Must Read: Definitive Guide for Independent Contractors

The Federal Government has just released a very helpful and informative guide comprehensively addressing all the issues which independent contractors and the organisations engaging them face.

This is not only a must read for all contractors, but also a requisite for anyone involved in managing and hiring contractors, as it clearly outlines the legal responsibilities and rights of each party.

Obviously, we highly recommend you read it and you can download it here.

Please check back here as we drill down on specific issues and refer to the handbook in helping you understand them, including:

• Superannuation responsibilities
• Personal Services Income (PSI)
• Worker’s Compensation

…among other issues…

ATO putting contractors under the microscope, are you safe?

A little over a month ago I wrote here to highlight a recent test case of PSI legislation which substantiated our long held view that in the case of most contractors – whom we refer to as Independent Professionals (IPros) – “there is no legal benefit in establishing a PTY LTD company, Trust or Partnership structure as a vehicle through which to contract through.”

You can see my blog post here

As John Kehoe reported last Thursday, April 23, in the Australian Financial Review, in an article titled “ATO puts mining contractors under microscope”, we should now expect a lot more scrutiny over contractors by the ATO.

Here are some key points from the above article (which we are not allowed to distribute due to copyright protection):

The warning…

“Engineers, miners and IT professionals working in the resources industry will be targeted by an Australian Taxation Office investigation into suspected tax avoidance in the sector.”

What happened recently…

“The ATO obtained income details of 11,000 contractors by labour hire firms and found 8,000 contractors did not correctly classify their earnings as personal services income.”

A good summary of the law…

“Tax laws are designed to prevent contractors setting up partnerships, companies and trusts to reduce their tax liability, instead of reporting the earnings as personal services income and paying tax at their marginal rates.”

More on that…

“A contractor employed by only one company cannot use conduit entities to receive income and pay tax below their individual marginal rate.”

My view…

I wish to point out further, that companies, not just individuals, engaging IPros this way could also be left exposed and liable.

Is the money being saved worth the risk and the negative consequences?

Our simple answer is no.

We offer an alternative which makes more sense. Firstly, our model is fully compliant – no risk. Secondly, we lift the administrative burden so our customers free up their time. Lastly, through economies of scale, we reduce the operational cost of running their “business” giving them more money in their pocket.

It sounds too good to be true, but I assure you, it’s not. Ask any of the 2,000 IPros we serve.

If you have any questions I will be happy to answer them here. You may also phone us directly and ask for one of our Customer Executives.