Restore VAT staff hire concession

The ARC urges the Government to consider reinstatement of the VAT staff hire concession that was withdrawn in April 2009. The concession, which was particularly helpful to public sector and other organisations that could not recover VAT, allowed the supply of staff free of VAT on certain conditions.

Reinstatement would put the attraction of using flexible agency staff on a more equal footing with regular employees, and many organisations do like to try someone as a temp before hiring permanently. This would cut the costs of hiring some non VAT registered agency staff by the tune of 20 per cent from the end of this year, thereby easing the strain on non VAT registered hirers including public sector, and at the same time would be in tune with the coalition’s desire to encourage new start businesses.

Reduction of cost to public sector hirers in particular at a time when they themselves are having to lay off staff, would clearly help them handle the strain. In addition there is an imbalance between the ability to use directly hired temporary staff, where no VAT is chargeable by the worker, and the same staff providing services via an employment agency, where VAT is chargeable on the labour supply. The resultant discrimination against those that use agencies to seek work, such that they may not be hired, is unfair.