- Entitlements for contractors and employees are vastly different and
therefore business taxpayers may have different obligations depending on
how their workers are classified.
- It is important that businesses classify their workers correctly or
they risk incurring substantial penalties for not paying the appropriate
entitlements to their workforce.
- 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.
- 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.
- 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.
- The Tax Office has also developed a decision tool that businesses
can use to determine the correct classification of their workers.
- For more information, click here.