02 Mar Contracting – An Inconvenient Truth
“With quotes from Al Gore Himself”
An Inconvenient Truth was a confronting movie about climate change. In the movie Al Gore, “the man who used to be the next president of the United States”, addresses his frustration at telling the world his message and struggling to get the world to listen. The message in this post is about my frustration at the construction industry (and others too but you guys are by far the worst offenders) relying on a myth to structure their tax and superannuation obligations.
Gore introduces himself in his movie by saying, “I’ve been trying to tell this story a long time, and I feel as if I’ve failed to get the message across”. I absolutely feel your pain Mr Gore. This is precisely the same feeling I get when I repeatedly hear so called experts in the construction industry saying with their self awarded authority,
“…. all you need to do to avoid PAYG and Super Guarantee is to get your staff to provide an invoice for their services”.
That’s just a fallacy, a lie so inherently false that surely nobody would take it seriously? Surely…….
No chance of that happening it seems. Smart people continue to rely on this “Convenient Untruth” over the Inconvenient Truth of how to engage contractors legally. The only line from the movie I could find to put in here to support this Convenient Untruth was [Laughter] and Gore’s response, “I don’t find that particularly funny.”. I don’t either as clients engaging contractors are issued substantial penalties and contracting clients miss out on their superannuation entitlements for fear of losing their job. Nobody wins.
What is the Inconvenient Truth? – From a Qualified Commentator – Me.
Engaging contractors is a legitimate way to resource a business and can indeed lead to the outcomes most parties are seeking – If done properly! The problem is it takes a little
bit more effort than relying on the Convenient Untruth, “just get them to give you an invoice”. It takes a desire to overcome your personal greed, to comply with the law, and treat your contractors like you would like to be treated. It might also mean you have to pay for good advice which is far better than trying to clean up the mess left by the amateur adviser. If not, then the outcomes are becoming increasingly obvious and increasingly disastrous for all concerned.
Rant over, that’s it in a nutshell. Gore says, “It takes a sudden jolt sometimes for us to become aware of a danger.”. So here is your sudden jolt:
If you don’t fully understand Personal Services Income, Superannuation Guarantee, the definition of a Worker, and the Results Test, then you need to take on some qualified and competent advice.
What Does the Future Hold?
“Old Habits plus old technology have predictable consequences.”, says Gore before he prophetically continues, “Old habits, that are hard to change, plus new technology can have dramatically altered consequences”.
Yes they can. The ATO are not always the brightest bunch but on super compliance they have new technology and it has changed the game well and truly in their favour.
This is a strong warning to contractors and employers who continue to rely on the Convenient Untruth that you will likely get caught out at some stage (soon), and there are likely to be significant consequences.
“What were our parents thinking? Why didn’t they wake up when they had a chance?”, pleads Gore in the movie. Don’t let this be the history your children repeat.
If you are doing the wrong thing either deliberately or ignorantly, the ATO will find you. I will even go one step further here and suggest that if you are the type to rely on this Convenient Untruth, then I am having a guess you are equally uninformed about Asset Protection and Director Penalty Notices and your kids home and future could well be exposed.
Conclusion and Final Line from the Movie
I hope you have read this blog with your tongue in cheek somewhat, but please don’t ignore the core message. If you are a contractor or engage contractors, please make sure you are doing things right and not relying on a Convenient Untruth or be well prepared to face the consequences.. For more information CLICK HERE to contact our office to arrange an appointment to review your compliance with our qualified team.
And one final quote from the movie, “It’s just human nature to take time to connect the dots. I know that. But I also know there can be a day of reckoning, when you wish you had connected the dots more quickly”.
Thank you Mr Gore.