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SUPER FOR CONTRACTORS



Live Issue:

The ongoing shift in the workforce towards contractors and other alternative work arrangements has made the payment of super a live issue for employers and contractors and the Australian Taxation Office is taking a keen interest.
Last year the ATO raised $377 million in SG payments after looking at cases involving 235,000 employees. For SG purposes the common law definition of employee is expanded to include contractors who are employed principally for their labour, which may include mental or artistic effort or physical labour, as well as directors, members of parliament and sports people.
Where SG is payable, contributions must be directed to the employee's fund of choice or to the employer's default fund.
In practice,the contractor/employee issue for SG purposes is a very grey area and is usually decided on a balance of tests . Someone who advertises their services is likely to be a contractor but someone who responds to a job vacancy  is more likely to be an employee. An employee is also more likely to be reimbursed for expenses incurred in carrying out their work whereas an independent contractor is not.

EMPLOYEE OR CONTRACTOR ?

Some of the circumstances to consider are: 

  •      control test: does the contractor have the right to control their hours and working conditions?
  •      results test: is the provision of services results based or for hours of work?       
  •      the power to delegator sub contract
  •      who bears the risk of injury or defect in the work? An independent contractor often holds their own insurance and         indemnity policies.
  •      is payment calculated on an hourly rate or at a fixed price?
  •      who provides the tools and equipment?
  •      does the contractor work for a single client?
  •      is the contractor required to wear a uniform of the business to which they are providing services?
  •      has the contractor been engaged as an employee in the past? If so,how well can the two relationships be distinguished?

Should you have any query regarding this issue please contact your C & W advisor.