Contractors Vs Employees
The ATO have signalled an intention to target employers who hire workers as contractors even though they are legally their employee.
We have experienced first hand the wrath of the ATO when it comes to this matter, having dealt with one recent audit in this area.
The ATO argue that employers are engaging full time contractors in an attempt to avoid paying tax and superannuation, and annual and sick leave entitlements.
Contractors who invoice based on hours worked are to be particularly wary. Not supplying materials for set jobs, an in some cases not using their own tools only add fuel to the fire that they are in fact an employee.
The ATO argue that if a contractor is engaged, they should be contracted for a specific job/task, including the provision of materials and the responsibility to rectify defects.
In several cases, the ATO has forced employers to pay 9% superannuation in addition to the amount already paid to these contractors which they ATO deed to be employees.
One measure introduced by the ATO in the building and construction industry from 1 July 2012 is that an annual report will need to be lodged by the business operator specifically identifying every contractor used during the year. Details required to be reported include on each contractor include:
- Contractors ABN
- Name
- Address
- Gross amount paid
- Total GST
This report will provide the ATO with a reliable database whereby they will know which businesses to target.
Beware,if you get a questionnaire in this field, its not random. The ATO's data matching has found anomalies in your reporting and are confident they will find something.
In addition to the above, the industries being targeted for unpaid superannuation include all trades, cafes and restaurants, while also targeting the cash economy in these fields also.
The extent the ATO are willing to go in the Cafe industry involves ATO auditors going back to wholesalers, determining how much coffee a business has acquired, and determining how many cups they should have produced and at what price, and attempting to match this to sales.
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