Subjects: Alienation of personal services income legislation; One Nation; GST rollback; ABC; heroin injecting rooms
E&OE................................
MITCHELL:
Mr Howard, good morning.
PRIME MINISTER:
Good morning, Neil.
MITCHELL:
Well, do you accept that the implementation of these changes on personal services income is a disaster?
PRIME MINISTER:
No, I don't accept it's a disaster. I mean, it's very easy to say, whenever there's a tax change made and some people are unhappy with it, that it's a disaster. I don't accept that. If people have arguments to put to me that the way it's been legislated or the way it's being implemented is contrary to the original policy statement by the Government then I'll examine those propositions.
MITCHELL:
But do you know how many people this affects and how many have applied for determinations?
PRIME MINISTER:
Well, I would have to ask the Tax Office that. I don't administer the tax Neil, you know that.
MITCHELL:
No, but we're told 200.at least 100,000 affected, 8,000 have applied for determinations and we're into the new financial year.
PRIME MINISTER:
Yeah, well that's people who have more than 80% of their income from the one source are, under the law, required to get a determination. It doesn't automatically mean that they are treated as employees, it means that if it's over 80% from one source then they may be treated as employees unless they satisfy one of four tests.
MITCHELL:
So do you accept that it is catching people who you don't want to catch?
PRIME MINISTER:
Well, I can't accept that until I have evidence that that is the case. I mean, you're asking me, do I accept things. What I'm indicating to you is that we brought the law in to prevent a situation where people who were really employees were using a device to reduce their tax when in reality they were performing exactly the same duties as people engaged as employees. You could have a situation where two people were literally working side-by-side in the one office, one of them, for tax purposes, being treated as a contract and paying a lesser rate of tax and the other person was having his tax taken out in the normal way as a P-A-Y-E taxpayer.
MITCHELL:
But I would argue in the process that you've caught a lot of genuine, self-employed people who are trying to have a go and are being thrown into a bureaucratic nightmare.
PRIME MINISTER:
Well, Neil, what I'm saying to you and to your listeners is that if you give me evidence of that I am more than happy to examine it. But, I mean, it's a bit.
MITCHELL:
Okay.
PRIME MINISTER:
I mean, I'm quite prepared to listen to that argument but you, please will you listen to the argument that not everybody who is involved in a contractual situation is, in your words, having a go, other than having a go to minimise their tax. Now, if you're dealing with a situation where a person is, somebody's a bona fide small businessman or woman, independent contractor, they are having a go and they are unintentionally caught up, well, I want to know about that.
MITCHELL:
Well, [inaudible] example, they can't argue that their office is at home. Now, how many people work from home? And under this regulation that is not a justification, your office has to be somewhere else, you can't even share an office. Now, how stupid's that?
PRIME MINISTER:
Well, I have had that complaint and.
MITCHELL:
Do you agree with it?
PRIME MINISTER:
Well, I think that it is true that there are a lot of people who have offices at home, yes.
MITCHELL:
Okay, and yet they won't be recognised by the Tax Office.
PRIME MINISTER:
Well, when you say, won't be recognised, it would depend on a lot of other considerations.
MITCHELL:
No, it won't be recognised as justification in this case. It must be a separate premises.
PRIME MINISTER:
No, no but they may satisfy some other test that's what.
MITCHELL:
But at the same time the Tax Office will effect your capital gains tax on your house but they won't recognise it in other hands.
PRIME MINISTER:
No, I'm sorry, when you say they were what on your house?
MITCHELL:
Well, if you have a home office and you sell your house, the percentage of your house is susceptible to capital gains tax because you've got a home office. That's one part of.
PRIME MINISTER:
I'm sorry, I thought you were inferring there was a capital gains tax on the sale of the home. I'm sorry.
MITCHELL:
Well, there is, on the part of the home that .
PRIME MINISTER:
Well, you're arguing on the part of it, yes, on the part of it.
MITCHELL:
So on one hand you're saying that is an office and you'll tax us, on the other hand you're saying it's not an office.
PRIME MINISTER:
Well, if in reality people are able to satisfy one or other of the tests, if their income from a particular source is over 80% then they will be excluded. But, Neil, what I'm saying to you is that, yes, these are changes, they weren't brought in without warning, they were legislated some time ago. I never intended and the Government never intended that they should affect people who were bona fide small operators who weren't in contractual arrangements for the purpose of avoiding tax. That was not the intention.
MITCHELL:
Well, you've had to change them already, haven't you, for the financial industry?
