Self Employed Australia

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Independent contracting

Labor’s agenda to outlaw the self-employed – Here it comes!!

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Labor's-agenda-outlawWe’ve alerted you in the past to the Albanese government’s plan to deny people the right to be self-employed. It’s an attack upon your basic freedom to decide how you earn your income. That attack plan is now unfolding.

The Department of Employment and Workplace Relations (DEWR) has released a consultation paper on the implementation of Labor’s plan. We’re preparing a detailed submission (due on 12 May). Legislation is set for the second half of this year.

Be very clear. We totally reject this agenda. It’s bad on many fronts. We’ll explain the multiple problems progressively over the following weeks.

We have started talking to Senators and MPs about why this is so bad and should be stopped. We’ll be very actively pushing to defend the right to be self-employed.

We’ve prepared a summary of the DEWR consultation paper. We’ve tried to reflect what they are saying accurately.

In broad summary, Labor’s plan is to:

  • Treat the commercial contract used by self-employed people as an employment contract.
  • Regulate self-employed people through the Fair Work Commission, thus creating conflict with commercial law and regulation by the Australian Consumer and Competition Commission. The DEWR papers says that this will be done on a limited selective basis. But those limits are as yet unknown.

Frankly, we see our campaign as perhaps the most important one that we have conducted in SEA’s 24-year history. We must attempt to stop this.

We argue that Labor’s plan is a recipe for commercial contract confusion and uncertainty. We find the consultation paper to be a confused hotchpotch itself, as it is forced to weave a path through well-established legal, regulatory and policy principles and practices. This is so because the plan would generate conflict with those principles and practices on a wide scale.

At this stage we seek to understand the detail of Labor’s agenda. The difficulty is that the agenda is wrapped up in seemingly good intentions which mask its true consequences.

Many people have asked us for more information. We suggest that you read our summary first and see what you think. We’ll release our analysis progressively.

Self Employed. Marxism. Corruption. Not Above The Law

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discernableAt Self-Employed Australia we’re covering what seems to be a wide range of topics. In fact, these all come back to a central ‘thing’ that we seek to protect—namely, your right to be self-employed should you wish. That is, your right to Be Your Own Boss.

One of our great supporters is Discernable, an on-line blog television channel run by Matt Wong. Matt’s a true self-employed, small business innovator. He’s invested his own money, time and effort to pursue a vision that says that media news and issues coverage doesn’t have to be slogan-slamming but can undertake patient, intelligent coverage of issues.

If you haven’t watched Discernable we highly recommend doing so. If you’re like us, you’re likely to find the long (frequently 2 hour) interviews engaging, addictive and binge-watchable. The stories that come from Matt’s guests are fabulously insightful.

Matt has interviewed SEA’s Ken Phillips on several occasions covering our Not Above The Law campaign and more. Just this week Matt interviewed Ken and SEA chairman Nick Karamouzis.

The interview is available here.

discernable

We covered a range of topics. And to make it easy for you here are the timeslots of the issues we covered.

marxism

We trust our interview gives you a good handle on our campaign efforts.

‘A Tale of 2 Croissants’ and Being a Little Bit Pregnant(?)

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substackI let you know a little while ago that I’ve started posting as a Substack writer. Substack is for obsessive writers (like me). I’ve called my Substack SELF-EMPLOYED AREN’T STUPID!

Substack gives me a platform to write about self-employed issues, ideas, concepts and thoughts that complement what we do at Self-Employed Australia.

So here are some thoughts that might interest you from SELF-EMPLOYED AREN’T STUPID!

A tale of 2 croissants

croissantsI explain that:

“In my home city of Melbourne there’s a near-inner-city suburb that’s rapidly changed from working-class to ‘woke-well-to-do’ class. At the outer edge of the suburb there’s one street that seems to divide the two classes. On the working-class side of the street is a popular bakery run by a Vietnamese family. Not quite half a kilometre away (in the woke-well-to-do section), is another bakery.

The Vietnamese bakery sells croissants for $4.00.

The woke-well-to-do bakery sells croissants for $6.50.”

Read more   

A serious look at being a ‘little bit pregnant’

surpriseThis article looks at the labour academic argument that self-employed people can be a ‘little bit an employee’.  I explain that:

For a long time, Australian unions, labour academics and their political fellow travellers have sought to cut away at the right of people to earn their income through the commercial contract. The Albanese government has committed to doing this later in 2023.

And explain the history and thinking around this idea.

Read more

Independence and the Death of Employment

bookYou may not be aware that I published a book on this in 2008. I’ve decided to make this available through Substack in serialised, chapter format. I’ll progressively release chapters. In this first release I provide the book’s Introduction. In it I quote Roman Emperor Caligula who stated:

“Bear in mind that I can treat anyone exactly as I please”.  That’s real power.

The modern employment contract is a contract of control and power, of one party over another. Few realise this. And much of my (obsessive) journey is to argue against such power and control.

