ACT Payroll Tax Changes
The ACT Payroll Tax adjustment to 6.85% has been pushed back a further 3 months, by Treasurer Andrew Barr till January 2015, giving contracts extra time to adjust to the change.
The tax was announced in the June budget, taking Canberra’s contractors by surprise, with an estimated 1000 contractors losing their payroll tax exemption and facing pay cuts amounting to thousands of dollars.
The tax change was to take effect on July 1, but under pressure from contractors the government pushed the start date back to September 1. Now after further criticism from the cross-party estimates committee, Mr Barr pushed the date back further, to January 1.
Contractors complained that they had already signed 12 month contracts to June next year before the new tax was announced and rather than their employers absorbing the tax, they were to pass it to the contractors instead, cutting their pay to cover it.
The Canberra Times spoke to an IT contractor Howard Taylor in ACT who explained the further delay was “a win” but would still adversely impact income for thousands.
“It is better, but to us it is still a retrospective change because we’d all signed contracts before the changes were announced,” he said.
“I think you will find everyone still believes they are being unfairly hit and have no way of avoiding the tax. The whole premise of what the Treasurer was saying is people are doing something that is illegal because we’ve been exploiting a loophole, but that is what every taxpayer does if they can.”
Mr Taylor said even with the now six-month delay, the change would cost him about $500 a month. He also predicts further action from contractors working in the ACT, and suggested that the change should be pushed back to the end of the financial year so people can adjust properly.
Compas Recruiting Services, Partner John Vassallo claimed the changes didn’t go far enough and called on Mr Barr to exempt all contracts signed before the budget and extending beyond January 1, 2015. He suggested that existing contracts should stay under the old rules and any new contracts from the legislation date can pay payroll tax.
Mr Vassallo furthered by stating “We might have to terminate a few of the existing contracts if the employee doesn’t agree with the reduction in the rate.”
Opposition treasury spokesman Mr Smyth said Mr Barr’s moves showed the tax changes “were wrong from the start”.
Mr Smyth said contractors should continue to pressure the government to halt the implementation of the change until the start of the 2015-16 financial year.
The move was expected to bring in an extra $10 million a year in tax, an average of $10,000 for each of the 1000 contractors the government estimated would be affected by the new regime.