PRIME MINISTER:
Well, we have made some changes along the way and we are always willing to fine-tune major changes to the tax law. Can I just finish. And, I mean, I would say to people who are concerned, if they do have concerns, I want to hear about them. And the original purpose was not in any way to prevent people operating bona fide small businesses, people who, by nature of the business, operated as independent contractors. But we were intent on preventing people who were really performing the same tasks and work as employees.
MITCHELL:
I understand the intent, Prime Minister, I'm arguing the implementation is a disaster.
PRIME MINISTER:
All right, well Neil, what I'm saying, well, I don't accept.I mean, it's very easy to use the language of disaster.
MITCHELL:
Well, I've got people telling me.
PRIME MINISTER:
Yes, well I'm prepared to listen to them, Neil.
MITCHELL:
Okay, fair enough.
PRIME MINISTER:
I mean, you're having a go at me, which is fair enough, but can I just say in my defence and the Government's defence that the purpose of this was not to block or more heavily tax bona fide small businessmen. That's the last thing I, in particular, would want to do.
MITCHELL:
I understand that. I would say that's the effect of it and that's my point.
PRIME MINISTER:
Well, I'm prepared to listen but, I mean, let's not brand everything that people disagree with as a disaster.
MITCHELL:
Okay.
PRIME MINISTER:
I mean, that's just.you know, let's have a sense of proportion about it. I'm very happy to listen to your people.
MITCHELL:
Okay. But it's a bit hard for a sense of proportion for the courier driver who's getting around town earning $40,000 and this is coming down around his ears. I think that's hard for him. Look, we'll take some calls. Steve, go ahead.
CALLER:
Good morning, Neil, how are you going?
MITCHELL:
Okay.
CALLER:
Good. Now, I'm a carpet layer subcontractor..
PRIME MINISTER:
I'm sorry, you're a what, did you say?
CALLER:
A carpet layer.
PRIME MINISTER:
Oh, sorry, yeah.
CALLER:
Yeah. Now, the way we all work, we're all subcontractors. Now, before this GST we were all paying 20% tax, around 20% tax. Now, with that, that was fine. We'd have a good accountant, we'd get away with 16%, 17% taxes. We work hard for our money.
PRIME MINISTER:
I'm sure you do.
CALLER:
So we'd get a cheque for $1000. We used to take out our tax and our material and we were talking around 30-35% that we were taking out of it. Now, thanks to your GST we get our cheque to $1000, we take out our 20% tax, like before. We take out our 10% GST, our 20% for materials that we use. Now, my $1000 cheque is only a $500 cheque. I haven't even begun to take out the running costs of my van.
MITCHELL:
So are you caught as a contractor under the personal services income changes?
CALLER:
Sorry?
MITCHELL:
You're not even aware of them.
PRIME MINISTER:
No, no, well I'm sorry.you're talking about the.well, I mean, Steve, I'm very happy to talk about the GST. I mean, you are entitled to get input tax credits back and the GST you've got to pay on your materials, you're entitled, as a business operator, to get that back. I mean, and without knowing all of the circumstances of your business it's very difficult for me to make a judgement. You'd be, presumably, paying a lower rate of personal tax if you.
MITCHELL:
Okay.
PRIME MINISTER:
Well, he's asked me the question.
MITCHELL:
Yeah, I know, but we're really trying to address a different issue.
PRIME MINISTER:
Yeah well, I'm sorry, he did ring up. I'm trying to courteously answer his questions. All right, I'll desist.
MITCHELL:
Okay, we have been through that before.
PRIME MINISTER:
I know but, I mean, it's your programme.
MITCHELL:
Okay, Mark, go ahead please.
CALLER:
Good morning. I'm a computer engineer and I've got various contracts. I'd like to point out that it's almost impossible to bring a product to market in under 12 months. So you will be working for one employer for maybe one to two years but as soon as the project's over, you're out. So the 80% rule is very unfair.
PRIME MINISTER:
But would you be performing the work, where would you be performing the work?
CALLER:
It would almost always be at the site.
PRIME MINISTER:
At the site. Now, would there be other people at the site doing exactly the same work.
CALLER:
Absolutely.
PRIME MINISTER:
They're being paid wages.
CALLER:
Absolutely.
PRIME MINISTER:
Yes, see, this is the dilemma.
CALLER:
But as a computer engineer you need the resources of the company.
MITCHELL:
Do you employ people?
CALLER:
No, I don't. At various times I take independent contracts.
