The Australian Taxation Office (ATO) has stated their intention to increase their audit focus on businesses that use contractors.
An incorrect employment classification of an employee / contractor could be a breach of both ATO and Workers Compensation legislation.
If ATO determine that your contractors are employees, you would have a shortfall in your Superannuation and PAYG payments and subsequently incur interest and penalties. In theory ATO can go back an unlimited period to collect the superannuation and PAYG for employees.
In past years there was confusion for business owners about the definition of a worker as the ATO definition was different to WorkCover Queensland’s definition.
Today the definitions have been aligned. WorkCover Queensland has adopted the same definition as the ATO who supply a simple online decision tool to identify ‘Employee or Contractor’.
You can check your circumstances by logging on to:
You are asked to answer a series of questions
- Is there an Agreement in place with the individual
- Occupation of the individual
- Does the individual have an ABN
- Details of Subcontracting arrangements
- Basis of payment for services
- Responsibility for provision of equipment / tools
- Who is responsible for Rectification of work?
At the end of the questionnaire a decision is provided based on answers given. You are able to enter personal details and a report can be produced for you to print /save. Retain a copy for your records and if audited, you have a documented basis on which you made your decision.
An important factor is the existence and content of a written agreement between you and the individual. You should consider obtaining legal advice in regard to any contractor’s agreement.
It is important to discuss all your labour arrangements with your CQIB insurance broker as contractor or labour-hire alters your exposures hence the need to tailor your insurance program to your specific needs.