Transcript No. 2000/32

TRANSCRIPT OF

TREASURER

Well, we’ve been joined now in our Canberra studios by the Federal Treasurer Peter

Costello. He’s speaking to Fiona Reynolds.

Treasurer, how much is this decision a result of a cave in to pressure?

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.

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?

There is a transitional provision which will have a cost to the Budget, a two year . .

.

Of what?

. . . 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.

But, will the Ralph reforms still be revenue neutral?

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.

Treasurer, thank you for joining us.

Thanks very much.