Question:
Big risks for employers with independent contractors
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Employers that misclassify someone as an independent contractor (rather than an employee) face big risks for employee entitlements, withholding tax, superannuation and also unfair dismissals following a Fair Work Australia decision in December.
The Full Bench of the national employment arbitrator found that a purported independent contractor working as a shop assistant in a furniture store was not a contractor, was paid a fixed weekly rate, did not have other clients and was not working through a company.
Unions, the Fair Work Ombudsman and the Tax Office are all cracking down on supposed “sham contracting”. In its decision, the Full Bench identified the following indicia for independent contracting:
+ Whether the putative employer exercises, or has the right to exercise, control over the manner in which the work is performed, place of work, hours of work and the like;
+ Whether the worker performs work for others (or has a genuine and practical entitlement to do so);
+ Whether the worker has a separate place of work or advertises his or her services to the world at large;
+ Whether the worker provides and maintains significant tools or equipment;
+ Whether the work can be delegated or sub contracted;
+ Whether the putative employer has the right to suspend or dismiss the person engaged;
+ Whether the putative employer presents the worker to the world at large as an emanation of the business;
+ Whether income tax is deducted from remuneration paid to the worker;
+ Whether the worker is remunerated by period wage or salary or by reference to completion of tasks;
+ Whether the worker is provided with paid holidays or sick leave;
+ Whether the work involves a profession, trade or distinct calling on the part of the person engaged;
+ Whether the worker creates goodwill or saleable assets in the course of his or her work and;
+ Whether the worker spends a significant portion of his remuneration on business expenses.
If businesses have faulty independent contractor arrangements, they should take action to put the engagement on a proper contracting footing, or alternatively, make employment arrangements.
www.fwa.gov.au/decisionssigned/html/2011fwafb8307.htm, WTB 2012/65
