Australian Government Defends Contractor Tax Turnaround

by Mary Swire, Tax-News.com, Hong Kong

11 July 2001

Prime Minister John Howard and Federal Treasurer Peter Costello have been out in force recently, defending the Australian government's decision to amend rules on the taxation of contractors. Mr Costello said on Monday that independent contractors would be allowed to self assess in the normal way after all, but at the moment the government and the ATO don't seem to be able to put a foot right with the Australian public. Despite the widespread unpopularity of the previous rules (to which this announcement was an amendment), Howard and Costello have been widely condemned for what the Australian media sees as a perfectly executed U-turn.

Mr Howard professes himself bewildered by the media's attitude, and says that the turnaround merely shows that the government is willing to finetune the tax system where necessary: 'I don't regard it as a concession, an admission of failure or weakness to finetune such a big change,' he protested. 'The obsessive use of words like backdown and backflip leave me...totally unfazed.'

Mr Costello told listeners to a Melbourne radio station that the contractors had been given what they wanted. 'They said "we don't want to go to the tax office, we don't want to fill in those long forms",' he explained. 'The change we announced yesterday was you don't have to go to the tax office and get your status clarified if you don't want to.'

Despite the fact that hundreds of thousands of contractors will now be able to avoid filling in the lengthy forms, and will likely remain at the lower taxation rate, the Opposition, who had previously distanced themselves from the measures, were quick to criticise Mr Howard, stating that the changes were simply a ruse, designed to placate voters in the run-up to the Aston by-election this weekend.

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