Q: What happens when an employer disguises an employment relationship as an independent contracting arrangement?
A: This is known as sham contracting and is an illegal practice where a person working as an employee is told they are an independent contractor when they are not. The Fair Work Act can penalise an employer up to $51,000.
Q: Are apprentices and trainees employees or contractors?
A: Apprentices and trainees are considered employees for tax and superannuation purposes. Employers are required to meet pay as you go withholding tax, superannuation and fringe benefits tax obligations.
Q: What happens if my contractor does not have an ABN?
A: If the contractor does not provide with an ABN, the principal is required to withhold 46.5% of any payments and report these to the ATO. A contractor who is not registered for GST should not charge you GST.
Q: Who is responsible for PAYG withholding?
A: Generally, whoever is responsible for remitting the PAYG withholding also has the liability for any unpaid amounts. This means they also have responsibility for:
• Reporting and paying all PAYG withholding to the ATO.
• Issuing payment summaries to employees.
• Preparing and lodging a PAYG withholding annual report.
In general terms, employees who have has PAYG withholding amounts withheld from their salary or wages are entitled to receive a credit for that amount when they lodge their tax return. However, if you are outsourcing your payroll, it is the contractor’s responsibility to withhold tax for you and provide you with the PAYG summary.
Q: Your super guarantee responsibilities?
A: Employers are responsible for paying super guarantee entitlements for their eligible employees. Contractors paid mainly for their labour are also employees for super guarantee purposes.
Still confused if you are deemed as an employee or a contractor… and have more questions that need to be answered… don’t hesitate to contact us…
