Reddit is teaching Australians more about tax than the ATO
Pocock wants rulemakers to be free from conflicts
The Greens and the Albanese Labor government are still at odds over whether active partners of accounting firms should serve as members of its revamped rulemaking body for accounting and audit.
Senator Barbara Pocock told Senate estimates that she remains concerned about conflicts of interest people may have when rules are being developed by the new body responsible for audit, accounting and sustainability standards.
Pocock made the criticisms of the proposed structure at the same time as the government was preparing to table it in the House of Representatives for parliamentary debate.
The legislation merges three existing structures — the Financial Reporting Council, the Australian Accounting Standards Board, and the Auditing and Assurance Standards Board.
It creates a new body, External Reporting Australia, with a governing board that oversees specialist standard-setting boards within a single structure.
The ERA will also have its own secretariat to run its own affairs, which will remove the influence of Treasury on the accounting and audit standard-setting structure.
The Treasury has supplied the secretariat for the Financial Reporting Council since it began operating in 1999, but the new proposal would allow a permanent secretariat to develop a stronger corporate memory.
Staff in the Treasury who were previously part of the FRC secretariat would be rotated from one division to another, which means knowledge of financial reporting is sparser than it otherwise ought to be.
Senate estimates did not feature much discussion of the technical elements of the proposal, as Pocock and the Greens have been more concerned with replicating the governance model they successfully implemented with the Tax Practitioners Board.
Pocock and her colleagues successfully secured the Albanese government’s acceptance of amendments to tax agent regulator laws that prohibit partners or directors of entities with direct financial links from serving on the authority’s board.
She said she found a letter from Assistant Treasurer Dan Mulino unconvincing on the issue of avoidance of conflicts of interest because Mulino said the process of appointing members of boards would focus on ensuring people with real or perceived conflicts of interest do not dominate standard-setting boards
She told Treasury staff during estimates that she remained concerned about appointing active partners in accounting firms to standard-setting boards that have financial interests, and that she wanted them to be free from those interests.
Treasury official Tony McDonald told Pocock that the way to avoid regulatory capture is to first recognise that the standard setter sets standards, not regulates those who must comply with them.
“The way to avoid regulatory capture in this instance is that it is not a regulatory body — it is a standard-setting body,” McDonald said.
“The regulations of auditors are clearly within [the Australian Securities and Investments Commission].”
McDonald said it was critically important that people undertaking work relevant to standard setters be part of that process.
He said that the intent of the legislation, as outlined in the correspondence from Mulino, was to strike the right balance between people who were actively involved in accounting firms and companies and other stakeholders who would bring an alternative point of view.
“These are points that were raised in the parliamentary inquiry and parliamentary evidence as well. They are not easy issues. It is about striking the right balance,” McDonald said.
Pocock told McDonald that she saw a real risk to the standard-setting process from having people on the standard-setting boards who are making decisions on standards while receiving income from their accounting firms or companies.
ATO 'asleep at the wheel' as sham contractors rort sector: Senator
The sham contract driver crisis pushing long-established trucking companies out of business could be fixed in months if the tax department did its job, says Labor senator and former truckie, Glenn Sterle.
"I want to see government agencies, including the ATO and the Fair Work Ombudsman, prosecuting the mongrels running the businesses responsible - this problem's far bigger than wage theft," Senator Sterle said.
He chairs the Senate's rural and regional affairs and transport committee, but said the mushrooming shadow economy, where some road freight companies illegally used underpaid drivers to avoid tax and employment obligations, could not afford to be deliberated about for months by a parliamentary inquiry.
"Legitimate operators are desperate for help," he said.
"If we don't act, if government agencies don't act, the road transport industry is heading over a cliff.
"It's a problem on steroids - there are suggestions that up to 40 per cent of drivers in the sector may be now employed illegally as ABN contractors."
Sham contracting means drivers are misclassified as independent contractors with their own Australian Business Number (ABN), despite not having their own truck and being recruited to work under conditions that legally define them as employees.
Senator Sterle said "good, decent operators" were going to the wall because they paid drivers properly, including their pay as you earn taxes.
They were losing freight contracts to shonky competitors who did not pay award wages, superannuation, workers' compensation commitments and leave entitlements, shaving up to 30pc from their payroll costs.
That, in turn, enabled them to pitch for work at unrealistically cheap rates.
"I've had trucking companies tell me they have clients - national businesses - asking them to match the cheapest tenders, or lose the work," he said.
While sham contracting tended to be more prevalent among city-based road transport operators, trucking industry officials have warned rural communities were experiencing the industry's black economy impact, as well.
Smaller and family-run regional and interstate carriers were particularly vulnerable to the freight industry's high operating costs, tight profit margins, elevated interest rates and fierce competition, according to a recent assessment by credit analysis group, CreditorWatch.
It noted they also lacked the cash reserves and negotiation leverage of larger logistics companies.
Among the rural industries considered most likely to be enticed to use unusually cheap freight providers is the horticulture sector, although feedback from industry leaders suggested sham contract operators were not obvious.
"That's not to say it isn't happening, and it's certainly not condoned, but there doesn't seem to be evidence of it impacting our industry," said National Farmers Federation Horticulture Council chairman, Jolyon Burnett.
The farm sector was well aware of the cost pressures associated with moving produce, but also tended to rely on farm-connected freight operators or contractors recommended by retailers.
He felt major horticulture retailers were expected to be dealing with credible operators and would be conscious to avoid connections with illegal employment schemers.
"We shouldn't have to put a bomb under government agencies to fix this," said Senator Sterle, whose family has lengthy ties to the trucking sector, including his own 11 years as a former owner-driver.
"I can't understand why the tax office is asleep at the wheel.
"There's a lot of unpaid tax and superannuation going unaccounted for, yet at the same time ATO's not afraid to jump on a family business that might be a few weeks late submitting their BAS details."
Australian Taxation Office officials told a November meeting with the trucking industry that while road freight companies must report annually what they paid contractors, which should identify tax avoidance through cash payments and income under reporting, the system was "less effective than it could be".
The ATO had agreed to review how the taxable payments annual reports were used to identify and act on omitted income, labour expenses and non-lodgement of tax returns to better detect operators in the shadow economy.
However, Senator Sterle, who convened the meeting, expected more decisive action from the ATO and other government agencies, including Border Force, the Fair Work Ombudsman's office and the National Heavy Vehicle Regulator.
He had identified transport operators who were employing unwitting foreign-sourced drivers on sham contractor arrangements and he expected relevant federal government agency officials to "drive into their yards and interview people".
"If you're employed as a driver you should have a payslip, if you are a contractor you should be able to prove it with a truck and registration papers," he said.
