Are Your Contractors Really Employees?

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Are Your Contractors Really Employees?

We all prefer contractors to employees because we think they’re more flexible, affordable and easier to dismiss, if needed.

But none of this is necessarily true.

Both the ATO and Workcover are gunning for contractors who they believe are really employees, not to mention Fair Work Australia.

Sure, there are true contractors out there. They’re the people you pull in from time to time to do a job and then they go on their merry way, working for other people. They do not work 100% of their time for you!

If the ATO, Fair Work Australia or Workcover determines that your contractors are actually employees, the effects on your business can be immense.

Think back payment of superannuation contributions (that are not tax deductible, with fines and interest). Think back payment of Workcover, including penalties and interest. And don’t forget about unfair dismissal rules and backpay of holiday and/or carers (sick) pay.

And if you think “everybody else is doing it” is a justifiable excuse, think again. You need to look at each and every one of your contractors to determine whether they are truly contractors.

Below is a flowchart to help.

Insert Flowchart of ATO Website.

If you think you’re a contractor, ask yourself the following:

  • Do you provide materials or significant machinery?
  • Do you employ staff or contractors?
  • Do you have office space?
  • Do you advertise for work from many employers?
  • Are you paid by the job or by the hour?

Not meeting one of these criteria isn’t the end of the world but the more tests you meet, the safer it is that you truly are a subcontractor.

If in doubt, speak to your accountant.


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