I have decided to write this post as the classification of employees and contractors is an area of tax law that the Australian Taxation Office will audit on a regular basis – it is also an area of tax law that most business get wrong.
Be mindful that contract industries now include cleaning, couriers, freight, IT, security and more. Their first TAPAR reports are due on the 28 August 2020.
4 November 2019
There’s no one deciding factor that makes a worker an employee or contractor for tax and super purposes. As an employer, it’s a decision you can only make accurately when you review the whole working arrangement.
The only way to get to the right answer is to ask the right questions. Answer these six questions before you hire a worker:
- Ability to subcontract/delegate: can they pay someone else to do the work?
- Basis of payment: are they paid based on an agreed quote they provided?
- Equipment, tools and other assets: do they provide their own tools and equipment needed to get the job done?
- Commercial risks: are they legally responsible for their work and liable for fixing mistakes or defects?
- Control over the work: do they decide how the work gets done subject to specific terms in the contract or agreement?
- Independence: do they operate their own business independently of your business?
If the answer is no to some or all of these questions, you need to seek further information and advice before treating your worker as a contractor.
Find out about:
Source: Australian Taxation Office
Date: 7 November 2019
If you require assistance classifying employees and contractors for your business, then contact your working professional at Coffs Coast Consulting – Ph (02) 5606 3692.
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