PRIME MINISTER:
And would you be doing more than 80% of your work for that one employer?
CALLER:
In various years it would be because, you can imagine, it's fairly intensive.
PRIME MINISTER:
But in some years would that not be the case?
CALLER:
It would be one out of five I would say.
PRIME MINISTER:
One out of five what, that you would be doing more than 80%?
CALLER:
No, less than 80%.
PRIME MINISTER:
One out of five less than 80%.
CALLER:
I would like to point out that as soon as the project is over you are out and you're looking for a new role. Now, because it's hard to bring a product to market in under 12 to 18 months you'll, you know, work intensively for 50 to 60 hours a week on that one (inaudible) simply because the company is wanting to get to the market and it must get the products out. But we've been penalised because we are doing the same role as other employees of this big firm ...
PRIME MINISTER:
Yeah, but you are, yes.
CALLER:
But we come under different arrangements, that the superannuation and so on is.
MITCHELL:
He's taking risks because he's paying his own superannuation.
PRIME MINISTER:
I understand.
MITCHELL:
Is that the sort of the person who should be caught Prime Minister?
PRIME MINISTER:
Well I would want to a know a little bit more about the situation, but I mean he does make the point that he's working side by side with people who would be paying a much higher rate of tax.
MITCHELL:
Neil go ahead please.
CALLER:
Ah yes Neil, Mr Prime Minister I'm a little bit confused by all of this, my company contracts its services to a fire protection firm and.
PRIME MINISTER:
To a which?
MITCHELL:
A fire protection firm.
CALLER:
So my revenue comes 100 per cent from them but I pay my GST.
PRIME MINISTER:
You have employees?
CALLER:
No I don't, I'm a sole contractor.
PRIME MINISTER:
Where do you work from?
CALLER:
I work from the road, I work from sites, I fit the fire extinguishers for their customers.
MITCHELL:
Where's your office, where's your office Neil?
CALLER:
Home.
PRIME MINISTER:
Do you have any. you do all your work for one firm?
CALLER:
Yes I do, yes.
PRIME MINISTER:
And you've always worked on that basis?
CALLER:
Yeah.
PRIME MINISTER:
Well depending on. and do you have tools of trade?
CALLER:
Yes I do, I have a van as well.
PRIME MINISTER:
Yeah.
CALLER:
Mobile phone, I have my fax machine.
PRIME MINISTER:
And are you required to provide all plant and equipment, or tools of trade?
CALLER:
About 99 per cent of it.
PRIME MINISTER:
Yeah and are you responsible for rectifying any faults in your work?
CALLER:
Yes I am.
PRIME MINISTER:
Well you could well be.even though you're doing more of it, doing all of it for one firm you because of what you've just told me could well be outside the operation of the new law.
MITCHELL:
Depends on the value of the van of course doesn't it?
PRIME MINISTER:
Well no.
MITCHELL:
And what it's used for, and is it a station wagon used for private use as well.
PRIME MINISTER:
Well you're putting a very restrictive interpretation on it Neil but.
MITCHELL:
I'm going though it Prime Minister, I've been through it in detail.
PRIME MINISTER:
I understand, so have I and.
MITCHELL:
The other area is the employees, the employee's required to do to 20 per cent of the market value, how in heavens name do you assess that from an employee? They're supposed to do 20 per cent of the market value of your work to make the contractor, if they have an employee, to satisfy the test. How in heavens name do you assess whether an employee, might be a bookkeeper or a secretary or a receptionist, how do you know they're doing 20 per cent of the market value of the work?
PRIME MINISTER:
Well the purpose of that rule as I understand it and that is designed to prevent somebody who's just got a purely nominal involvement in the activity who might be a relative or whatever.
MITCHELL:
I understand that.
PRIME MINISTER:
And I think you know that's the reason.
MITCHELL:
I understand but that I still ask how do you possibly satisfy the tax office that an employee's doing 20 per cent of the market value of the work?
PRIME MINISTER:
Well I think a lot of people can do that.
MITCHELL:
Really? Will it be reviewed?
PRIME MINISTER:
Well look Neil it's self evident that I'm prepared to listen to people who think they have been unfairly caught up with it. I wouldn't be listening and going through the detail of it in the way I am this morning if I weren't because it is not the purpose of the legislation to catch people who are bona fide small businesses.
MITCHELL:
Rob Gottliebsen in the Australian today called it the retrospective bastardisation of 1.4 million Australians.
