Small Business Employer Warning

ATO TAKING A HARD LINE ON “CONTRACTOR” ARRANGEMENTS

 If you are currently operating your business using ABN contractors to provide labour for you, then you MUST read this!

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We are seeing a lot of ATO activity in this area due to a recent court case Probin v Commissioner of Taxation which has given the ATO an even greater focus on this issue.

WHAT’S AT RISK?

Superannuation liability

The ATO will review the arrangement you have with your contractors and may decide that they are “employees” . In many cases it does not matter if you have a written agreement in place, which states that they are a contractor.

If the ATO decides that your contractor is an employee, then they will be treated as an employee. If this is the case, then you may be liable to pay the 9.5 percent superannuation guarantee charge plus penalties, on the amount that you have already paid the contractor. This can add up to a significant amount if the arrangement has been going on for a number of years. 

Is your contractor an employee? 6 quick questions you should ask yourself…

 The Probin case confirmed that a property maintenance business was liable to pay its contractor superannuation as though he was an employee because:

  1. The contractor was providing labour mainly for the business
  2. The contractor wasn’t trying to expand its own business by separate marketing or advertising
  3. The payment was made mainly for labour rather than a specific expertise
  4. For difficult jobs the business owner would still supervise the work
  5. The contractor didn’t vary his rate from job to job and the rate was generally a fixed hourly rate
  6. The business did the quoting and would generally bear the ‘loss’ if the contractor billed for more time that the initial quote

DOES THIS SOUND LIKE THE RELATIONSHIP YOU HAVE WITH YOUR CONTRACTORS?

What we are doing to help?

Hinterland Accounting Services will be scheduling an information session in February to give businesses a full understanding of all the facts.

Businesses should review their current arrangements and think seriously about changing the way they pay their labourers before the decision is made for them by the ATO. 

We know that there can be additional compliance when you have employees, but the extra work may be better for your business than the cost of an expensive ATO superannuation audit.

Come along to our information session and we will walk you through the options available to your business. Keep an eye out as we will be releasing details shortly. 

For any other questions, please contact our office on 07 5439 0188.

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