Small business faces hidden expenses under WorkChoices, says ALP

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Small business faces hidden expenses under WorkChoices, says ALP

Small businesses will be hit with costs of at least several thousand dollars and considerable red tape as they move under the new Federal Government’s WorkChoices Act, according to the ALP.

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Small businesses will be hit with costs of at least several thousand dollars and considerable red tape as they move under the new Federal Government’s WorkChoices Act, according to the ALP.

Federal Labor’s Industrial Relations Taskforce met with the West Australian Minister for Small Business, Norm Marlborough, yesterday to discuss the hidden costs for small business in complying with the new WorkChoices Act.

The Taskforce says the WorkChoices Act means that:

  • While incorporated businesses currently employing under federal awards or agreements will automatically transfer to the new WorkChoices system, those currently employing under State Awards or Agreements will be obliged to move to the new system within three years.

  • Unincorporated businesses currently in the federal system will not be able to remain under WorkChoices beyond five years from the date the legislation comes into effect.

Costs and hidden options

However it claims the Howard Government has failed to advise small business of the complex transitional arrangements of the WorkChoices system. It has also been encouraging unincorporated small businesses to incorporate - without explaining the hidden costs.

The Taskforce says that, in general, a small business operator considering incorporating has two options:

1) Register a company directly with the Australian Securities and Investments Commission (ASIC) at an initial cost of $800. This is not a recommended option as significant additional corporate administration work is required on the part of the business owner in order to fully comply with the corporations law. Additional accountancy fees associated with this option are likely to be in the vicinity of $700; or

2) Purchase a shelf company from a shelf company provider, either directly or through an accountant or solicitor. The acquisition of a shelf company, which comes complete with a corporate administration volume containing minutes, registers and other related documentation to comply with the corporations law, costs on average $1,000. Additional accountancy fees associated with this option are likely to be in the vicinity of $500.

The Taskforce says the average cost to a small business of acquiring a company, therefore, is likely to be around $1,500. In addition, there is also an annual renewal fee of $212.

Stamp duty

The Taskforce says that, as incorporation involves transferring the ownership of a business to the new company, stamp duty may be payable to the State Government on the transfer.

Stamp duty is levied on the combined market value of the dutiable business assets.

In Western Australia, the applicable stamp duty is:

Market value of dutiable assets Stamp duty
$150,000 $4,400
$200,000 $6,200
$600,000 $26,100

Indirect costs

The Taskforce says the indirect costs of incorporation will vary from one company to another, but may include the costs of:

  • changing bank accounts;

  • complying with ASIC annual reporting requirements (largely time costs); and replacement of stationery.

It says that despite a $55 million advertising campaign, the Federal Government has not informed small business of the implications of the WorkChoices Act for their business.

The Taskforce, which has already conducted hearings in Tasmania, Queensland and the Northern Territory, will hold its next hearings in Gladstone and Rockhampton on April 4th and 5th. It will report its findings to Kim Beazley and Caucus later in the year.

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