Employee v Independent Contractor - ATO Scrutiny

We have previously written in relation to the position of whether you and/your staff are employees or independent contractors. Many businesses seek to make their staff independent contractors to avoid numerous regulatory obligations including Pay As You Go Tax, Superannuation, leave entitlements and payroll tax.

The ATO has announced that independent contractors are high on its list for auditing this year to stop sham contracting. Significant penalties can apply to businesses for failing to pay employee entitlements.

The ATO ‘s latest compliance program lists as high risk employers the following :

  • Cafes;
  • Restaurants;
  • Real Estate Businesses; and
  • Carpenters.

The ATO expects this year to contact some 13,000 employers in response to complaints from staff members about unpaid Superannuation in particular.

There have been many attempts to disguise employment arrangements as being something other than employment. As Mr Justice Gray in Reporter: Re: Transport Workers Union Australia said:

The parties cannot create something which has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck.”

If you have any concerns regarding the status of your staff members whether they are indeed truly “independent contractors” or are in fact employees please contact us to have a review of your agreements and operating procedures. The consequences for getting it wrong are quite considerable!