Self Employed Australia

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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.

Some good news? Workcover NSW and Federal Government contracts

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Wednesday, April 26, 2017

Mostly we’re complaining about bad government behaviour. And we should! And we will continue!

BUT, it makes a pleasant change to report some good news.

Workcover NSW:
As far back as 2005 we had been actively trying to defend self-employed people in NSW from the NSW WorkCover Authority. In 2012 the new government undertook a review. In our submission we stated that the workers compensation scheme is

… one of institutional oppression directed towards [the] self-employed, …has inflicted enormous harm on NSW small business people…and … the authority has a history of acting in a dictatorial manner, answerable only to itself.

We substantiated our claims with actual case studies.

Following the review, the Workcover Authority was effectively sacked. A new body was formed to handle the scheme called icare. What a difference!

We’ve had dealings with icare over the last 3 years and some recently on some touchy, difficult issues. We may not be in complete agreement with some outcomes. However, we’ve found the icare personnel and their processes open, transparent, honest, interested in facts and not presumptions and genuinely interested in fairness. icare has just undertaken a new review focused on improving customer service delivery. They deserve congratulations and we trust the improvements continue!

Federal Contracts
You’ll be aware of our work to secure unfair contract protections for small business people and the success we’ve had with that. However, what’s always ‘got up our noses’ is that government is exempt from these laws. You know—one law for the plebs and a different standard for the powerful!

We chatted with the Australian Consumer and Competition Commission about this. They conducted a review of the Federal Government’s ‘standard form contract’ and found some concerns. As a result, the government has amended its contract. This is hugely important. Massive numbers of small businesses and self-employed people provide goods and services to the federal government.

We’ll have more to say on this. There are some sensible and fair elements. Here’s the new contract.
If you do business with the Federal Government, we suggest you make sure your contract is in accord with this one.

NAB destroys its own small business brand

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Friday, March 03, 2017

The National Australia Bank (NAB) has been caught out, in our view, in bald-faced lying to its small business customers. In so doing, it has trashed its own brand. Again, our view is that, for small business people, NAB has just declared that it can’t be trusted.

The issue arises from NAB’s issuing arguably false advice to its small business customers that it has amended its loan contracts to comply with the new unfair contract laws. We obtained a copy of the NAB advice and its new 100-page contract and forwarded them to Robert Gottliebsen of The Australian, initially thinking that this was a ‘good news’ story. But NO!!

When the NAB loan contract was checked, it was obvious that the contract breaches the new unfair contract laws in many ways. Robert Gottliebsen has written up the outcome today.
He says that by inserting the words ‘acting reasonably’ NAB asserts the power to:

(a)    Reduce any loan limit.
(b)    Introduce new fees or vary fees.
(c)    Change the way it calculates default interest.
(d)    Change customers’ repayment obligations.

These and other clauses effectively give NAB the power to change its own contracts enabling it to bankrupt any small business it chooses.

NAB has clearly breached the intent of Parliament when it passed the new unfair contract laws and we believe it has actually breached the laws. We will be lodging formal complaints with both ACCC and ASIC asking for NAB to be ‘jumped on from a great height’. If the NAB con trick of ‘acting reasonably’ proves to have neutered the unfair contract laws, we will push hard for amendments to the legislation.

ATO’s humiliating admission exposes its baseless accusations of fraud

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On Monday, ICA’s Ken Phillips sat in the Federal Court in Sydney with our legal team witnessing an extraordinary event.

We were defending Rod Douglass against the ATO. You’ll remember we’ve been assisting Rod for nearly two years. We’ve explained this before.

Rod had been accused by the ATO of fraud/evasion on the basis that he should have sought ‘professional’ advice before submitting his tax returns even though he followed ATO website information in completing his returns. He had declared all income. Yet the ATO sent Rod a $550,000 tax bill backdated 10 years which meant he would be bankrupt.

This ATO attack against Rod can happen to any self-employed person. In fact the ATO do this constantly in our experience.

On Monday the ATO caved in. They totally withdrew their accusation of fraud/evasion against Rod saying they had made an ‘error’. Note the ATO only admitted this once we were in court and a massive legal bill had been run up to defend Rod. The ATO’s behaviour is an outrage! How would you defend yourself against such an ATO attack?

Here’s the thing. The ATO can accuse you of a criminal act (fraud), issue a bankrupting tax bill, maintain the accusation for two years then say ‘ah sorry, we were wrong!’ You will have a huge legal bill and the ATO does not offer any compensation for turning your life and work upside down.

Senior business journalist Robert Gottliebsen from The Australian joined us in court on Monday and witnessed the entire episode. His comments are important.

