2 million self-employed
Their interests are our interest
It's your contract: Take control of it!
We say you should control your contract. Here's how. Check for clauses that are:
Red for Stop
Amber for Caution
Green for Go
You can also make use of our Contract Template to design your contract.

Matrixes and template are available here (ICA members only). Not a member? Join here for as little as $55.
You and Your Contract
Charter of Contractual Fairness.

Debate: Suck it up?

Contract problems?
Fixing business disputes
There's lots happening for new dispute resolution services for small business people. The Small Business Commissioner (SBC) model is being rolled out across Australia. Explanation of developments.
Watching: The new world of work
We track and discuss what's happening with work.
The new Cuban revolution.
Watching: The coordinated attack against self-employed in Australia
Do unions hate the self-employed?
Federal tax attack
Sham contracting small problem
Watching: New Technology
Opportunities and new threats for self-employed people
Left versus right: the great debate
Ken Phillips (ICA) and Peter Strong (COSBOA) debate "The Future (or Death) of Employment". Vids are here.
Our Campaigning
We need unfair contract protections
Defend contractor tax laws
Watching: Your Super
We're monitoring superannuation
Watching: Work Safety Laws
Harmonised laws have big problems.
Watching: Government Contracts
Military Aircraft (JSF)

National Broadband Network
Watching: Fair Work Act
We're watching

What the AIG wants
Handy ATO Links
Filing your tax return:
A member's problem
ATO advice

Handy ATO tax links:
ATO debt collection: overview
ATO debt collection: 'Products'
Guide to managing your debt
Not-for-profit tax guide
Lodge your BAS online
PAYG withholding tax tables
New tax form: Taxpayer Statement of Account
New tax form: Notice of Assessment
Mortgage scams
Small business support
Payment arrangement calculator
Want an ATO visit?
ATO Help for small business
ABN eligibility rules
Self managing your tax debt

Handy Super links:
ATO SMSF compliance
ATO free seminars.
SMSF Admin advice
New Super clearing house
Tax on SMSF loans
Watching Global Economies
Watching Global Economies
Watching the USA
Watching China
Central Banks on Debt
Watching Housing Bubbles
Ken Phillips on the debt equation

Budget 2011

13 May 2011

 The Gillard government's budget is gunning for self-employed small business people. They are making two key moves against us:


  • Tying up contract work in so much red tape complexity that the practical ability to be self-employed will evaporate. This has had extensive media coverage (see immediately below).
  • Removal of the Entrepreneurs Tax Offset for micro-business people. The most vulnerable small business people will be hit hard.
Here are your comments.

Update: September 2011
Collective vs individual [29 September 2011]
Australian Prime Minister Julia Gillard has declared that Labor must embrace the individual to modernize its commitment to the collective. Ken Phillips says Labor's deeds don't match Gillard' words. The trouble with the collective is that it's normally controlled by elites. Join the debate.

Update: June/July 2011
ICA's response and submission to the government's "consultation" paper. Ken Phillips' follow-up Business Spectator article.

Massive red tape reporting imposition (Updated 2 June)

A 'consultation' paper has been released by Assistant Treasurer Bill Shorten. It's not a 'consultation' but really a description and attempted justification of what they intend doing to you. Read it to discover the wacky reasoning behind their moves!

Here's the budget paper reference: Read page 47 in Budget Paper no 2.

This media coverage explains how the Gillard Government is planning to suppress self-employed/small business people:

Budget Summary supplied by Institute of Public Accountants

ICA thanks IPA for permission to republish this summary. The Institute of Public Accountants has put together this high-level snapshot of some of the major changes contained in the 2011 Federal Budget. You are invited to forward the PDF to all of your clients, associates, family and friends.

Removal of Entrepreneurs Tax Offset

The Entrepreneurs Tax Offset (ETO) gives micro-business people an automatic tax rebate of up to $2,750. It's designed to help the smallest of small business people, mostly independent contractors. The maximum refund amount ($2,750) is available when your total business income is under $50,000. As your business income increases, the refund decreases.

