Posted on September 27, 2021 by admin
Being a contractor offers flexibility, choice and more control over your own schedule. It also means that you have different responsibilities from other employees that you may have to fulfil.
For employers, knowing the difference between a contractor and an employee is a must. It can lead to costly penalties if the two get confused.
An independent contractor is someone who operates under an ABN and is not an employee of the company that they perform work for. They may also provide services to another person or business,
Sometimes an independent contractor may operate their own business and have many clients, in other cases the independent contractor may only do work for one company.
There are a number of factors that determine whether or not you may be classified as a contractor versus an employee. These can include:
In Australia, independent contractors often use the sole trader business structure when operating and conducting their business. Due to this, there is a legal requirement that you register an ABN for yourself or your business if operating as a contractor/sole trader.
Having an ABN is important. It identities you and your business to the government, and helps with tax and other business-related activities.
Not everyone may be entitled to an ABN (especially if they are considered to be an employee for the work that they are performing),. As a sole trader though, you are as you are considered to be starting or carrying on an enterprise.
For those who wish to contract you for your services, an ABN means that your clients will not be required to deduct tax from you. If you invoice an organisation without being in possession of an ABN, they are required by law to deduct tax at the highest rate that they can, as well as declare the income you receive from them through to the ATO.
If you’re operating as an independent contractor or sole trader, losing a chunk of your income to tax before you even get paid isn’t something that you’re likely to want to happen. That’s why having an ABN is important for you, to ensure that that doesn’t happen.
If your business is looking into creating a working relationship with a contractor, you need to be careful that you do not fall into a sham contracting arrangement.
A sham contractor arrangement is when a business (or individual) tells a worker that they are an independent contractor. It can exist even if the worker is treated like an independent contractor in some ways such as having an ABN and providing invoices like what a genuine independent contractor might have to do.
It’s illegal, and may be done knowingly by an employer to avoid taking fiscal responsibility for paying legal entitlements to employees. It is illegal to:
If you are concerned that you may be involved in a sham contracting arrangement, or are an independent contractor looking for assistance in ensuring that you are remaining compliant with your current obligations when it comes to tax, super or business, we can assist. We are also equipped to help you with dealing with an ABN.
Posted on April 14, 2024 by admin
For businesses in Australia, providing fringe benefits to employees can be a valuable way to attract and retain talent, as well as incentivise performance.
However, employers need to understand their obligations regarding Fringe Benefits Tax (FBT). The Australian Taxation Office (ATO) administers FBT, a tax on certain non-cash benefits provided to employees in connection with their employment.
Let’s explore the types of fringe benefits subject to FBT to help businesses navigate this complex area of taxation.
One common type of fringe benefit is the provision of a car for the private use of employees. This includes company cars, cars leased by the employer, or even reimbursing employees for the costs of using their own cars for work-related travel.
Employers may provide housing or accommodation to employees as part of their employment package. This can include providing rent-free or discounted accommodation, paying for utilities or maintenance, or providing housing allowances.
Expense payment fringe benefits arise when an employer reimburses or pays for expenses incurred by an employee, such as entertainment expenses, travel expenses, or professional association fees.
If an employer provides loans to employees at low or no interest rates, the difference between the interest rate charged and the official rate set by the ATO may be considered a fringe benefit and subject to FBT.
Providing employees with property, such as goods or assets, can also result in fringe benefits. This can include items such as computers, phones, or other equipment provided for personal use.
When employers provide allowances to employees who need to live away from their usual residence for work purposes, such as for temporary work assignments or relocations, these allowances may be subject to FBT.
Entertainment fringe benefits arise when employers provide entertainment or recreation to employees or their associates. This can include meals, tickets to events, holidays, or other leisure activities.
Residual fringe benefits encompass any employee benefits that do not fall into one of the categories outlined above. This can include many miscellaneous benefits, such as gym memberships, childcare assistance, or gift vouchers.
Employers must understand their FBT obligations and ensure compliance with relevant legislation and regulations. This includes accurately identifying and valuing fringe benefits, keeping detailed records, lodging FBT returns on time, and paying any FBT liability by the due date.
Fringe Benefits Tax (FBT) is an essential consideration for businesses that provide non-cash benefits to employees.
By understanding the types of fringe benefits subject to FBT, employers can ensure compliance with tax obligations and avoid potential penalties or liabilities.
Seeking professional advice from tax experts or consultants can also help businesses navigate the complexities of FBT and develop strategies to minimise tax exposure while maximising the value of employee benefits. Why not start a conversation with one of our trusted tax advisers today?