As you are a subscriber to, or member of, Self-Employed Australia, you’ve become part of, or maybe are committed to, the campaign to defend self-employment—that is, escaping the control and power over you that comes with ‘employment’.

I invite you to subscribe to my Substack SELF-EMPLOYED AREN’T STUPID! blog and join me on the further development of this journey.

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.

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.

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’.

Government report: Don’t destroy self-employed gig workers. We agree

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report-gigDespite the Albanese government’s description of self-employed ‘gig’ work as a ‘cancer’, a recent government report (interim) says that such work and workers should not be ‘stymied’. We totally agree and have made a supporting submission.

The Productivity Commission is a high-powered federal government economic research think-tank. What it says is important.

In its (interim) report it studies and makes recommendations on the gig/platform economy. It says:

Regulation should evolve to meet the workplace relations challenge of innovative new business models, without stymying their potential contributions to productivity.

This is a heap of common sense. We hope the Albanese government takes note. Don’t throw the baby out with the bathwater!!

Our submission makes key points of fact.

There’s no confusion between an employee and a self-employed person:

  • An employee earns income through the employment contract.
  • A self-employed (independent contractor) person earns income through the commercial contract.

This legal fact is supported by research conducted by the International Labour Organisation and by international standards to which Australia is a signatory. Like the Productivity Commission, the ILO says:

National policy for protection of workers in an employment relationship should not interfere with true civil and commercial relationships…

We say that employment-structured firms are under competitive threat from gig/platforms and self-employed people. These firms are marshalling their well-entrenched political power to stop or limit the competition for power. This explains the ‘third way’ push which is on the Albanese government’s agenda.

The ‘third way’ push is highly dangerous. It has been rejected by the ILO and is causing great harm in the UK, for example. We explain this in our submission.

We also say that self-employed people are entitled to ‘protections’ but through commercial regulation not employment regulation. For example, protections are already available under laws covering unfair contracts, work safety, collective bargaining (under competition rules), minimum rates guarantees and dispute resolution.

But there is urgent need to reform the workers’ compensation schemes, for example, to allow individual self-employed people to register directly with the schemes without being forced into ‘employment’. Currently, self-employed people are banned from workers’ compensation, a glaring discrimination.

We explain these issues and more in our submission.

Unfair contracts ‘beef up’ – Big tick for Albanese

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albanese-tickIn our comment earlier this week we heavily criticised the Albanese government for its plans to attack Australia’s 2.1 million people under the con of ‘gig protection’. We will continue to mount that criticism.

But today a huge tick for Prime Minister Albanese and his government. The government is moving with great speed to ‘beef up’ the unfair contract laws. This will give real protections to self-employed, small business people from bullying, unethical big businesses. It’s a game-changer for the economy in ways which few people, we think, would understand.

A brief background:

To the credit of the Labor Party, it has supported the creation of these laws since the beginning. In fact, in 2016 the laws would have been useless if not for the hard Senate negotiations conducted by Labor. Now the ALP is moving quickly to beef up the laws. We explained this in August this year.

Our summary of the new laws is here.
The Explanatory Memorandum to the Bill is here (with our highlights).

The key thing with the new laws is that there are big fines for breaching them. $2.5m for an individual and $50m for a corporation.

But back to basics. What do the laws actually prohibit? The laws make it clear that a contract is ‘unfair’ if it gives one party, but not the other, the ability to:

a)  Avoid or limit the performance of the contract.
b)  Terminate the contract.
c)   Apply penalties against the other party for a breach/termination of the contract.
d)   Vary the terms of the contract.
e)   Renew or not renew the contract.
f)    Vary the contract price where the other party cannot terminate the contract.
g)   Unilaterally vary the characteristics of the goods or services under the contract.
h)   Unilaterally determine if the contract has been breached or to interpret its meaning.
i)    Limit one party’s vicarious liability for its agents.
j)    Permit one party to assign the contract without their consent.
k)   Limit one party’s right to sue the other party.
l)    Limit the evidence one party can use in legal proceedings.

That is, the law balances the contractual power between big and small businesses. This is real, serious protection for self-employed and small business people. Now with real teeth, big business will be forced to comply.

To gig or not to gig. Is that the question?

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pub-gigIf you’ve ever been to a pub gig, you’ll have taken part in what the Albanese government wants to (effectively) close down. The Albanese agenda is starkly clear after Workplace Relations Minister Tony Burke declared the ‘gig economy’ is a ‘cancer’.

Here’s a simple example of why we strongly oppose the Albanese/Burke agenda.

The gig economy is not something new. The Stones, Cold Chisel, AC/DC all did and/or do ‘gigs’. Gig is the contractual lifeblood of the entertainment industry locally and globally.

A gig is pretty simple. There’s a contract for a set price to do something. “Come to my pub. Play for three hours and I’ll pay you a thousand bucks”, says the pub manager. “Done”, says the singer. The singing done and the money paid. End of contract.

Somehow, for the Albanese government this is a ‘cancer’.

