Senator Nick Sherry is to be the new federal Small Business Minister in Julia Gillard’s fragile minority government.  Previous small business minister Craig Emerson MP has been shifted to Trade.   So what now for small business and franchising?

Nick Sherry’s background relates more to big business and a passion for retirement funds and superannuation where his recent dabble in small business matters were not received kindly. If SMEs were to base any expectation on his recent proposals for changes to independent contractors then they might be a little pessimistic. Franchisee advocates might be unduly optimistic. You decide!

Earlier this year the Board of Taxation suggested a series of recommendations that would impact terribly on small business independent contractors.  Under the proposed legislation independent contractors would need to differentiate between their income from capital [business assets – equipment] and their income from their labour.

Under the Sherry-blessed plan, part of the income derived from labour would be attributed to the person who supplied the labour and those people would be treated as employees – not business people. The income earned on capital could be returned to the owner(s) of the capital, which may differ from the person who provided the labour.  Robert Gottliebsen

Independent contractors would be required to report differently to the ATO and if following that reporting the contractor is deemed to be an employee, business deductions will reviewed less favourably and potentially their customers may need to deduct tax when paying an invoice.

Instead of throwing the ridiculous recommendations out, Sherry backed them and then thanked the union movement for alerting him to the independent contracting situation. It’s no secret that the unions hate independent contracting.

It is expected that should such legislation go ahead then the unions, which have huge pull with a Labor government, would have access to the massive independent contractor sector in Australia.

But the unions got into the ear of assistant treasurer Nick Sherry and the taxation review board came up with a crazy proposal that is best described as the small business equivalent of the original mining tax disaster. It would decimate independent contracting, turning many into a strange form of employee.  Robert Gottliebsen

The proposals were passed to the Henry Tax Review committee which means the proposals became a distinct possibility.   The Coalition stated they would leave the current independent contractor tests alone but Gillard ignored making her stance on this matter known prior to the election.  That was smart and saved an awful voter backlash but what will Labor push now?

Parts of the Henry Tax review focused firmly on Nick Sherry’s passion for superannuation even though SMEs howled down the idea of increasing employer contributions by 3% and the proposed changes to independent contractors amongst other concerning recommendations.

It is unknown how much of the proposed legislation will actually help small business rather than damage it. Labor’s last term in government did nothing for the ignored but massive small business sector and this portfolio change can be seen as an unappealing demotion for Nick Sherry.

With independent contractor legislation there might need to be accommodations for small franchising units or Nick Sherry might be at odds with the Franchise Council of Australia and franchisors.  

If more than 80 per cent of the business income came from one group then whammo! You are an employee …..….

And, oh yes, every business must have two employees to be a business.

While the previous small business minister achieved nothing for the sector it seems that the new minister is on course to crush some elements of small business and damage what’s left. How the balance in the House, the Independents, and the Senate, the Greens, react to government’s likely suffocation of small business is yet to be seen but Nick Sherry’s appointment seems a far cry from the Coalition’s Bruce Billson’s move to acknowledge small business and bring it into Cabinet.

Any Labor proposed legislation that goes from the House to the Senate can be expected to be backed by the Greens and although the Greens, like the Independents, have something ranging from distrust to loathing dor the ACCC, deals are going to be cut.

In a perfect union world the workforce dictates efficiently to big business. Small business entrepreneurs are left out in the cold. Small business is an election afterthought at best. Franchising doesn’t rate. Franchisees don’t carry a card.

But then again political spin can often be conflicting;

You've got to have a much tougher regulatory framework. You've got to provide full protections if theft and fraud occurs, and full compensation, and you've got to regulate fees and charges, and that the Liberal party simply will not do. You've got to ban commission products, you've got to ban entry and exit fees, which can be massive. These fees have massive impacts, and also in terms of the compulsory superannuation guarantee, the 9 per cent, you've also got to decide whether you in fact cap the fees and charges.  Nick Sherry 2003