Vulnerable small business operators denied tax justice

The Australian, November 29, 2017 – Robert Gottliebsen

When governments set policy and back it with tangible action, business usually responds.

And so there was no surprise when Adam Creighton this week revealed that there has been “an extraordinary collapse in the number of businesses being launched in Australia”.

The Australian Taxation Office, with the apparent blessing of Treasurer Scott Morrison and Revenue and Financial Services Minister Kelly O’Dwyer, has devised a simple and devastating way to play a role in reducing the new business numbers—refuse people the right to carry on business by stopping them obtaining (or sometimes even cancelling) Australian Business Numbers.

The minister directly responsible, Ms O’Dwyer, has no power to direct the ATO but she does have power to conduct reviews and appoint an independent arbitrator to decide tax matters.

In accordance with the Westminster system she must therefore take responsibility for the basic direction of ATO actions.

In essence, what is at issue is the way Australian small business should be conducted.

But it is a national scandal that the ATO should deprive some of the most vulnerable people in the community because they don’t conform to the ATO version of how Australian small business should be conducted.

My readers will be well aware of the fact that I believe that small business in Australia is entitled to an independent appeal review outside the internal tax appeal systems. Courts are too expensive.

The failure of Morrison and O’Dwyer to provide proper tax justice to small business in Australia contributes to the fall in small business numbers. When public servants deprive small businesses of income by withdrawing ABN numbers the message spreads like wildfire around the nation.

Well-meaning ministers like Assistant Minister for Industry, Innovation and Science Craig Laundy are wasting their time trying to promote new business establishment in these circumstances.

Before detailing how all this works and the easy solution that is available, let me first share the sort of people the ATO is now targeting.

Here are a few of them:

* A stay-at-home mum with 2-year-old who has health issues including neurological chronic pain;

* A wife whose husband is main breadwinner but who gains a seasonal income making cards, and via contract typing from home. She also has part — time job as a receptionist;

* The next generation — a university student;

* A single woman living remotely in the NSW Blue Mountains where jobs are scarce. She has an auto-immune disease which means she is unable to work for periods of time;

* A single woman in her 60s who is totally open in declaring contracting income that supplements her Centrelink benefits.

As far as I can determine all have been totally honest in revealing their income.

By refusing these people and many others Australian Business Numbers the ATO stops them earning income because they then can’t undertake contracting, so can’t earn income unless they are employed.

The above people all need ABN numbers to contract to transcribe the dictation of solicitors, company minutes and a myriad of other transcription tasks. An intermediary company assembles the work and then contracts it out. The ATO declared that the people doing this work should be employed by the link company and not be contractors.

That was never going to happen because its contract work can be just as easily contracted offshore.

More importantly, around the country contracting is the way small business is increasingly being conducted. This is public servants imposing their model on Australia, starting with the most vulnerable.

Under the Australian Business Number Act a person can hold an ABN if they are an “enterprise”. Under the ABN Act the definition of enterprise links to the definition of enterprise under the Goods and Services Act. Under the Goods and Services Act an enterprise “ … includes any profession, trade, employment, vocation or calling but does not include an occupation as an employee”.

To a lay person if you contract to undertake transcription and choose the work you want, working when you want and are paid per job, using your own equipment, then you are a contractor.

If O’Dwyer and the ATO believe that understanding of the law is wrong then there is a well-established system to determine the outcome —you conduct an ATO-funded court case to determine what the act means. And you let the vulnerable continue to earn an income until the case is decided.

In the unlikely event that the court rules that contract transcribers should be employees then we need to change the act.

Instead the ATO simply took away the ABN numbers to deprive the vulnerable of income.

It was a despicable act made worse by the fact that the ABN withdrawals appear to have been targeted at one intermediary company. Indeed one transcriber was told that she could keep her ABN if she did not work for this company.

She took careful notes of the conversation. Again I emphasise that Kelly O’Dwyer does not have the power to direct the ATO.

But when the ATO tries change the way small business is conducted in Australia by attacking the vulnerable and not conducting test cases then any minister is duty bound to use the powers that the parliament allows.