Employees v Contractors - Common myths dispelled

1. Entitlements for contractors and employees are vastly different and therefore business taxpayers may have different obligations depending on how their workers are classified.
   
2. It is important that businesses classify their workers correctly or they risk incurring substantial penalties for not paying the appropriate entitlements to their workforce.
   
3. Common myths listed by the Tax Office include:
   
   • A worker having an Australian Business Number (ABN) must be a contractor;
   • Assuming common industry practice will apply to all workers in a taxpayers business;
   • Workers employed for the short term or to get extra work done during busy periods are contractors;
   • Businesses should only take on contractors to avoid paying superannuation guarantee contributions; and
   • Workers with specialist skills or qualifications should be engaged as contractors.
     
4. Further, if a worker wants to be considered a contractor and the business taxpayer feels obliged to take on the worker as a contractor, the business may still face penalties, interest and charges for not meeting their tax obligations.
   
5. Whether a worker is an employee or a contractor is not a matter of choice but depends on the working arrangement and specific terms and conditions under which the work is performed.
   
6. The Tax Office has also developed a decision tool that businesses can use to determine the correct classification of their workers.
   
7. For more information, click here.