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More tales from the small business frontline

Sunday, March 30, 2014

We receive a lot of input from self-employed people about the realities of being their own business. The practical examples below help bring home the truth about the complexities of being in business for yourself.


John Findley—Shanghai and tax

Below is an extract from a short email from a mate in Shanghai:
“Business is flat but ticking. Chinese business is slowing I am sure – Ms. Mei was saying that family businesses—i.e. small factories—are being chased to register in her home town and 20% of the workers are now unemployed and they are wondering what will happen next. I feel that it’s all becoming harder.

 Expats are struggling with getting visas; it’s made much more longwinded and complex and people are leaving because of the difficulties.”

There has been a creeping enforcement environment in regards to small business meeting their tax obligations.  I suspect it is driven by problems that local governments are having servicing loans taken for grandiose but useless civic development projects.

Chris Mazzotta—Time for building giants to show some spine

Chris Mazzotta is a contruction subcontractor. He’s sick of union intimidation but is standing up to it. In The Australian he says “I am blaming the builders for getting us into this situation. They have just rolled over.”

Full story here.

Luke—Strange times in the IT sector

Luke tells us:

What’s been happening in the IT industry as far as I can tell is that there has been a shift in contracting/employment contracts.
Previously jobs in the IT industry broadly fell into 3 categories:
  • Full Time employed (salary – no end date) – What most people consider employment – an Employer/Employee relationship.
  • Full Time Contract (Usually 3-6months and usually billed by the hour or day) – This is either done through an agency or the person may have their own business, typically one, sometimes two, clients at a time.
  • Freelance contract/Consultant – Much like writers for a newspaper or a professional such as an architect or accountant, they get paid for small jobs like writing a few web pages or developing a code module typically which take hours to weeks to complete and they will have many clients.
Now there is a fourth category
  • Full Time employed (salary – end date supplied) – Same as a full time employed but people are hired for generally 1 year, sometimes 2 years – An Employer/Employee relationship with an end date of employment built in.  They have the same entitlements as a full time to super, holidays and sick leave, but basically they are being told when hired that they will be redundant in 12 months’ time.  Think of it like being hired as a full time employee and being given twelve months’ notice of your redundancy the day you start work.

Kevin—Pitfalls in working internationally

Hi Ken,

I thought you might be interested in some issues I face as a self-employed independent contractor working on overseas contracts. The dangers are many, not least the ease that contractors can breach and get away with it. I experienced a breach of contract in the US several years ago, when the wealthy company owner simply asset stripped the project funding entity and in effect said ‘so sue me’. The trading company continued to trade whilst insolvent; they can do that in the US. At least I earned good money up to that point.
This experience pales in comparison to my recent experience in China, when an industry prime decided to breach after obtaining substantial intellectual property. Contracting in China is a minefield for small players; you are on your own when it comes to redress. In my case even my high profile Beijing lawyer jumped ship. Austrade attempted to bring the two parties together without success and my state (SA) government was sympathetic, but certainly was not going to go out on a limb for me. They would (and have) if it was a billion dollar contract! There is a blog on my website here.
Another issue is the very valuable APEC card, which allows rapid transit through customs in participating countries and incorporates Visa requirements. When mine came up for renewal, I found that the rules had changed so that small/micro businesses are effectively ruled out unless previously travelling several times per year. I suppose this is some improvement since there was an interim period where small business was almost totally excluded on the rationale that they used the card for travel to Bali and Phuket.      

Finally, I am still in business at age 76. The previous federal Labor government eliminated the age cap for the Superannuation Guarantee, but were you aware that Independent contractors at my age can no longer make contributions to super?  Any new income I make will be taxed at the marginal rate.


Rod—The Australian construction cartel

Rod from Queensland says:

This cartel you speak of is not only 2 entities, the third entity is the legal insurance and liability factor.

This has been operating for quite some time. When I was in the mines it was all clash and bang, now there are connections between the unions, govt and legal/insurance, it was costing the companies exorbitant amounts of money to insure, the govt was always having to step in and make the taxpayer fund losses, while the unions went on the rampage—still happening—the insurance sided with the unions to allay some differences and then they worked with the companies to sort out a more co-operative agreement, the govt was happy with this as it—ha, ha—made peace.

It’s no wonder that the mining workers are getting exorbitant wages, because the unions have enforced strict rules on members, not the companies. That way the member has no argument against dismissal, the insurance people are happy with the stringent rules and accidents are down, the govt is happy with less strikes, and the unions act as if they actually run the management of the company, AND ALL THE WHILE THE ONLY PEOPLE WHO ARE IGNORANT OF THIS SETUP IS THE -WOIKER- HE THINKS IT’S ALL GOOD UNION MANAGEMENT ONLY.

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