Robert said yesterday in his article:

  • “…before the Federal Court, I have witnessed the Australia’s Commissioner of Taxation, Chris Jordan, make an unprecedented and humiliating admission of error.
  • tax officials tried to falsely bankrupt a small businessperson,
  • The commissioner’s barrister confessed that the facts in the Douglass case as presented were “incorrectly formed” and so the allegations of tax fraud and tax evasion “are withdrawn”.
  • Douglass worked as a contractor in partnership (with his wife)…. But the tax office … drummed up an unsigned opinion that fictitiously claimed that Douglass was guilty of tax evasion and fraud…(and) issued Douglass with a mammoth $500,000 assessment by going back 10 years
  • …I fear the ATO may have bankrupted hundreds and possibly thousands of small businesses by issuing Douglass-style fictitious opinions.”

Robert said in his article today:

  • “In the case of Douglas it is very easy. Clearly you can’t have the current anti-small business groups deep in the tax office preparing fictitious opinions so that upstanding Australians are falsely accused of evasion and fraud and are threatened with bankruptcy.
  • No person should be accused of evasion and fraud (which enables the ATO to go back much further than the two years that applied in Douglass) without the case being approved by the Federal Court as was envisaged by the constitution and the 1903 act.
  • In order for small enterprises to prosper in Australia this nonsense must stop.”

There’s a lot more to happen on this.

We’ll be back in court next year again defending Rod over ATO allegations on the Personal Services Income tax laws where we say the ATO (again) is wrong!

 

Gig economy and unfair contract laws suit self-employed

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Two current events occurring some 17,000km apart reveal regulatory tension over the “gig” economy. One event tears at the new economy while the other is working with this economic change.

Last weekend, Australia’s unfair contract laws covering small business people began. Late last month, a precedent-setting judgment in London declared two of Uber’s 40,000 British drivers to be employees and thus entitled to minimum wages.

The Australian event is accommodating the gig economy within a regulatory framework. The London event assaults the structural heart of the gig economy.

It’s a mistake to think that the gig economy is a technological revolution. Yes, the integration of apps, GPS location, mobile phone and related technologies facilitate the new economy, but it’s the use of those tools by people that makes this economic “thing” work. And it’s people who opt to be self-employed who are primary users of the technology. This is the cutting edge issue.

The heaviest driver of the gig economy is the willingness of people to become “businesses of one”.

The legal structure is that individuals walk away from wage-slave employment to self-employment.

Unions hate this. It diminishes their institutional power.

The Uber ruling was on a case brought by the GMB union to the Central London Employment Tribunal. In a 40-page ruling, the tribunal declared two Uber drivers were “workers” within the meaning of the British Employment Rights Act. The tribunal ignored or twisted key indicators of self-employment to reach its conclusion. No consideration was given to the fact that Uber drivers provide their own tools, a vehicle and pay all expenses.

Drivers have total control of when or if they work by turning the Uber app on or off, but the tribunal asserted that when the app was on, Uber controls the drivers because it gives directions as to driving routes through the Uber GPS map.

The tribunal dismissed much of Uber’s stated operational evidence preferring hearsay from off-the-cuff remarks by others as more reliable.

Uber intends appealing.

In comparison to the London ruling, Australia’s unfair contract law does not try to suppress self-employment but rather embraces the status.

The law is “revolutionary”. It is a likely global first in regulating the “fairness” of business-to-business contracts, but it’s light touch.

It applies only to standard-form contracts affecting small business people.

Offending clauses are void, leaving the balance of a contract intact. The law largely codifies the common law structure of a commercial contract backing the power balance inherent in commercial contracts with legislative “oomph”.

What is significant is that the unfair contract law does not go to the issue of price. Here is the big regulatory difference.

Employment regulations have institutions that define “fairness” based on determining and enforcing the price (income) that must be paid to individuals declared to be employees. The London ruling pulls Uber drivers into that framework. Compare this to competition law, of which the unfair contract law is part, where “fairness” considerations relate more to contract honesty, including preventing price manipulation.

The gig economy is regulated under competition laws because its contract structures are so dependent on people being self-employed. However, if the gig economy does not have regulation that effectively protects self-employed people, have no doubt it will be exploited by big businesses.

Here’s the tussle: employment-regulating institutions respond to the gig economy by seeking to pull individual workers into their ambit to impose price (income) controls.

This kills the creativity, innovation and wealth-creating potential of the market-dependent gig economy.

If competition regulators do nothing, employment regulators will move in to the regulation void, do their thing and damage competitive markets.

Competition laws and regulators must actively respond to this growth in self-employment by creating light-touch regulation to support the small business (of one) base of economic activity. The Australian unfair contract laws are a step in this direction.

Large businesses operating in the gig economy space should encourage such market regulation of their activity. If they don’t, the golden goose they desire from the gig economy will be attacked—potentially even killed off—by employment regulators.

