Many small businesses in Sydney face the challenge of navigating Australia’s onerous employment laws, which have sparked numerous debates on whether to hire staff as employees or contractors, as observed by accountants in Sydney.
There are numerous benefits of engaging a contractor instead of employing an employee. However, when you hire a worker, forget the common myth that they are contractors because they have an ABN.
Whether or not a worker has an ABN makes no difference to whether you should treat them as an employee or a contractor.
Regarding tax and superannuation, working out if your worker is an employee or a contractor is based on the terms and conditions of their working arrangement with you. It is essential to get it right because your tax and superannuation obligations can change based on those arrangements.
The Australian Tax Office (ATO) has an employee/contractor decision tool to help you find a quick and reliable answer. The tool will tell you if your worker is an employee or a contractor for tax and superannuation purposes and what this means for your business.
One significant risk is that an employer (or company directors) can be held personally liable for the PAYG withholding tax and superannuation for employees. You don’t want to get the employee or contractor’s decision wrong and be held personally liable for the tax and superannuation after you have already paid the contractor in full.
The ATO will pursue the employer, not the contractor, and the chances of recovering anything from the contractor once you have paid them would be futile. So you, as an employer, need to ensure you make the right decision about whether a worker is an employee or a contractor.
As always, don’t hesitate to contact your Client Manager if you have any issues.
Kreston Stanley Williamson Team
*Correct as of May 2016
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.