CAVE:
Well, we’ve been joined now in our Canberra studios by the Federal Treasurer Peter Costello. He’s speaking to Fiona Reynolds.
REYNOLDS:
Treasurer, how much is this decision a result of a cave in to pressure?
TREASURER:
Oh, this is a, as we said, the process of consultation. When John Ralph brought his report down he said that you had 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’re trying to do here in legislation, which I’ll be introducing today, is to protect genuine contractors. Now, generally speaking, a contractor has numbers of clients, and anybody who has numbers of clients is considered to be a genuine contractor. But you do get that situation, particularly in the building industry, where a self-employed carpenter, or a plumber, or somebody like that, may just work on job to job for the same builder. They’ve always been recognised as a contractor, they bring their own tools, they’re paid by the job, and what this legislation says is, those people who have always been recognised as contractors will continue to be recognised as contractors, will be treated as people in business.
REYNOLDS:
How much is this going to cost the Budget given that you made a commitment that the Ralph reforms, as well, would be revenue neutral?
TREASURER:
There is a transitional provision which will have a cost to the Budget, a two year . . .
REYNOLDS:
Of what?
TREASURER:
. . . a two year transitional provision. Well, at the end of it, the measure still raises in its first year, I think, $190 million or something of that order. The two year transitional provision is this. That if you are in the prescribed payments system, that is, you’ve already been recognised for prescribed payment system purposes, then that will be recognition that you are in business, that determination will last for two years, you won’t have to apply for a new determination until the expiration of a two year period, because you’ve always been recognised in the prescribed payments system.
REYNOLDS:
But, will the Ralph reforms still be revenue neutral?
TREASURER:
Oh yes, the Ralph reforms are revenue neutral, and they’ve been set up to be revenue neutral. This is a transitional measure which will have a cost, but the full measure will still be implemented as recommended by John Ralph. And the reason why we’re having a transitional measure is, first, if you’re in the prescribed payment system you’ve already been recognised by the Tax Office as being somebody who’s independent. And the second reason is, if you didn’t give that class exemption, as it were, to people on a prescribed payment system, the Commissioner could be looking at 130,000 applications between now and 1 July, which would have to be individually determined. So, the Commissioner will be able to say, anyone on the prescribed payment system has the advantage of a two year transitional period.
REYNOLDS:
Treasurer, thank you for joining us.
TREASURER:
Thanks very much.