Aussies get lucky

Australians will often tell you what a great country they live in: the climate, beaches and sporting culture. Many UK knowledge based contractors, who up until now have not given a XXXX about Australia, may suddenly change their views on the country of amber nectar and honey. For at the last minute, the Australian Treasurer has scrapped proposed regulations similar to IR35, aimed at preventing workers claiming business deductions under the guise of being contractors.

Originally the Australian government planned to raise $500m (£185m) a year with the crackdown, aimed at slowing the growth of contracting – where workers set-up as contractors to avoid PAYE. Sensibly, instead of casting a net to catch all contractors, as has been done in the UK, the Australian proposals meant that any contractor who earned more than 80% of their income from one source, would have to obtain a special ruling from the Tax Office. So whilst not all contractors were caught in the original proposals, even these have been scrapped!

After lobbying by the IT and building industries as well as backbenchers, the Treasurer has now gone on record saying,

(Originally the proposals aimed) to set up a system whereby people who are really employees couldn't pretend that they were contractors and walk out of the PAYE system, but you had to protect genuine contractors who really are in business. And what we are trying to do here is protect genuine contractors….those people who have always been recognised as contractors continue to be recognised as contractors and treated as people in business.

To avoid having to have a special ruling by the tax office, contractors would need to satisfy only one of four special criteria:

- Have business premises

- Have two or more related clients

- Satisfy the Tax office that the business is not loss making and that equipment is supplied, such as a laptop

- Have one or more employees who perform at least 20% of the work.

New businesses have also been given a two year grace period from the above.

The u-turn has come about after strong lobbying by traditional contracting sectors, such as building, as well as those in the new economy. The original proposals have been softened considerably to protect fledgling dot com start-ups and businesses in the IT field. Also there had been concern that the Tax office would not be able to cope with the flood of status requests.

The Australian government has evidently listened to the voting public and acted in the best interests of those who make up the working economy. They are obviously looking to avoid closing businesses and forcing contractors overseas. Furthermore they appear to have understood that in the global economy, the IT sector needs to be nurtured, not nailed. Perhaps New Labour could take a leaf out of the Aussie book.

(And if you are quick, you could be in Sydney in time for the Olympics.)