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One man has the potential to single handedly make Tony Abbott Prime Minister of Australia – Assistant Treasurer Nick Sherry.
Sherry appears to be concocting one of the biggest attacks ever mounted on the small business community by a government minister in direct violation of solemn promises made by Kevin Rudd’s ALP at the last election.
Once Tony Abbott understands what Sherry has on his agenda, the Coalition will realise that unless Sherry is well and truly put back in his box, Anthony John Abbott has a real chance to be Prime Minister later this year.
These are not claims I make lightly. Both John Howard and Peter Costello were very careful to make sure that small enterprises had to be treated fairly and sensibly.
At the last election, Kevin Rudd might not have been elected had his party not guaranteed in writing to continue the same basic policy. And until now, Rudd and his people have honoured the ALP promise.
But in the background is a seething union movement that wants small contractors to be turned into employees so they can be put in their web.
In a nutshell, what happened was the Board of Taxation came up with a series of outrageous recommendations and Sherry – instead of saying that these recommendations were against ALP policy and that they would send small business into chaos – gave them his blessing and even thanked the unions for their input. Sherry has sent them off to the Henry Committee for review (Full coverage: Henry tax review).
So here are just a few of the ideas that Sherry now has on his agenda.
Each plumber or computer consultant in Australia will need to differentiate between their income from capital (spanners, shovels and computers) and their income from labour (digging the ditches and writing software).
Under the Sherry-blessed plan, part of the income derived from labour would be attributed to the person who supplied the labour and those people would be treated as employees – not business people. The income earned on capital could be returned to the owner(s) of the capital, which may differ from the person who provided the labour. Have you ever heard of anything more stupid? But the Sherry-blessed plan gets worse.
The plumber and computer person must make an annual report to the ATO so that the ATO can match data to see how many clients they have had in a year. If more than 80 per cent of the business income came from one group then whammo! You are an employee.
And once the plumber and computer consultant are deemed to be employees, all their business deductions will be looked at in a different light. Their customers may be required to deduct tax when they pay the invoice.
And, oh yes, every business must have two employees to be a business.
There are a lot more crazies being considered, but that’s enough to confirm that, potentially, this is a candidate to rank as the biggest attack anyone has ever mounted against the Australian small business community.
The whole Sherry plan will bind the small enterprise community in red tape and slash Australian productivity. Sherry justifies the proposals this way: “The use of sham contractors is a threat to the integrity of the taxation system and a threat to working conditions of employees – and the Rudd government is determined to see an end to its inappropriate use.”
No one will argue about that principle. The first step is to determine from the Australian Tax office what the problem is and then you fine tune the ALP policy presented at the last election.
You don’t send the whole small business sector into chaos because a few people are sham contractors. The first alert to what was on the Sherry agenda came from Ken Phillips in a report Business Spectator just before Christmas, which also has links to the actual Board of Taxation report and the Sherry press release.
Both the coalition and ALP research shows that small business people tend to congregate in marginal seats. In the last election they were not under attack from either party and voted on other issues. But in 2010, once Tony Abbott explains to them what Nick Sherry has put on his agenda they will vote almost as one.
The latest statistics show that 212,000 of the small business people Sherry is targeting live in 20 marginal electorates and they will each influence two or three more voters – at least. The 212,000 business people in Sherry’s sites vote in Bass (Tas); Bennelong (NSW); Bowman (Qld); Braddon (Tas); Corangamite (Vic); Cowper (NSW); Deakin (Vic); Dickson (Qld); Flynn (Qld); Hasluck (WA); Herbert (Qld); LaTrobe (Vic); Macarthur (NSW); McEwen (Vic); Paterson (NSW); Robertson (NSW); Solomon (NT); Stirling (WA); Sturt (SA); and Swan (WA). The coalition will soon know how many Sherry targets are in each electorate.
Mark Westfield undertook a fascinating analysis of where Labor and Liberals might win seats in the next election. When he wrote that, Westfield had no idea that Nick Sherry was canvassing a policy that, if left unchanged, would almost certainly deliver the above 20 marginal seats to Tony Abbott and give him government.
Kevin Rudd says that he needs to improve. The first improvement should be to tell Nick Sherry about the ALP promise at the last election. Unless he rejects the crazy ideas of the Board of Taxation, Rudd should find someone to be Assistant Treasurer who understands small business.
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24 Comments
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Don Gilbert wrote:
Both sides of politics have promised empty promises to small business for years (see One man can make Abbott PM, March 3).
In my opinion, Howard was elected on the small business ticket; similarly, part of Rudd's popularity was a disenchanted small business ticket. Neither delivered.
