New tax rules for government tender bids from 1 July

Businesses tendering for Commonwealth contracts more than $4m will need to prove they have a clean tax record.

For the very first time, businesses tendering for Commonwealth contracts worth more than $4 million will need to provide a statement from the Australian Taxation Office proving they have a satisfactory tax record from 1 July this year.

The new measure was announced in the 2018-19 Budget in response to the Black Economy Taskforce’s final report.

In a joint message, Assistant Treasurer Stuart Robert and Minister for Finance Mathias Cormann said the policy is about reducing black economy behaviour by businesses involved in government procurement contracts so the government can lead by example and support businesses that are doing the right thing.

“Targeting the integrity of government procurement was recommended in the Black Economy Taskforce final report that found the supply chain is becoming more complex and competitive.

“Supply chain integrity can easily be undermined due to illegal supplier practices that are often unknown to the purchaser at the procurement stage or during the course of the contract that creates an unfair advantage.”

This policy is said to level the playing field for businesses that are already doing the right thing by locking out the competition that may undercut prices by not complying with key tax obligations.

“The black economy harms those less able to protect themselves and penalises those doing the right thing. These people bear the cost of the individuals and businesses dishonestly participating in the black economy. While the financial costs for individuals and businesses are significant, it is the societal costs that can cause the most harm. The black economy undermines trust and creates an uneven playing field.”

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell said the new rules requiring companies to prove they have a clean tax record when tendering for major government contracts is a welcome improvement, but more needs to be done to assist and protect small businesses subcontracted to these projects

“This is an important step to ensure businesses tendering for government projects are up-to-date with tax payments.

“It provides small businesses, particularly subcontractors who work further down the supply chain, with some security, but certainly more can be done in the procurement space,” she said. “Small businesses rely on contracts being awarded to businesses that operate in a fair and sustainable manner.”

Carnell  said government should also require that tenderers use contracts with subcontractors that comply with unfair contract terms legislation and that all subcontractors are paid on time.

“If businesses do not comply, they should be banned from future tendering for a period of time. I will continue to argue the case for a level playing field and the need to give small business a fair go in the procurement process.”

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