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Wednesday, 23 March 1994
Page: 2109


Senator WATSON (6.08 p.m.) —The opposition will oppose clauses 80 and 81. We are dealing with part 4 which amends the Superannuation Guarantee (Administration) Act. During the evaluations of this original bill in relation to the superannuation guarantee certain undertakings were given as to the definition of wages as per the Income Tax Assessment Act. Over the years we have been accustomed in this place to the terminology called `bracket creep' whereby insidiously the effective revenue available to the Commonwealth is increased as a result of inflation. Personal income rises, but no adjustment is made to the tax rates.

  I would like to introduce the term `coverage creep' because this amendment puts beyond doubt the fact that the original definition of the term `wages' has been extended to cover contractors. It is a somewhat unfortunate extension. It comes under this broad heading of coverage creep because, as a result of efforts to ensure that contractors services come under the ambit of the PAYE system—certainly under the coverage of the superannuation guarantee charge—the concept of wages has been ever widening. This has lead to some pretty artificial arrangements that I do not agree with, particularly in the building trade.

  For example, some large builders say to their contractors, `You will not be employed on this job unless you incorporate, because without that incorporation, with you as a contractor, we will be subject to the superannuation guarantee arrangements'. Because of the administrative complexities and costs, a large number of building contractors are asking people such as tilers and other contractors to incorporate. Those contractors then go to a lawyer, seek incorporation without knowing the full consequences, and get caught up with all the problems associated with the filing of returns and the other requirements of a corporation.

  We believe that there is quite a distinction between the reward paid to employees and contractors—particularly independent contractors—on the basis of control and independence. For that reason we have serious concerns about a number of aspects of the superannuation guarantee charge. I remind the Senate that the Senate Select Committee on Superannuation, of which Senator Sherry was the initial chair, is looking at the ramifications of the superannuation guarantee charge, and a number of issues will be under evaluation, particularly the position of casual and part-time workers.

  During the conclusion of the debate on the second reading, we expressed general concerns in relation to contractors. We lost that debate because of the combined forces of the other parties. I do not intend to put this to the vote because I believe it would be a waste of time, but at the same time I do wish to have recorded in Hansard our total opposition to clauses 80 and 81.