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Phone 02 8383 4400

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CONTRACTOR vs. EMPLOYEE – EMPLOYER OBLIGATIONS

Are you sure that someone working for your company is a contractor? Could they be an employee? Or vice versa?

It’s time to check and get it right. The ATO is increasing its audit activity of ‘contractor vs employee’ obligations. Within your company there may be many different working arrangements and it’s your responsibility to get it right for each individual. Getting it wrong could mean penalties apply.

Employers are obligated in many areas including PAYG Tax, Superannuation and Fringe Benefits Tax (FBT). Your obligations will vary depending on your determination of whether someone is a contractor or an employee.

OBLIGATION

CONTRACTOR*

EMPLOYEE

Superannuation Guarantee

May not be applicable if Contractor provides materials as well as labour and/or delegates the work

Yes, if eligible Employee, pay at least every quarter

Leave Entitlements

No

Yes

Hourly Rate Payable

Yes, pay a higher hourly rate

Yes

Workers’ Compensation

May not be applicable if Contractor has his/her own insurance policy

Yes

PAYG Withholding Tax

No, unless by agreement

Yes

Employment Contract

Yes

Yes

GST Payable

May be applicable if Contractor is registered for GST

No

ABN Requirement

Yes

No

Taxable Payments Report

Yes, if Contractor has undertaken work within the Construction and Building Services industry

No

Employment Engagement Period

Contractor may leave at any time – Check any end-of-contract obligations

Employee secure – Check your pay and tax obligations for disengagement

*Obligations to a Contractor may vary depending on the structure of a Contractor’s business (company, trust, sole trader).

The ATO website has a chart you might use to help you determine whether someone is a contractor or an employee. Link: https://www.ato.gov.au/Business/Employee-or-contractor/Difference-between-employees-and-contractors/

It’s not a choice and there are rules, so ask us at YML Group to help you come to the right conclusion about your workers and meet your obligations in your business’s circumstances.

How can YML help?

Talk to our Accountants today to see how YML Chartered Accountants can assist you with your employer obligations. Contact us on (02) 8383 4400 or by visiting the Contact Us page on our website.