However, this familiar entertainment industry ‘gig’ model has taken new forms. Now gig work is available for ride-share, food delivery, aged and disability care, and odd jobs. The list goes on. And, yes, the entertainment industry has gig platforms. Gigsmash is but one.

What’s happened is that online technology has made gig work secure. Gig platforms enable anyone wanting to do a job to connect with someone needing a job done. The revolution is that job specifics and price are upfront and agreed by the parties. The gig platforms also make the payments and enable both the ‘doer’ and the ‘receiver’ of the service to rate each other.

It’s fantastic. The risk of not being paid is massively reduced. Think of how many times a pub manager has failed to pay the full amount agreed, screwing over the worker (singer)? It’s the security of payment and security and clarity of the gig work agreement that’s made this expansion of gig work so seemingly popular. And it’s all happened without government sticking its nose in!

But Minister Burke has promised to create laws that will require gig workers to have holiday pay as one eample.

So the pub manager will have to pay holiday pay on top of the $1,000 agreed. How is this to be calculated? Holiday pay is for full-time employees who’ve worked a full year. How is this to be calculated for 3 hours work and no more? Ouch! That has heads scratching! But let’s say it’s $10. It’s clear what will happen. The pub manager will only agree to $990 for the gig. $10 will have to be held back.

But when does the gig singer get the $10? Does the singer determine when it’s ‘holiday’ time or does the pub manager decide? Sounds like a recipe for scamming! So will Albanese/Burke then set up a massive new government-run department to manage gig workers’ holiday pay? Will the singer need to apply to the government for the $10?

But there’s more. Around 830,000 Australians do gig platform work in any year. But only 22,000 use gig for their full-time work. In other words, around 810,000 Australians (about 7 per cent of the workforce) only use gig work as part-time top-up work. How is gig holiday pay to be calculated for all these part-timers?

Whatever Albanese/Burke do, it’s destined to be a mess. The proposal/promise is illogical. It doesn’t fit the reality of how people work. It’s dumb. Its dangerous. It will do much harm.

We will keep arguing against this.

New UK PM sets benchmark for self-employed (tax) rights

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truss-albaneseWe’ve been campaigning for more than a decade for major reform to how the ATO treats self-employed small business people. And since 2000 we’ve studied how the UK tax authority (HMRC) treats the UK’s self-employed. Both the ATO and HMRC seem to have been trained at the same bureaucrats’ ‘bully school’. Both defile the ideas and practices of justice and fairness.

But late last week, the new Truss government took a giant leap by repealing tax administration laws that HMRC has been using to bludgeon the UK’s self-employed. The Albanese government should take note.

What drove the UK repeal was a realisation that the UK laws were doing major harm to the UK’s economy. But more, the issue was cancerous for the Conservative Party’s political future.

The UK issue goes back to 2000. The UK tax authority, His Majesty’s Revenue and Customs (HMRC), views all self-employed people as tax dodgers. In 2000, laws were introduced (called ‘IR35’) which enabled HMRC to declare self-employed people to be employees. The trouble is that, invariably, when the courts looked at HMRC’s declarations, HMRC lost. But they kept destroying small businesses.

In 2017 HMRC shifted tactics. Instead of directly attacking self-employed people, additional new rules, called ‘Off Payroll’, required the engaging business to be responsible for deciding if a person was self-employed or an employee.

In 2021 HMRC applied the new Off Payroll rules to the private sector. This is where disaster struck (again). Third-party operators had evolved since 2017 who claimed that they could manage the Off Payroll rules. The public sector, followed by the private sector, forced self-employed contractors to work through these third-party operators. But far too many of these operators ran their own tax-dodging schemes, stole from contractors, and operated outside the UK to avoid UK laws.

In August 2022 the London School of Economics reported that UK self-employed numbers were down by 500,000, and dropping. It said, “The economy is not going to recover until we start treating them (self-employed people) better.”

This message about economic reality was delivered shortly after Boris Johnson had resigned as PM, but it was already resonating throughout the UK. Rishi Sunak was Johnson’s Chancellor. He introduced Off Payroll to the private sector in 2021. When Sunak made his pitch to become Conservative Party leader he was hammered on social media for his trashing of the self-employed. Liz Truss promised to do something about IR35. Truss won the leadership.

What has caught everyone by surprise is that the new Chancellor’s announcement last week is a complete destruction of Off Payroll. This is a massive embarrassment for HMRC but shows the extent to which the Truss government is seeking a total reset. Dumping Off Payroll is a headline part of a substantial package of UK business encouragement reforms aimed primarily at easing regulatory complexity.

What has all this to do with Australia? Business regulation complexity and bureaucratic stupidity grinds down economic growth. The UK’s HMRC has been doing huge harm to the base of the UK economy, self-employed people.  The ATO is doing the same in Australia. At some point we need a government that will seek a fix.

It’s about collecting tax within a framework of legislated fairness and justice. Here’s our model for a solution. (YouTube)