[First published in The Australian, November 2016]

So there are no unfair contracts? Look again

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Sunday, November 13, 2016

When we first started arguing for unfair contract laws for small business people in 2009 we had discussions with the Federal Attorney-General’s Department. They told us that there wasn’t a problem because no-one complained. But we campaigned persistently for seven years until the laws were passed.

The new laws started last Saturday, 12 November 2016. (Hooray!) The Australian Consumer and Competition Commission last week released a report into the 12 months’ research they have done on unfair contracts. The ACCC believes that somewhere between 8 and 10 million (yes million) contracts will need to be re-written to comply with the new laws.

The ACCC has uncovered common terms in contracts that are unfair. According to the ACCC these are:

“Terms that

  • give one party an unconstrained right to unilaterally vary key aspects of a contract;
  • that unfairly seek to shift liability from the contract provider to the small business; or
  • that provide unnecessarily broad termination rights will almost always raise concerns about unfairness.”

Businesses that rely on these types of terms should be aware that they are leaving themselves open to action by the ACCC or another party.

If you have a contract that you think could be unfair, contact us.
We were interviewed on ABC The Business explaining the importance of the Unfair Contract laws.

Victory for small business fair contracts is an economic game-changer

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Friday, November 11, 2016

Tomorrow, Saturday 12 November, the new unfair contract laws for small business people come into effect.

At ICA we can be rightly proud of these laws because we spent seven years arguing for the laws. There’s no question that these laws have happened because of ICA.

Yes, we’re entitled to ‘bang our own drum’ on this one! But nothing is achieved on one’s own. The Australian journalist Robert Gottliebsen was central to the campaigning. He kept pushing.

Here’s his article today explaining the impact of the laws. Robert says that, according to ACCC research,

 “It appears that somewhere in the vicinity of eight to 10 million contracts will have unfair clauses when they come up for renewal” and
“While it (the laws) will annoy a vast array of large enterprises, the new legislation is vital for the nation.”

In other words, this is huge. It’s an economic game-changer and it’s all about giving small business people a fair shot at being in business.

Former Small Business Minister Bruce Billson must also be thanked. He drove this with the Abbott government. But politics is always ‘interesting’. Here’s the inside story on how the laws were pushed through in the Senate.Now the Australian Consumer and Competition Commission is in the business of enforcement. We’re working closely with them.

But we’re planning to do lots more in this space. As Winston Churchill famously said at the end of the Second Battle of El Alamein: “This is not the end… But it is, perhaps, the end of the beginning.”
ICA has major new plans to help small business achieve fair contracts and will announce these next year.

ATO attacks mum and dad partnerships. We’re all at risk!

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If you are one of the 2 million self-employed people in Australia we suggest you read the following very carefully. This is a story of (frankly) how concerned you should be about your potential treatment by the Australian Taxation Office. It’s the story of Rod Douglass, a 55-year-old IT contractor, but it could just as easily be you.

We first explained the tax issues in March this year. Then three weeks ago we announced the legal action we have organised to defend Rod, who’s been accused of tax evasion and sent a bill for $550,000 backdated 10 years. (It will bankrupt him!) What he did was comply with tax information published on the ATO website. However, the ATO says that by acting on this ATO information Rod committed tax evasion. ICA and our legal team are organizing Rod’s defence at no cost to him. This an important issue of justice.

The court documents have been lodged in the Federal Court and the Administrative Appeals Tribunal and pre-court discussions are occurring with the ATO. Because of confidentiality issues we are constrained in what we can say at this stage.

However, yesterday Robert Gottliebsen from The Australian had an outstanding commentary based on the public domain court documents. Robert’s article is here. Robert made the following points:

Partnerships

  • “The result of (Rod’s) case will determine the fate of tens of thousand of husband and wife partnerships …”
  • In 2005 Tax Commissioner “Carmody ruled that husband and wife partnerships in which both parties were responsible for half the debts were a legitimate way to organize business…” and that “tax avoidance schemes did not apply (to such partnerships)…”

Fraud/evasion trigger

  • Normally the ATO can only go back 2 years on tax assessments. “This is a really important protection for small enterprises…”
  • However the Commissioner can go back over any period if he/she forms an “opinion that there has been fraud or evasion.” “…the normal essence of evasion is where some material facts have been omitted or misconstrued. In this case, according to Douglass’ statement of claim, there were no facts omitted or misconstrued.”
  • “If Douglass loses the case it would become a chilling precedent for tens of thousands of enterprises.”

We have an excellent legal team and researchers preparing Rod’s defence. The case tests:

  • ATO fraud and evasion ‘opinion’ procedures.
  • Personal Services Income tax assessment processes.
  • Partnership income-sharing legitimacy.
  • Reliability of information/advice published by the ATO.

On the last point (ATO reliability) the issue puts at stake the faith Australians can have in the very integrity of the tax administration system.

There’s a lot hanging on this case.