An ICA member describes the practical implications of removing the ETO and gives some examples.

Here are the full details from the Australian Taxation Office. The ATO says that 402,485 micro-business people claimed the deduction in 2008-09.

It's people like this the ETO helps:
  • Tradies who've just finished their apprenticeships and want to be their own boss. Typically, as they start up their business, their business revenue is low. They'll use an old car and secondhand or borrowed equipment. Slowly, they'll upgrade equipment as their income and cash improves.
  • Stay-at-home mums who might have a business doing direct selling online. There are tens of thousands of people doing just this. They don't want to build a big business but are happy running their own micro-business in between looking after their children at home.
  • Semi-retirees who are still active and want to continue in business but not full time. (The larger percentage of Australia's independent contractors are older.) They may run a one-person consultancy specialising in the field where they've spent a lifetime developing extensive knowledge and expertise. They don't want to expand their business and are happy with their more modest business income.
  • People with a market stall who attend the local markets each weekend selling produce or products they've made at home during the week.
These are the type of people who are Australia's mini-entrepreneurs. The ETO is designed to support them. Given their small incomes, the receipt of a $2,750 tax refund is comparatively huge and makes a big difference to them.

This is to be jettisoned
The Treasurer, Wayne Swan, has announced the ETO is to be cut in the federal budget to be delivered today, 10 May 2011. This will immediately affect the 402,485 mini-entrepreneurs in Australia who received the refund (2008-09).

But Swan says this is good for small business because he's introducing a new tax rebate scheme. You'll be able to obtain a tax rebate---but only if you spend lots of money on new equipment. It doesn't stack up. Under the ETO, you could receive $2,750 just by running your micro-business. Swan says you'll need to spend $33,960 (on a car, for example) to receive a tax benefit of $1,275.

However you look at it, it's a bad deal. This is the Gillard Government taking from the poor to give to the rich. There's a comparatively large amount being taken from the most vulnerable small business people. Then some is being given to richer people who can afford to buy equipment.

Sorry Mr Treasurer, saying you support small business sounds like political spin. The removal of the ETO is a direct tax attack against the less-well-off self-employed people in our community.

Smart company has a good discussion and analysis of the issue.

Abbott Opposition's position

The Abbott Opposition has announced that it opposes these moves. See here and here.

Send us a Comment

To send us a comment on this story, click here.

Submitted Comments

On 2 June, Luke commented:

With the consultation paper there is a lot of mention of ATO says this, researched that and some very pretty graphs, but I could not find one link, reference or mention of the name of the ATO report/investigation used in the consultation paper. Does this investigation actually exist? If so, do you know where it is? If Bill Shorten can't back up his statements with a facts then it is pure conjecture.


Implications of the removal of the Entrepreneurs Tax Offset. Some examples

Labor's proposal to replace the entrepreneurs' tax offset with a $5,000 car tax break is ill-considered and shows a complete ignorance of small business issues.

The entrepreneur's tax offset in simple terms is a tax offset equal to 25% of the income tax payable on business income for small businesses with a turnover of $50,000 or less. The offset progressively phases out when the business income hits $70,000.

The tax was specifically introduced to provide an incentive for the growth of small businesses, which form the backbone of the Australian economy. It was designed to assist at start up when a small business is most vulnerable, and phase itself out when the small business is established (ie business income of $70,000).

In monetary terms, it usually amounts to an approximate tax rebate of between $1,000 and $1,400, for a business income of $50,000.

To replace it with a $5,000 deduction for a small business to purchase a new car is counter-productive, encourages spending when the small business can least afford it, and removes one of the very few benefits provided by government when such a business is starting up and inevitably struggling.

It is particularly pernicious for regional and rural small businesses which struggle for a longer period of time due to smaller population densities lessening potential customer bases.