At the next election their promises will be etched in stone. Watch this space.
3 Mar 2010 8:36 AM
Andrew Punch wrote:
How is this different to the anti-business personal services income test that the Liberal party introduced? (See One man can make Abbott PM, March 3.)
In fact, by allowing capital related income to be split out, this is actually more pro-business than the Liberal party's policy. As such, I really can't take this article seriously.
3 Mar 2010 9:25 AM
Paul Frost wrote:
This is almost as crazy as removing the 'exempt foreign income' category for those working abroad, with only 6 weeks notice (see One man can make Abbott PM, March 3).
That decision was unforgivable. Most of us affected by it simply left the country altogether and took the money we were spending in Australia with us. I see this government as being totally inept. I was brought up to vote Labor and did so for half my life, but never again will I vote for a 'working man's party'.
3 Mar 2010 10:49 AM
Bob White wrote:
If the Prime Minister stops this now because of the political sensitivity in an election year, he will certainly not stop it if he gets re-elected when the same mandate does not apply (see One man can make Abbott PM, March 3).
3 Mar 2010 11:48 AM
Jeff Appo wrote:
Sherry has been told to stir up some dust, make a few threats to those in these marginal seats – only to reduce or retract same approaching the next election, as a 'give' to those small businesses; who then feel relived and justified in staying the course. (See One man can make Abbott PM, March 3).
3 Mar 2010 1:04 PM
Josef Franek wrote:
You are right, Robert. (See Have big four profits peaked?, March 3.)
If the taxman needs more money, he should be looking at the banks, miners and top end of town. I am sure you and the BCA will agree with that.
3 Mar 2010 1:36 PM
Gavin Putland wrote:
"Their customers may be required to deduct tax when they pay the invoice." (See One man can make Abbott PM, March 3.)
Unless the ATO pays the customers for this service, this would appear to violate s.82 of the Constitution: http://tribune.grputland.com/2009/06/making-tax-system-comply-with-s82-of.html .
3 Mar 2010 1:53 PM
Eames Tony wrote:
As you outlined it, the Sherry plan is sheer insanity. (See One man can make Abbott PM, March 3.)
Bearing in mind how many small businesses operate on the knife-edge of viability and how many older owners of such enterprises are debating whether or not to continue working, such legislation would surely convince them to close shop immediately.
And have our ideology-driven mandarins considered the productivity-robbing consequences of yet another layer of compliance-related paper-shuffling?
If his colleagues fail to talk sense to Sherry, this 66-year-old is definitely heading out the door.
3 Mar 2010 2:11 PM
Laurie Hodder wrote:
This is scary stuff. But will enough people realise its implications? And will they act early enough to bury it? Common sense just isn't very common is it!
(See One man can make Abbott PM, March 3.)
3 Mar 2010 2:11 PM
Mark Schrader wrote:
If this is just the beginning, one can only imagine what they would do if elected to a second term. (See One man can make Abbott PM, March 3.)
The problem is that they do not care about the small businessman. The union movement will somehow try to get a share of their income to fatten the account balances of the union movement. This in turn spills over to the advertising campaigns of the Labor Party. The connection is obvious and simply put – you get what you elect to Parliament, social manipulators or those who want to help society move from strength to strength.
3 Mar 2010 2:34 PM
Jim Manning wrote:
Robert you have done it again – well researched and well delivered. (See One man can make Abbott PM, March 3.)
Small business still remains a very large employer in this country. To abuse it is to threaten the very essence of Australian economic stability.
3 Mar 2010 3:05 PM
David Tobias wrote:
"The plumber and computer person must make an annual report to the ATO so that the ATO can match data to see how many clients they have had in a year. If more than 80 per cent of the business income came from one group then whammo! You are an employee." (See One man can make Abbott PM, March 3.)
The 80 per cent rule from one source has been in effect for many years – how is Sherry's proposal different to the existing law?
"And, oh yes, every business must have two employees to be a business".
This is simply bizarre. So are you saying that Sherry is banning genuine one-man businesses?
3 Mar 2010 3:36 PM
Brent Walker wrote:
And I thought that Labor had already totally upset small business with their changes to superannuation contribution limits and their changes to what is constituted as income for a whole range of purposes including the Medicare levy. (See One man can make Abbott PM, March 3.)
Small business is also worried about their removal of the Medicare rebate to many of their constituency. About the only section of small business that hadn't already thought Labor was on the nose was the dodgy fly-by-nighters who are taking advantage of the home insulation program and the school hall building program and as far as I am concerned Labor is welcome to their votes as they don't amount to many. I used the past tense deliberately here because even many of these dodgy fly-by-nighters working on the insulation program are very unhappy right now and the ones ripping us off on the school hall program must be concerned that their gravy train is about stop anytime soon.
