario: a Trump Presidential and Congressional win.

Just a week ago a Republican Trump loyalist won a bye-election for a Californian House seat, defeating the incumbent Democrat with a 19 per cent swing. A bye-election ‘flip’ of this sort has not happened in California since 1998, let alone one with a swing of this size.

The Trump Republican candidate campaigned hard against the Californian Democrats’ anti-small business law (AB5).

The national implications are clear. The Democrats’ Presidential candidate, Joe Biden, has endorsed California’s AB5, promising to take it across America if he wins. The Trump Republicans will campaign saying Democrat Biden will destroy small business across America. It’s powerful political messaging underpinned by the glaring reality of California’s AB5.

The Democrats have dug themselves into a deep hole. Their actions speak of hatred of self-employed, small business people.

What unfolds in the USA with the November Presidential and Congressional elections over the rights of self-employed people holds potential lessons for Australia—namely, can a political party attack self-employed, small business people and survive politically? Watch this space!