Employee or Contractor?

The Australian Taxation Office (ATO) Small Business Newsroom recently ran a story on the need to ensure you understand whether workers are employers or contractors.

It warned that before hiring a worker you need to check if they’ll be an employee or contractor. It’s important you get this right because it affects your tax, super and other obligations. If you wrongly treat your employees as contractors, you risk having to pay penalties and charges.

If you win or are seeking opportunities created by light rail, you may need to increase your workforce and this advice may be applicable to you.

The ATO said businesses can assume workers are contractors so long as they invoice you – but this is a myth.

“Receiving an invoice from a worker is not a deciding factor on whether they’re an employee or contractor. You need to consider the whole working arrangement so that you are clear on your tax and super responsibilities for them.”

On the ATO website you can find an employee/contractor decision tool that will help you quickly assess under which arrangement a worker is engaged.

“The tool is free and anonymous. You simply answer questions about the working arrangement and the tool will give you a result, including a report that you can keep in your records. Provided you answer each question accurately, you can rely on the result provided by the tool.

“Remember, some workers are always employees. If you hire any of the following types of worker you need to treat them as an employee:

  • apprentices
  • trainees
  • labourers
  • trades assistants.

Companies, trusts and partnerships are always contractors.”

The ATO also offers interactive webinars if you want to learn more.