3 Mar 2010 3:42 PM
Peter Alexander wrote:
Brilliant article – brilliant. (See One man can make Abbott PM, March 3.)
The Rudd government is worse that the Whitlam government, and, like the Whitlam government, they are so incapable they cannot even learn from guidance such as this. This will be a one term government. Thank you for this article.
3 Mar 2010 3:45 PM
Elizabeth Barrett wrote:
I read your commentary once regarding the Sherry plan. I read it again as I couldn't believe what I was reading! (See One man can make Abbott PM, March 3.)
What's the cost/benefit of this madness?
What's in it for small business people (when paperwork is already the bane of their lives)?
The notion that every business must have two employees...where did that wisdom come from?
Is it a case of commonsense being very uncommon?
3 Mar 2010 4:22 PM
Bruce Armstrong wrote:
I agree completely.
Being resourceful, there are ways to avoid or accomodate this sort of legistaion, but the most direct is to rout the party the proposes it. (See One man can make Abbott PM, March 3.) On this one issue, I would be happy to distribute Liberal 'how to vote' cards at the next election.
3 Mar 2010 4:59 PM
Brendan Edgar wrote:
I couldn't agree more, I am a sole consultant, I particularly object to this myth that the system is being rorted by some unstated body of sham contractors. Where are the stats to back up the claim? How insulting that the government and tax office always start with a presumption of guilt. I pay an awful lot of company and personal tax and get legitimate deductions. What a bland world for Australia if we all have to go back on the payroll, plus the loss of productivity. The building, IT, courier sectors to name a few would be thrown into absolute turmoil. (See Have big four profits peaked?, March 3.)
3 Mar 2010 5:05 PM
Ian Fleet wrote:
An interesting analysis of Nick Sherry's determination to alienate and disrupt 212,000 small businesses in 20 marginal electorates (see One man can make Abbott PM, March 3).
But let's not forget Stephen Conroy's determination to alienate the 2 million Telstra shareholders, many of whom would also live in marginal electorates. Could Stephen Conroy already be the one who has made Abbott PM?
3 Mar 2010 7:05 PM
John Davidson wrote:
Since I retired I have worked as a casual design and commissioning engineer in the mining and construction industry. I have worked as a casual rather than a contractor because of the cost and difficulty of getting professional indemnity insurance.
To my mind there should be no difference in the expenses that can be claimed based on funny rules for determining who is a contractor (see One man can make Abbott PM, March 3).
3 Mar 2010 10:48 PM
David Chew wrote:
Worse than the situation for plumbers, a lot of doctors and other health professionals also work on a sole trader or small business basis (see One man can make Abbott PM, March 3).Can you just imagine the chaos.
As it is, the new fair work arrangements are putting considerable stress on this sector in which workplace flexibility is of utmost importance, given the unpredictability of health presentations.
3 Mar 2010 11:53 PM
C Chaaya wrote:
Forcing people to become employees is a ridiculous idea. In my opinion, even if a person gets 90 per cent of his income from one source and wants to consider himself a contractor, it should be encouraged (see One man can make Abbott PM, March 3).
Such a person wants to stand on his feet and be independent, rather than link his future to the decision of one boss.
4 Mar 2010 8:00 AM
Keith Armistead wrote:
Dear sir,
Regarding the article One man can make Abbott PM (March 3):
I am now retired but my wife and I previously ran a dairy farm, with 280 cows tuning over more than $500,000 per annum, with no employees. Instead, we made use of contractors for a lot of specific jobs.
However, we had one person, who we allowed to remove fallen trees from the property to sell as fire-wood. He also used to do contract maintenance for us around the property with his own equipment. We would tell him what was required and he would do it at whatever hours suited him, as he had other contract employment a well.
As we had no employees, under these proposals would we, and many others be classed as business's while having a multi-million dollar investment?
Would that person have to be made an employee and if so, would this affect his ability to work flexible hours?
This may well have a very severe impact in rural areas as well as in the urban environment.
4 Mar 2010 8:58 AM
Robert Lenne wrote:
I am self employed and this would definitely have an impact on the way I do business (see One man can make Abbott PM, March 3).
4 Mar 2010 9:00 AM
Ben O'Grady wrote:
The Labor party does not need an opposition – they are their own worst enemy (see One man can make Abbott PM, March 3).
They sooner they are relegated back into the shadows, where their ideas can't hurt the economy, the sooner the bulk of hard working Australians can get on with facing the true challenges in life, rather than this rubbish.
5 Mar 2010 10:28 PM
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