Even It Up!

Shifting the balance for jobseekers

Guest blogger: more from an ICT contractor

with one comment

Dear Diane,

This (see email below) is probably not a direct reason for avoiding agencies but a very strong motivator.  You may be aware of the PSI legislation (a contractor cannot earn 80% or more of their income from one source) and it would seem that the ATO is just going to the large ICT recruitment firms and throwing one big net over all the contractors that have earnt income through that agency.  In effect the presence of agencies facilitates the ATOs agenda to catch “non contractors”.

The PSI legislation is interesting in its effect.  The government is basically trying to stop people exiting the PAYG system.  The legislation imposes certain tests (results tests) that establishes the bona fides of contractors to operate as businesses.  The reality is that most if not all ICT contractors would fail the results test.  Ironically most ICT contractors think that they would pass the results test but they are wrong. This leaves the income test: meaning that most ICT contractors would need to have at least 2 clients each year to establish the under 80% earning requirement from a single client.

The reason why this is topical is that the current government commissioned the Henry Review into taxation.  The ATO are being asked to show that the PSI legislation has delivered and in a last ditched attempt the ATO is trying to show that they have implemented it rather than (as usual) sit around and hope that it eventually goes away.  Seems funny to say this  about the ATO but they are public servants after all.

The end result for contractors is that if you want to be exposed to the ATOs auditing agenda then continue to go through recruitment agencies. Contractors might think that it is easy and hassle free but many ICT contractors are just about to get a wake up call.  If they do then they might start to seriously consider the model that they are working under.

The only way to be a truly independent contractor is to have a contract with the organisation itself and be able to go from one organisation to another, that is, true independence.

Dear Contractor,

In a recent data matching initiative announced by the Australian Taxation Office (ATO), Paxus Australia Pty Limited has been asked to provide details of payments remitted to various entities (companies, trusts and partnerships) which derived personal services income for the 2007 and 2008 financial years.

This may or may not impact you, however we  wish to advise you that the ATO is requesting this information.
As part of the initiative we expect that  the ATO will match the data provided by labour hire firms (i.e. payments made by Paxus to you according to our records), placement agencies and computer consultancies against the ATO’s  taxpayer records (i.e. Individual Tax Returns filed by you). This work will focus on payments that are mainly a reward for personal efforts or skills, which is personal services income (PSI). Attached is a copy of the Data Matching Program protocol, together with the information request notification for Paxus Australia.

By law Paxus Australia is required to provide this information. This requested data is currently being collated and will be forwarded to the ATO shortly.

If you have any queries on the above, please contact your Accountant/Financial Adviser or the ATO on the contact details provided.
Contractor Operations

Written by evenitup

July 15, 2009 at 5:27 pm

One Response

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  1. Actually this is only partially true. The same measures exist (in that the 80/20 rule) applies to both business and agencies alike. Although this particular agency got a really bad rap at review recruiter, http://www.reviewrecruiter.com.au

    John Fitzpatrick

    March 17, 2010 at 9:50 am

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