CALL US: (07) 3367 0999 | EMAIL US:

Employee or contractor: Know the difference

Employers that incorrectly treat employees as contractors can face hefty penalties and charges as well as claims for entitlements and superannuation contributions.

Sham contracting arrangements, where an employer attempts to disguise an employment relationship as an independent contracting arrangement, are illegal and breach the Fair Work Act 2009.

Under the sham contracting provisions of the Fair Work Act 2009, an employer cannot:

Employers who engage in sham contracting arrangements can face serious penalties for contraventions of these provisions. The courts may impose a maximum penalty of $54,000 per contravention.

These businesses also risk penalties and charges from the Tax Office, including:

The ATO provides guidance to work out if a worker is an employee or contractor for tax and super purposes. Here are the key differences between employees and contractors:

Employee

Contractor

Ability to subcontract/delegate: the worker cannot subcontract/delegate the work – they can’t pay someone else to do the work.

Ability to subcontract/delegate: the worker can subcontract/delegate the work – they can pay someone else to do the work.

Basis of payment: the worker is paid either for the time worked, a price per item or activity or commission.

Basis of payment: the worker is paid for a result achieved based on the quote they provided.

Equipment, tools and other assets:

  • Your business provides all or most of the equipment, tools and other assets required to complete the work, or

  • The worker provides all or most of the equipment, tools and other assets required to complete the work, but your business provides them with an allowance or reimburses them for the costs.

Equipment, tools and other assets:

  • The worker provides all or most of the equipment, tools and other assets

  • The worker does not receive an allowance or reimbursement for the cost of this equipment, tools and other assets.

Commercial risks: the worker takes no commercial risks. Your business is legally responsible.

Commercial risks: the worker takes commercial risks and is legally responsible.

Control over the work: your business has the right to direct the way in which the worker does their work.

Control over the work: the worker has freedom in the way the work is done, subject to specific terms in any contract or agreement.

Independence: the worker is not operating independently of your business. They work within and are considered part of your business.

Independence: the worker is operating their own business independently of your business. The worker performs services as specified in their contract or agreement and is free to accept or refuse additional work.

Business
advice

taxation
planning

compliance
services

News

Understanding various kinds of super fees

February 16, 2018

No matter the kind of superfund you opt for, you will be subject to super fees. Understanding how these fees work and the difference they can make to your next egg is vital.

When it comes to superfund fees, there are two factors you need to get your head around; the kinds of fees you are being charged and the rate of fees you pay. Opting for a superfund based on these two factors can see you retire with hundreds of thousands more money.

You should be aware of the various types of fees you are being charged. If you would like to find out the fees you are being charged, you should do two things. Firstly, Google your fund’s product disclosure statement and scroll through to the fees section. You should see a list of different types of fees, with an explanation of what they are, how they are applied, and how often they will be incurred. Secondly, you should log in to your superfund account and take note of all the fees being charged to you. Investigate how closely these correspond and correlate with the product disclosure statement.

If you feel there are discrepancies, do not hesitate to contact your superfund or financial advisor and ask for clarification. It is worthwhile doing your research and comparing the fees you are being charged against other super funds and what they charge. Being complacent and not paying attention to your super is extremely irresponsible; the dividends you will receive later in life for being diligent now outweighs the burden of taking time to be informed today.

Some of the common super fees across the board include:

Another major factor contributing to how much you accumulate in your super account throughout your working life is the rate of fees you pay. Plain and simple, some funds offer much lower fees than other, creating a difference of hundreds of thousands of dollars when it comes time to retire.

Generally, funds are categorised into three groups; low super fees, medium super fees and high super fees. Ultimately, you want to be in a fund that charges low super fees. In saying this, it’s not only about super fees, as some funds have medium-high super fees but also perform better based on investment strategy, meaning you will get more back from your investments.