Contractor Tax Obligations

• the worker's contract states they are a contractor
• the worker provides an Australian Business Number and /or is registered for Goods and Services Tax
• the worker invoices for their services
• the worker can refuse work and/or work for others (this can also apply to casual employees)
•  the worker is paid on a result rather than hourly basis and/or
• there are no employment tax obligations for incorporated contractors

While each of these factors may affect whether a person is a contractor or employee, a worker can fit into one or more of these categories but still be considered an employee. Even if a worker is a contractor as determined by common law, the worker may still be deemed an employee for certain tax purposes.

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There are a range of potential implications if someone is misclassified, from incorrectly treating employees or deemed employees as contractors, including:

• failure to pay payroll tax on the salary and wages of those employees
• failure to make compulsory 9% superannuation contributions on behalf of those employees
• breach of income tax rules about PAYG withholding
• failure to pay workers' compensation amounts on behalf of the employees
• possible GST issues
• fines from FWA
• interest and penalties

Some businesses may already have received letters of caution or other formal correspondence from the FWO or Australian Building and Construction Commissioner or other industrial relations bodies. These businesses should obtain professional advice as soon as possible. Because of the increased sharing of information between government departments, there is a real risk that the ATO and SRO may also follow up.

Businesses that have not been contacted yet should review their contractor arrangements and consider: