Businesses should obtain expert taxation advice. Depending on how much work a contractor performs for one principal and the nature of the work, tax and superannuation obligations may still exist for contractors. 

If an individual provides services as an independent contractor:

1. Does not quote an ABN when submitting an invoice for work undertaken; tax must be withheld at the top rate;

    

2. The contractor should be registered for GST and submit a tax invoice quoting an ABN and charging 10% on the supply of the services.

   Note: The contractor does not have to register for GST if the total annual contracting fees are less than $75,00 per annum. Businesses must regularly check with the contact to see if they have reached the GST threshold. 

    

3. Where a contractor performs over 80% of their work for one business, the business may be required to deduct tax from payments made to the contractor as if the contractor were an employee. If deductions are not made, the worker cannot subsequently pay their tax. In that case, the ATO may look to the principal for payment if it considers there was properly an employment relationship.

A contract worker can also be an employee for the superannuation guarantee legislation if the contract is wholly or principally for labour.

For HR Help in engaging contractors in Wollongong and the Illawarra, give John a call on 0407 069 507.