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Submission No. 299 Back to full list of submissions
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AGJ:cfr

 

2 July 1999

 

Dr Alan Preston
Review of Business Taxation
Department of Treasury
Parkes Place
CANBERRA ACT 2600

 

By Email: rbt@treasury.gov.au

 

Dear Dr Preston

RE: Review of Business Taxation

I refer to the announcement of the Prime Minister that he has referred to the Review of Business Taxation for consideration the merits of a 20% alternative minimum company tax and measures to limit the use of company structures for personal services.

MBA Inc is concerned that any changes to the current taxation system for self employed workers should not adversely effect productivity in the building and construction industry.

MBA Inc is the peak body of Master Builders Associations in Australia. Members comprise all of the State and Territory Master Builders Associations. Collectively MBA Inc represents more than 18,000 employers in the building and construction industry.

The share of self employed workers in the building and construction industry is much higher than the economy-wide average. At the present time the building and construction industry accounts for approximately 70% of revenue received by the Australian Taxation Office under the prescribed payment system.

Various studies of the sub-contract system have concluded that this is the most effective method of operating in the building and construction industry, particularly in the housing area, where the majority of the sub-contract arrangements exist. Reasons for this include:

 

  • Sub-contractors can enter the industry with very little capital outlay resulting in a very competitive environment.
  • The system provides an important opportunity for skilled tradesmen with necessary motivation to significantly increase their earnings with their income directly related to their efficiency and the actual times they work; and
  • The system is administratively simple and reduces supervision costs considerably.

Whilst MBA Inc would welcome any improvements to the current system of taxation of sub-contractors and, in particular, any changes which would make it more difficult for those who are not genuine sub-contractors to continue to undermine the operations of those who are meeting their legal obligations, MBA Inc is concerned at any proposal which would substantially alter the competitive nature of the sub-contract system or increase its cost structure to the detriment of the industry and in particular the housing sector.

Any proposals for changes to taxation arrangements in the sub-contract system should be designed to eliminate illegal practices, not designed to erode the competitive advantages to the industry of use of this type of work arrangement.

MBA Inc would welcome the opportunity of detailed consultation with the Review Committee to assist it in its consideration of this matter.

Yours faithfully

 

John Murray
National Executive Director