The Tax Office recently gave employers a “head up” that they may be looking at thier arrangements with so-called “contractors”, who might be better described as employees.

The Tax Office’s strategy for tackling non-compliance in this area focuses on businesses that do not withhold from payments to workers as required and fail to make superannuation guarantee contributions.

This can be through deliberate and striaghtforward non-compliance by payment of cash wages and can also involve using an ABN to mask underlying employment relationships.

The Tax Office stated :”Increasingly it seemd that many employers prefer to treat workers as contractors as it can enable them to cut costs in temrs of workers compensation, payroll taxes and superannuation guarantee. They can also negotiate pay rates ouside of normal wages and conditions and do not withhold tax”.

The following case study looks at a case that is non-compliant with the current law.

Evidence suggests that the current tighter economic contitions hace increased the prevalance of such arrangements as more businesses feel the need to cut costs, and labour market conditions can make employees more vulnerable to these practices.

Case Study

A telemarketing business claims its several hundred workers are all independent contractors. They are all required to quote an ABN. No tax is withheld under PAYG and superannuation guarantee is not paid.

Workers are contracted to perform work personally at the premises of the business, using equipment and information supplied by the business.

The telemarketers do not provide any assets and they have very limited control over how they perform their duties.

The telemarketers are not contracted to achieve a specific result or outcome by working on thier own account or in their own business, but are contracted to work in and are integral to the business and are paid on an hourly rate.