When hiring workers, do you understand the difference between contractors and employees for tax and super purposes? Getting it wrong compromises your ability to meet their tax and super obligations, and can mean workers miss out on employee entitlements. If you misclassify workers they can also be caught out with penalties and charges.
There is no one deciding factor that makes a worker an employee or contractor. To help classify their workers, you must consider the whole working arrangement, including questioning worker’s:
- ability to subcontract/delegate: can the worker pay someone else to do the work?
- basis of payment: is the worker paid based on an agreed quote they provided?
- equipment, tools and other assets: does the worker provide their own tools and equipment needed to do the job?
- commercial risks: is the worker legally responsible for their work and liable for fixing mistakes or defects?
- control over the work: does the worker decide how to do the work, subject to specific terms in the contract or agreement?
- independence: does the worker operate their own business independently of your client’s business?
If you answer no to some or all of these questions, you should seek further information and advice before hiring, or continuing to treat their workers as contractors. Remember, if you are taking on an apprentice, trainee, labourer or trades assistant, those workers are always employees, never contractors.
Source: Australian Government – Australian Taxation Office.
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The information provided in this article does not constitute specific advice. For further information , you should contact your professional adviser.