07 5451 1118 Over the last few years it has become increasingly popular to engage contractors instead of employees. Due to this, it is important to know whether you are employee or contractor. The Australian Tax Office (ATO) has released a number of handy tools to help you make this decision. If you click on the link below it will take you to a virtual form that will tell you whether you are an employee or contractor. Whatever the outcome of the form, print it out and keep it with your tax records.
What is the difference between a contractor and employee? The main difference is when it comes to PAYG, superannuation and GST. If you are an employee, your employer will pay your PAYG and superannuation on your behalf.
However, if you are a contractor, you are responsible for all of these payments. If you are making a profit as a contractor, you will need to pay PAYG instalments during the year to reduce your tax liability at the end of the year; no one likes a large tax bill after the 30 June. We work with many clients through the year to ensure that there is no surprise at the end of the year and that they have enough money set aside for their tax bills. If you are a contractor it may be an ideal time to talk to us.
Is your turnover $75,000 or more a year? If so, you need to register for GST and lodge a quarterly or annual BAS. Please remember, if you do not pay your tax liabilities on time you will be subjected to ATO interest at a rate of over 9%. Also if you lodge you BAS or tax return late, the ATO can charge you late fees.
While it is not compulsory to pay superannuation as a contractor, it is very beneficial to do so. Not only is it a tax deduction, if it is paid into your super fund before the 30 June, each year it is helping you save for your retirement.
Comments are closed.