Case Example 1
Bill is a young air conditioning mechanic who has finished his apprenticeship, and is considering going out on his own and establishing himself as a stand-alone tradesman. He has some contacts, but by definition no long-established customer base. Consequently his income initially inevitably drops. His overheads are reduced because he still lives at home.

His typical estimated costs to start up are a range of tools (minimum of $2,000), prepaid insurances (public liability $600, income protection $1,600 or workcover equivalent), materials ($2,000) and accounting/invoicing/structural costs ($1,500).

The $1,400 rebate is clearly extremely beneficial at his most vulnerable time.

A purchase of a new car to access the $5,000 deduction is the worst encouragement that Bill could get. It encourages him to fail by increasing his expenditure when he can't afford it.

Case Example 2
Jane has a qualification as a horticulturalist, and wishes to establish a nursery growing exotic orchids for the domestic and international markets.

She locates her nursery in regional NSW to lower her major capital costs (land) while retaining reasonable access to transport/export facilities for her markets. Her business plan expects her to run a loss the first year (with many similar costs to Bill starting out). The business will move to a turnover of $50,000 in the second year and $70,000 in the third year, increasing thereafter.

Clearly, the entrepreneurs' rebate is of vital assistance while establishing this business. It is much more useful than a $5,000 rebate on a car purchase when the business is established and a new vehicle can be afforded.

Labor clearly doesn't understand the critical role of the entrepreneurs' tax offset in assisting small business getting established.


Pola comments on the policy move and the Greens:

It [the changes] are problematic for all contractors. They can pick 2 segments today. Tomorrow it will be another sector's turn. Laws should be for everyone, otherwise it is outright discrimination. Perhaps these are the sectors the unions are losing members. Good luck. As for the Greens, they are an evolving force in politics and I think that their numbers of more right-wing business minds with ethics is growing. Don't lump them with Labor. At this stage I think we should give them more heads up on what would be fair policy positions for contractors ... many contractors would be Green in their thinking too.Congratulations again on your TV presentation, and best wishes.


Virtual Assistants debate

You might like to have a look at this. The last bloke, Adam, likes to think that if you're self-employed you're not 'in business'. He said first "they (VAs) may be able to successfully transition to being a business owner from being self employed"---which to me implies you're not a business owner if you're self-employed, but later reckons that's not what he said.


Arno in Perth commented:

Have we forgotten the Australian Tall Poppy syndrome? Every person who sticks their head up through the masses and looks around for an entrepreneurial possibility is effectively a tall poppy! Australians don't like anything but conformity---we revel in the (false) idea of egalitarianism that we believe that we enjoy. But this doesn't fit with individual freedom which we also falsely believe we enjoy. Tragically, conformity is relatively easy to police, so let's push that concept and all those who don't want to conform for whatever reason can be squashed. How on earth did this government get into power and why are they remaining there? Let's open up our society to more possibilities and not less. Let's encourage innovation and the pursuit of individual freedoms instead of trying to curtail them.

In Education we have been developing courses for years based on the idea of individual differences and then we release these people into the market where their individualism is negated. God help us!


June in Sydney wrote:

Hi Ken
I always find your articles really interesting and easy to understand, so thank you.

I hear this morning that the unions are creating a fuss about losing their power---taking companies to Court? Would it be prudent to ask the unions if they would continue to argue this issue if there was no financial gain to be made by them? I don't know whether the question has been asked, but the majority of people have no idea that unions have been making money out of small businesses when they go to court for some time.


Arno from Perth again:

Ken, didn't every "big" business begin life as a "small" business? What is the matter with these people? It feels to me that they are trying to regularise their own income via tax so clomp over everybody that doesn't fit into the "work for pay" model (the wage slavery model you often refer to) and forgetting that small acorns often grow into big oak trees and that the weak often gains strength. One of the world's strongest companies was almost bankrupt a few years ago (Apple). This same company with revenue now in billions was started by two guys in a garage! Talk about a small business success.