Blog Layout

Contractor or employee?
Liz Gibbs • Jun 19, 2023

Contractor or employee?

Following two landmark decisions handed down by the High Court, the ATO has issued a new draft ruling on determining whether you are an employee or independent contractor.

 

Ensuring that you are correctly classified as either an employee or contractor is important and can have significant ramifications for you. For example, employees (and some contractors deemed to be employees) are eligible for superannuation guarantee on their salary and wages. On the other hand, if you are an independent contractor, you may need to obtain an ABN to avoid the top rate of tax being withheld from the payments you receive. 


In the new ruling, the ATO still looks at the totality of the relationship between the parties to determine the classification. What has changed in the new guidance as a result of the High Court decision is that the ATO has confirmed that where the parties have entered into a written contract, the analysis of whether it is a contractor or employee relationship should focus on the terms of that contract to establish the nature of that relationship (rather than just the conduct of the parties).

 

Merely being labelled an independent contractor doesn’t necessarily make it so if this is inconsistent with the rights and obligations under the contract. A genuine independent contractor will typically be:

 

·        Autonomous rather than subservient in their decision-making;

·        Financially self-reliant rather than economically dependent upon the business of another; and,

·        Chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.



Need Help?

Talk to us if you want assistance determining whether you are an employee or independent contractor.


Please note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation

Illegal access to super
By Liz Gibbs 08 May, 2024
The ATO has made a call to professional accountants to help identify and manage illegal early access to superannuation by members of self-managed superannuation funds (SMSFs).
Transfer business to your kids
By Liz Gibbs 08 May, 2024
Generational succession - handing your business across to your kids or family - sounds simple enough but, many families end up in a dispute right at the point when the parents, business, and children are most vulnerable.
The ‘bank of Mum & Dad’
By Liz Gibbs 06 May, 2024
The great wealth transfer from the baby boomer generation has begun and home ownership is the catalyst.
Division 7A crack down
By Liz Gibbs 06 May, 2024
The ATO is cracking down on business owners who take money or use company resources for themselves.
Excess Concessional Contributions
By Liz Gibbs 04 May, 2024
The Administrative Appeals Tribunal ('AAT') recently held that a taxpayer was liable to pay excess concessional contributions tax in relation to contributions made on his behalf by his employer.
False invoicing
By Liz Gibbs 03 May, 2024
The Serious Financial Crime Taskforce ('SFCT') is warning businesses about using illegal financial arrangements such as 'false invoicing' to cheat the tax and super systems. False invoicing arrangements may consist of the following:
illegal access to super
By Liz Gibbs 02 May, 2024
Faced with tough times, some people may be thinking about accessing their super early.
Disaster
By Liz Gibbs 01 May, 2024
Taxpayers should be aware that some natural disaster relief payments are not taxable.
Scam
By Liz Gibbs 01 May, 2024
The Government has urged Australians to be vigilant regarding scammers who target ATO log-in details to commit tax fraud.
ABN up to date
By Liz Gibbs 29 Apr, 2024
When did you last check your Australian Business Number (ABN) details on the Australian Business Register (ABR)? If you’re not sure
More Posts
Share by: