Paul Drum, Head of Policy at CPA Australia explains why the ABN system needs to be overhauled, following revelations tradies are using Bunnings in an ABN tax scam.
Introduction: Tradies using dodgy ABNs to rip off Bunnings
Ross Greenwood: Welcome back to Money News right around Australia you may not be aware but right now there is a task force going on looking at the black economy. In other words cash jobs, dirty jobs all over the place, avoiding tax all that type of thing. There was a paper put out by the chair of that black economy task force Michael Andrew which is also a part of a national roadshow. There’s industry roundtables number of things taking place. There have been some 90 meetings with business, with union, community sector and so forth.
Now what’s happening is there’s some IDs already out in this paper. The actual full recommendation final report is not due to go to the federal government until October this year but already what Michael Andrew and his committee has identified is significant abuse of the Australian business number system. In other words you going to work as a trader, as a sole trader, as a company in this country you need an ABN number. You cannot work without it but he’s also identified other areas significant problems with companies. In other words, you’re a business you basically have a whole lot of creditors you owe money to, you send the company broke, you turn up next day and you start a new business.
There’s also a lot of other issues taking place but the issue that caught the attention of media today was about the Australian business numbering system, the ABN system where was discovered that 40% of traders in the Northern Territory are using the ABN number of Bunnings. Now that in itself makes you stop and go what, how does that work? In other words, the traders who were doing this using a fraudulent ABN because they’ve simply got to get through and try and have an ABN to be able to deal on a wholesale basis inside Bunnings or to be able to do a job with many organizations. Well, what they’re doing is getting away with either not paying tax, getting a cheap deal or whatever it might be so where is the issue right here. Let’s go now and look at a system that clearly needs an overhaul, head of policy at CPA Australia is Paul Drum who’s on the line. Many thanks for your time Paul.
Interview: Paul Drum, Head of Policy, CPA Australia
Paul Drum: Hi Ross thanks for having me.
Ross Greenwood: All right I just want to gather a couple bits and pieces here in regards to this you represent accountants. They see often the legitimate side of it but the ABN system itself no business, no sole trader can operate without one in this country but if you’re going to simply rip off the Bunnings ABN it seems as though the system is terribly flawed.
Paul Drum: Well Ross you’re quite right and to us, this was an alarming revelation. I understand that issue in Michael Andrew’s info report that something so blatant could be happening and particularly that it would be so focused on one industry. This is an example as you said it came out of the Northern Territory from what he picked up as part of his roadshow but 40% of ABNs quota as you said in the Northern Territory were Bunnings and this is basically fraud and fraud’s an indictable offense.
It’s not just skimming a bit of cash off the top and not declaring everything that goes through the till and this is quite 40%. I mean the magnitude of this is enormous Ross and you know you wouldn’t say that the Northern Territory would be a unique case. If this is an example of what’s happening in all the other states then certainly the ABN system which been in place for 17 years now is really not working in the words of Michael Andrew.
Ross Greenwood: I’m sure I’ll get plenty of calls about this from people who will explain how this occurs but it seems to be a red hot rod to me. In other words, a person who in many cases is not a full time employee because many businesses these days insist that a person operate as a sole trader or a contractor. Therefore they need an Australian business number to be able to work for that particular organization so they don’t have to hire them as staff, pay their superannuation do a range of other things. It would seem as though a lot of people avoiding paying superannuation and potentially even paying tax if they’re able to rob the system.
Paul Drum: That’s quite right. Even paying income tax because why would somebody quote a false ABN in this case a convenient one for them to find Ross because most of us go to Bunnings and get a sausage most weekends. We got little jobs to do and they probably got a receipt that’s got the ABN on the top of the receipt. It’s easy for them to just insert that on their invoice. I guess for the listeners it’s probably important for them to understand Ross how the ABN system works. It’s about business to business and if a supplier can’t supply a business he’s done a job with if it can’t supply that business with a valid ABN then whoever you’ve done the work for the payer they are required by law to withhold 47% of that payment. Of course the supplier does not want any withholding so they might be– we really don’t know the ins and outs of this. It might be that they have a valid ABN but a couple of months of the year they miss quote an ABN so they can skim a bit off the top and why would you do that to your point really is that money is subject to income tax. That’s really the issue.
Ross Greenwood: I’ll tell you what good to have you on the program explaining that. We’ll take calls on this as well just to explain exactly how it works so if anybody has got the drum on how this basically operates the ABN system where people do the wrong thing give us a call on 131 873 where we just got the drum from Paul Drum the head of policy at CPA Australia. Paul I appreciate your time.
Paul Drum: Good on you Ross thanks for having me.