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Thursday, 28 February 1985
Page: 345

Mr CADMAN(10.01) —In addressing this legislation yesterday, I was drawing attention to the problems which the interpretation of the Commissioner of Taxation had placed on numerous consultants and small business people when the Commissioner chose in Ruling No. IT 2121 to impose penalties and taxes on family companies and trusts in relation to income from personal exertion.

This is a most deplorable matter. It has caused widespread disruption, great concern and real damage to many small business people throughout Australia. People who originally entered into arrangements whereby they could go out and seek work from a range of clients are being seriously disadvantaged. The Commissioner has levied taxes, fines and back payments to the extent, in many instances, of $40,000 or $50,000, which he has gathered through a process under existing legislation to convince people they should meet assessments dated before 28 May 1981.

Mr Robert Brown —You know that the honest ones have nothing to worry about.

Mr CADMAN —That is not true; that is far from the truth. If the Government believes that, if that is the Government's attitude, it will be condemned by every small businessman in Australia. What the Government is doing in fact is, by a back door process, forcing the unionisation of many areas which are not currently unionised. It is denying access and opportunity for people of capacity, drive and good intentions for themselves their families and the people of Australia. Many of those individuals have been denied the opportunity of regular employment. They have been told by their former employers that the only way in which they will be able to maintain a regular income is by becoming a consultant or subcontractor to that company. They have no option; either they lose their job or they become a consultant. In many instances they have gladly taken up the opportunity of becoming a subcontractor or a consultant, because it gives them a range of opportunities that had not existed for them previously.

However, the Commissioner, in his interpretation of the Federal Court of Australia case of Tupicoff v. Commissioner of Taxation, has said that he is not concerned about the details of the arrangement. As long as that person has changed the process of his arrangement with the company which is providing the funds, that person will be regarded as an employee. That is a deplorable approach and a deplorable decision, and it is supported by the Australian Labor Party.

It is a dreadful thing that the Treasurer (Mr Keating) will not apply his mind and his skills to these matters, instead of trying to trick the Caucus into accepting a larger number of banks than it thought Australia was going to get. He should apply his mind to the real needs of the nation, such as the clearing up of the present tax fiasco. It has created great concern and disruption all around Australia because nobody knows what tax will be applied next.

The Treasurer should apply his mind also to this decision made by the Commissioner of Taxation. The Commissioner has said some incredible things in his ruling. He has said things about employers and employees that show a naivety, a lack of understanding, about working relationships within the community. Many individuals, having been forced to change their relationship with a company, have established bona fide private companies and have set up offices within their homes. They do not have the capital to rent professional offices and hire secretaries, or in every instance to buy equipment, but they have established a proper process of business. Where will it stop? Already the Commissioner has said that he is chasing people involved in industries such as mining, computers, insurance, motor vehicles, real estate and entertainment. There is not much more left. My friends in the building industry and in other important industries indicate that they will be next in line. The man on the tools and the man and his mate who go out with a skill will need to be very cautious in the way in which they approach their work from now on. The writing is on the wall; the Commissioner will pursue people who are bona fide, legitimate small business people.

These people have taken the big plunge, they have made the decision to go out on their own-sometimes coercion can work in more than one way because the Commissioner has taken the extraordinary step of writing to major contractors asking for details of their arrangements with sub-contractors and consultants. It is extraordinary for the Commissioner to write to a head contractor and say: 'I want the details of your arrangements with your sub-contractors'. The Commissioner has a responsibility to gain tax from those who owe it, but he should be dealing directly with the individuals about whom he is concerned rather than the people who employ them or use their services. My friend the honourable member for Charlton (Mr Robert Brown) nods his head in agreement. I know that we agree in this area. I must convince members of the Australian Labor Party that they are cruelling every opportunity for small business and the fear that has been put through the whole of the small business community cannot be underestimated. This matter involves 250,000 taxpayers. That is a large number, and in many instances they and their families are being asked to pay as a result of assessment fines and charges which they cannot meet. They have no resources to meet those fines and charges. The Commissioner, in paragraph 6 of his findings, said:

There are said to be advantages to the former employer in these types of arrangements in as much as there is no longer any obligation to take out workers compensation insurance and to make tax instalment deductions. In some cases the former employer has also sought to escape the obligations for providing recreation and sick leave.

Why should any former employer be obliged to make those payments? It is not an employer-employee relationship; it is one between a contractor and a consultant. It involves a prime organisation. Surely the Taxation Commissioner must go back and look at these issues. That is a completely fallacious and biased statement written by somebody who does not support the concept of small business and individual effort. It is written by somebody who believes that there should be only major employers and major unions, and if people do not fit into that category then they are not wanted in Australia. The steps taken by the Commissioner will destroy much of the small business incentive in Australia.

This is a dreadful thing that the Commissioner has done. One has only to read his ruling to see what a biased approach has been taken in this matter. Again the Commissioner has chosen a very unusual type of case on which to base his ruling. He has chosen the case of Tupicoff v. the Commissioner of Taxation in the Federal Court of Australia, a case in which all the factors of previous employment were carried on by an individual who called himself a consultant. I would like the Commissioner, the Treasurer and honourable members opposite to investigate very clearly the circumstances of people within their electorates, within Australia, to establish how many actually reflect this Tupicoff arrangement. I suggest that there are very few indeed.

Let me give but two instances. One of the draftsmen employed by a major Australian company was told that his employment was not further required and that his employment would cease at the end of one week's notice. In the same discussion he was offered the opportunity of becoming a consultant the following Monday. He was told that he would be sacked if he did not become a consultant. He was sacked anyway but he had the option of becoming a consultant or getting no work. He took up the consultancy and for almost one year worked consistently and solely as a sub-contractor for that employer. Gradually, as an individual, he picked up a diversity of work from other clients. It takes time to establish a business. It takes time to get out and make one's name known in the market place. It takes time to build up the contracts and to become an effective consultant operator for a draftsman, a real estate agent or somebody in the automobile industry. That is what the Commissioner has failed to recognise. In this instance the Commissioner is saying that the draftsman that I am speaking of will be regarded as an employee for a portion of his period of self-employment and, for the other period he will be considered to be self-employed. Imagine anything so ridiculous. A man who is establishing his own business for the first time is told--

Dr Klugman —Mr Speaker, I raise a point of order. I was just wondering whether the honourable member had entered for the hypocrisy prize.

Mr SPEAKER —Order! I have already warned honourable members about frivolous points of order.

Mr CADMAN —Mr Speaker, if you do not ask the honourable member to withdraw I will use that word consistently in the House.

Mr SPEAKER —Order! I remind the honourable member for Mitchell that the term was not applied to him; it was applied to a prize. As such it was not out of order.

Mr CADMAN —Is it proper for me to speak of the hypocrisy of the Government, and the double dealings of this Government in the way in which it has dealt with consultants?

Mr SPEAKER —Order! The honourable member's time has expired.