PRIME MINISTER:
Well that is inaccurate, I mean 1.4 million people is just wrong.
MITCHELL:
It could close businesses.
PRIME MINISTER:
Well to use language of that type is just not helpful, it's not constructive and it's not accurate.
MITCHELL:
We'll take a break, we'll come back with other issues for the Prime Minister.
[commercial break]
MITCHELL:
The Prime Minister's in our Sydney studios, Mr Howard Pauline Hanson and David Ettridge facing fraud charges, Mr Ettridge has claimed there has been political pressure behind this. Your reaction to that?
PRIME MINISTER:
Well none of that political pressure has come from me.
MITCHELL:
Has there been any you're aware of?
PRIME MINISTER:
I'm not aware of any. But I mean if he's got a complaint take it up with the Queensland Government. I mean as I understand it he and Ms Hanson have been charged on summons from the Queensland police. Now I don't want to comment about it, I'm not keen to do that in any way. I don't pretend, other than what I read in the paper and so forth, I don't pretend to understand it but I can assure you and your listeners that I have not exerted any political pressure of any kind, any kind, to have Pauline Hanson or indeed anybody else charged. I'm quite happy to see the natural processes of political debate played out, but all of us are subject to the law and I would remind your listeners that people in different political parties over the last few years have been charged with different offences which in some way relate to their political activities. Now I'm not passing judgment, she's entitled to presumption of innocence like anybody else.
MITCHELL:
Is she able to (inaudible) is she is facing charges?
PRIME MINISTER:
I don't think there's any prohibition on anybody standing unless they are actually. I think the rule Neil is that if you are convicted of an offence that carries the penalty of more than a years jail you are not eligible to sit in Parliament. I don't think there's any prohibition on standing. But I may be wrong about that. But look Neil this, I didn't know this was coming and I just don't want to get caught up in debate about it. I mean it's a matter between her and the police.
MITCHELL:
Fair enough.
PRIME MINISTER:
It has not resulted from any pressure that I've exerted. I heard some ridiculous comparison made on the radio this morning between this and my criticism of the Malaysian Prime Minister about the prosecution of Anwar Ibrahim, now I think that really is absurd.
MITCHELL:
Who said that?
PRIME MINISTER:
I think Mr Ettridge. Can I just say that that is ridiculous.
MITCHELL:
Another legal issue, it's reported in the Age that police have began investigation into rape allegations against Geoff Clark the chairman of ATSIC. Given if that is correct, the police investigation is under way, should he step down pending that police investigation?
PRIME MINISTER:
Well there's no requirement that he do so and whether he should when there's no legal requirement to do so is a matter for ATSIC.
MITCHELL:
What's your view?
PRIME MINISTER:
Well I really want to stay out of it quite honestly because whatever I say on something like that will be used against me by my political enemies. Because it's very difficult for me to express any view on certain aspects of Aboriginal affairs without it being distorted and used against me. Look I think you may have asked me about it, well maybe somebody else asked me about the Age allegations before and I said like everybody else he is entitled to a presumption of innocence. Now if the police are investigating things that is all the more reason why I should not comment.
MITCHELL:
Okay Michael go ahead.
CALLER:
Good morning Mr Howard. Look I work for a company, we're out in the Aston electorate. You know our company. We've corresponded a lot over the past few years.
MITCHELL:
What is it Michael?
CALLER:
Millard Design. We once had over a hundred employees. Now we're just a handful. We've been brought to our knees. We were introduced by the Australian government, the Indonesian government, the then Minister Habibie, which signed a contract and to get to the point under that...this was in the run up to him becoming President. He owes us $44 million. It's recognised by the Indonesian government as a government debt. Most of the negotiations over the past years have been handled by senior ministers - Fischer, Downer, Moore. We haven't got our money. We're not privy to a lot of discussion. We're in a desperate situation. I need some help and we need some answers.
PRIME MINISTER:
Well I'll have to look into the detail of that. I don't carry it around in my head I'm sorry. I don't. I have heard of your company but I'm not aware of all the details. I don't know where those negotiations sit. I can but suggest that we make a note of it. We've got your address. I'll find out and I'll write to you as soon as I can.
MITCHELL:
Okay. We'll keep you in touch Michael. Prime Minister, if the Coalition lost the election would you oppose Labor's Rollback in the Senate?
PRIME MINISTER:
Well that would be a matter for the new Opposition Leader.
MITCHELL:
What would your view be?
