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The Building Industry: Small Contractors and the ATO

An email from a contractor in Queensland (March 2014)


Thank you for your commentary over the years.

I’m sure you are aware of the fundamental change in the construction industry over the last 4-5 years with the expulsion of small ABN contractors being labeled as “Sham contractors”  This has had a profound impact on productivity at the coal face which is where most productivity is gained and/or lost.  The small contractors have been pushed out of the industry by a fear campaign waged by the ATO, the Unions and FWBC.  We have since changed all small contractors to wage employees and have consequently suffered a loss of productivity and have been making no to negative profits for the last 5 years.  Now we are faced with the prospect of being coerced onto signing CFMEU EBA’s so our tenders will be considered on large jobs.  This is another reduction in productivity and at a time when we are desperately needing margin increase to regain our health its not looking good for the near and long term future.

One of the unfortunate consequences of this change is that now there is very limited pathways for workers to start their own businesses and thus the industry and Australia is and will be missing out on the drive and innovation of those business owners.

Are you aware of any submissions to the Federal Government addressing the small contractor issue in the building industry?

Ken Phillips replies:

Yes: ICA is active on this issue.

ICA has been campaigning on this issue for many years. The situation became particularly severe under the Gillard government. Most recently we have:

  • Directly raised our concerns with the Small Business Minister, Bruce Billson.
  • Had long discussions with senior tax officials about why their system is so damaging and fails to increase (probably damages) tax compliance.

We have been quite open in recommending the shutting down of the ATO’s:

  • “decision making tool’ and
  • removing the reporting compliance on construction companies engaging independent contractors.

With the government about to launch its red tape reduction legislation we strongly recommend that the government include these two changes (closures) in their process.

More info and links in our recent blogpost here.

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