You can also click here for more information on the subject.
Download this PDF for more information on this complex issue.
- Tax File Declaration form.
- Instructions for choosing a super fund.
- Current Award, which applies to the employee.
- Fair-work Information Statement.
- My Employment Checklist.
- Letter of employment.
A Self-audit checklist will help you meet your requirements under Australian law.
There is the impression that when a person has an ABN and works in a business, their employer does not need to pay superannuation or tax on their behalf. This concept is often misunderstood, as not all contractors are considered Independent contractors.
What does an Independent Contractor look like?
An Independent contractor have the freedom and ability to complete the work in their own time frame. They are also responsible for ensure the workmanship is of a certain standard and organising their staff independently.
- They have a high level of control over the job
- They have agreed to a set amount of hours or price of the job
- Engaged for a specific task
- Bear the risk of making a profit or loss
- Use their own tools
- Have an ABN
- Organise workers
- Submit invoices
- Pay their own GST and PAYG
What does an Employee look like?
An employee is expected to work a certain amount of hours and to turn up when required. Unlike a contractor they have their work organised for them and are not responsible for the profit or loss of the business.
- They have their work controlled by their employers
- Work set hours (full time, part time or casual)
- Usually have an ongoing work expectation
- Have their tools supplied by their employer
- Their tax is deducted from their wage
- Paid sick and annual leave
- Bear no financial risk
It has become quite common for businesses to request their staff have an ABN for tax purposes. This is often asked of an employee because their employer believes they are not required to pay superannuation, sick and annual leave. This is considered Sham Contracting
What is Sham Contracting?
Sham contracting is when an employee is asked to obtain an ABN to work as an independent contractor. They are treated like an independent contractor without the benefits of being an independent contractor (examples above)
It is illegal to Sham Contract. It is illegal to:
- Claim an employee as an independent contractor
- To pressurize an employee to become an independent contractor
- Dismiss an employee for not being an independent contractor
- To dismiss an employee and hire an independent contractor to do the same work
The Fair work act protects independent contractors from adverse action, coercion and abuses of freedom of association. See Protections at work for more information.
For Further Information
You can find out more about independent contractors by contacting business.gov.au on 13 28 46.
For independent contractors who want to employ someone, make sure you check the Hiring employees page with Fair work.
It involves the tracking of superannuation to improve efficiency of the superannuation system.
Under SuperStream, employers must make super contribution by submitting data and payments electronically in a consistent and simplified manner.
19 or fewer employees: If you have 19 or fewer employees, SuperStream starts from 1 July 2015. You have until 30 June 2016 to meet the SuperStream requirements when sending superannuation contributions on behalf of your employees.
From 1 July 2014 SuperStream became mandatory for all employers making super contributions to APRA-regulated super funds, self-managed Super funds.
Note: You can voluntarily adopt the SuperStream from 1 July 2014 if you are ready, and many solution providers may offer to assist you to do this from this date.
Employers have a few options for meeting SuperStream. It’s a good idea to start investigating your options now.
Your options may include:
upgrading your payroll software
using an outsourced payroll function or other service provider
using a commercial clearing house or the free Small Business Superannuation Clearing House (19 or fewer employees).
Your default fund may also have its own electronic channel that can be used during the transitional period up to 30 June 2016. This fund can provide you with details about how to comply with the SuperStream using their preferred facilities.
Employers will need to collect the following information:
- unique superannuation identifier (USI) for APRA-regulated funds
- ABN for SMSF funds
- bank account details
- electronic service address.
For existing employees, simple processes will be implemented to enable employers to obtain this information. This may include receiving information:
- through the Fund Validation Service
- via employees who have elected a choice fund (such as a self-managed super fund)
- through a clearing house.