New South Wales

Air Conditioning and Mechanical Contractors' Association of New South Wales - ABN 99 000 546 538

z

Tax and Super

Employee or Sub-contractor?
Spot the difference!

It is essential that employers correctly assess whether people working for them are employees or independent contractors and discharge their (employers') taxation and superannuation liabilities correctly.

A very general guide to the law and practice on the subject is given via the hyperlinks on this page. However, these charts and notes only broadly explain how to distinguish between employees and sub-contractors. Failure to correctly check all circumstances of employment may expose employers to heavy penalties for failing to meet their taxation, superannuation and insurance obligations.

If in doubt (or even if you think you're OK), check details of each case with a solicitor or accountant.

Don't guess or trust to luck: it isn't worth the risk.

Although guidelines are available (some are printed below), the nature of and the circumstances surrounding EVERY contract of employment or engagement must be independently assessed to determine liability for:

• Goods and services tax;
• Pay-as-you-go tax (used to be known as group tax when dealing with employees' tax obligations);
• Fringe benefits tax;
• Workers' compensation insurance;
• Superannuation guarantee (minimum 9% of wages).

Printed below is a list of hyperlinks to various explanatory papers, which are very helpful, published by the Australian Taxation Office and Workcover NSW. The implications of the Independent Contractors' Act will be added later.)

• ATO paper: How to determine if workers are employees or independent contractors: click here.
  
  Diagram based on the above paper: click here.
   
• How to determine if workers are employees or independent contractors for Workcover requirements: click here.
   
• ATO paper: Employers' guide to superannuation guarantee obligations (contractors and general):
  click here.
  
  Diagram based on the above papers: click here.
   
• ATO paper: Employers' guide to superannuation guarantee obligations (general): click here.
   
• ATO paper: No ABN withholding (a general summary of when to ask for an ABN and a tax invoice): click here.
   
• If you want to find out if your contractor has quoted a valid ABN and/or is registered for GST, click here.
   
• The Australian Securities and Investments Commission's web site www.asic.gov.au is also very informative.

Date of posting: 27 September 2007
Back to top