PRIME MINISTER:
I haven't thought about it. Can I tell you I'm not hypothesising about what we might do in Opposition if we lose the election, Neil I'm focused very heavily on winning it.
MITCHELL:
Keating and Beazley have done that in the past. They've said we lose this election we'll do XYZ on the GST. Isn't it reasonable that we know what would be the position of...?
PRIME MINISTER:
Well look I think it's reasonable, but it's also reasonable of me to make the point that if we lose the next election I won't be seeking the leadership of the party after that election. That's self evident.
MITCHELL:
So I should ask Peter Costello?
PRIME MINISTER:
Well you can ask anybody but I think you'll probably get the same sort of response. I mean in the end I don't think you're going to have a serious rollback proposition anyway. I mean I predict now that when we get to the election campaign you will have the most nominal of all rollbacks.
MITCHELL:
Would you not have any more exemptions? You think all these exemptions complicate the tax system?
PRIME MINISTER:
Well I think it does and when you're talking about rollback you're not talking about administrative fine tuning, you're not talking about changes to the BAS form. What you are talking about is taking the GST off items, off goods and services to which it now applies.
MITCHELL:
So you don't believe there's any goods and services it should be removed from now?
PRIME MINISTER:
No. I believe in something which is as uniform and consistent as possible, I mean subject to the fact that we have, the Parliament's made a decision about food. And in case my answer is misinterpreted and distorted we are not going to put the GST on food. That decision's been made by the Parliament. But the question of rollback in the Parliament, of rollback if Labor wins, I mean I don't think they're going to propose much rollback. I really don't. I mean this is the total fraud of rollback. They're trying to give the impression that if they win the election there'll be massive exemptions made to the GST. In reality there won't be and if I'm wrong I invite them at any time between now and the election to come forward and say this is what we're going to take the tax off. I mean Sharon Burrow says they're going to take it off household utilities like the electricity bill. Mr Beazley denies he's made that undertaking. Well I think it's about time they stopped talking the generality of rollback and gave us a bit of information about what they're going to do.
MITCHELL:
I'll pursue them on that. Can I ask you about ABC? The million dollar defamation case lost by the ABC to Ron Clark this week. They were wrong, they knew they were wrong, they wouldn't apologise. It's now cost a million dollars. Who answers to that?
PRIME MINISTER:
Well the ABC operates independently. Look, and Neil, don't start holding me to account for internal decisions of the ABC.
MITCHELL:
No but one would hope that somebody would be called to account..
PRIME MINISTER:
Well I would hope that would happen in any organisation.
MITCHELL:
Well in any other organisation it wouldn't have gone to court probably.
PRIME MINISTER:
Well look I don't have the luxury of making those sort of on the run comments. You know that.
MITCHELL:
The ABC Chairman reappointed for five years. Does he suffer from being your mate?
PRIME MINISTER:
I think some people have unfairly criticised him because of the personal association. I mean Donald McDonald had all the qualities in the world to be appointed Chairman of the ABC irrespective of the fact that he was coincidentally a friend of mine.
MITCHELL:
What do you think about their new programming? Lifestyle programs, I thought they'd been and gone. I mean it's very much a commercial approach isn't it?
PRIME MINISTER:
Well yeah but I mean once again I'm not running the ABC. I'm only the head of the government that funds it. I mean I'm damned if I do I'm damned if I don't. You expect me to give a running commentary on the quality of their programs and if I do I'm going to get accused of interfering with it. C'mon.
MITCHELL:
A retiring judge in Melbourne, if I can get your reaction to this, he's compared safe injecting facilities, which I know you don't approve of, to safe raping rooms. What do you think of that?
PRIME MINISTER:
I'm astounded. You're joking?
MITCHELL:
No. Well he's not...he's saying safe injecting rooms are a bad thing and you might as well have safe raping rooms.
PRIME MINISTER:
I'm sorry. I took it the other way around. Well look, I must say I wouldn't have necessarily used that analogy. But I am totally and completely opposed to injecting rooms. One of the things that disappoints me is that the significant fall in the heroin death rate which has occurred this year in Victoria is not given more prominence. We still have this incredibly sterile debate about injecting rooms instead of hailing the fact, it may be only short lived, but there's been a dramatic drop in heroin deaths and I think that is fantastic good news.
MITCHELL:
Thank you for your time. Did you know what a cadastre was until you looked it up?
PRIME MINISTER:
I have to admit I didn't.
MITCHELL:
Neither did I. Thank you for your time Prime Minister.
PRIME MINISTER:
Thank you.
[Ends]