Senator KEMP (Assistant Treasurer) (3:03 PM) —Senator Murray asked a question without notice to the minister representing me, Senator Ellison, on 2 December on whether the government would consider legislation allowing the Australian Taxation Office to deem contractors as employees. I seek leave to incorporate into Hansard the additional response to the question.

Leave granted.

The answer read as follows—

RESPONSE TO QUESTION FROM SENATOR MURRAY ON DEEMING CONTRACTORS AS EMPLOYEES

The response read as follows:

The Government has proposed legislation as part of its tax reform package that will address the concerns of Senator Murray.

Specifically, the introduction of the Australian Business Number (ABN) will provide an opportunity to improve compliance. Businesses will generally be required to issue an invoice quoting their ABN. In most cases this will happen as part of the normal GST arrangements for tax invoices.

These quotation arrangements will be complemented by the new pay as you go (PAYG) system. The withholding arrangements under PAYG will apply to payments to employees and other office holders covered by the existing pay as you earn (PAYE) system.

In addition payers will withhold:

. from specified payments, such as labour hire arrangements;

. from a payment for work if the payee agrees to instalment deductions being made; and

. from a payment on an invoice that does not include quotation of an ABN.

This approach will do away with the need for difficult judgments by the businesses about whether the service providers they engage are employees or contractors.