1. Important: Please read our guidelines and tips for new players before posting, particularly if this is your first time. If looking for answers, start with a search of past topics.

sub contractor- no tax paid for 5yrs nor lodged

Discussion in 'Money matters' started by grubette, Oct 16, 2013.

  1. grubette

    grubette New Member

    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Hi there
    Im after some advice, ive just found out my fiance has not paid tax as a sub contractor for 5 yrs nor lodged a tax return.
    3 yrs ago he worked as just an employee for about a year & his tax taken out but still never lodged.
    Ive asked him to please see an accountant but I would like to know if anyone has any answers/advice what are the repercussions now and IF he doesnt sort this mess out.
    Also does/will it affect his credit rating.
    Thank you ;)

    *yes he is a puppet and stuiped
  2. Greg_M

    Greg_M Well-Known Member

    Messages:
    1,096
    Likes Received:
    694
    Trophy Points:
    113
    First up, he won't be the lone ranger, in my experience especially in construction, it happens often.

    You need to get an accountant, sooner, rather than later. I'm not an accountant, so please only take this as opinion ... I'm sure one of the many pro's on here will have better advice.

    As someone whose been in the poo with the taxman, I'd say you're far better off coming forward and dealing with it, than letting it get any worse. I'd see an accountant first though.

    I've found the ATO to be very good to deal with if you approach them to resolve it. If they find you, it's a bigger issue.

    To look on the bright side, last years return isn't that late ... yet. He's worked for wages one year, so he's in credit for that year, less a fine for a late return.

    That leaves 3, he may not have remitted any tax for those years, but he also hasn't claimed any expenses either.

    Go see, or talk to someone who really knows what they're doing.

    Hope you get it sorted.
    grubette and (deleted member) like this.
  3. grubette

    grubette New Member

    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Thank you estim8
    I definitely want him to sort it before it gets worse. The reason he has to sort it is now he has to become a company instead of sub contractor for work unless he goes on wages which is fairly poor.
    I just hope there isnt going to be a ridiculous amount!
  4. Greg_M

    Greg_M Well-Known Member

    Messages:
    1,096
    Likes Received:
    694
    Trophy Points:
    113
    You'll definitely need an accountant, if you're setting up a company, better to clean the slate while you're at it.

    You might even get a bulk discount :)
    1 person likes this.
  5. nighttax

    nighttax Active Member

    Messages:
    125
    Likes Received:
    37
    Trophy Points:
    28
    Most people like your fiancé are scared because they usually imagine it will be far worse than it ends up. One thing for sure it will only cost him more the longer he leaves it. Get it sorted before the ATO comes after him and they will let him enter a payment arrangement to pay the debt off. If they chase him and catch him they are getting nastier nowadays and may demand full payment at once and will sue him through the courts and may bankrupt him. That will definitely affect his credit rating for at least 7 years and even longer.

    Regards
    Evan
    grubette and (deleted member) like this.
  6. POC

    POC New Member

    Messages:
    3
    Likes Received:
    3
    Trophy Points:
    3
    It sounds like possible sham contracting to me. The ATO is on to this now especially in construction.
    It may be worth paying for a legal opinion as well as the accountant.
  7. grubette

    grubette New Member

    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Im not sure whats goin on but most of the subs that are brickies & labours are getting company. We are in canberra, the accountant I briefly spoke to said this is perfectly legal. Its crap to be honest.
    My fiance was/is a sub so works for another bricklayer company, they have gone bankrupt today due to workers comp payout to a fellow worker. The boss has started another company in a diff name and has asked all brickies & laboursttogo company because hes not forking out insurance, super and workers comp. So my fiance will still be only on $45ph when he'll be his own company. It just doesnt work unless he started his own gang
  8. POC

    POC New Member

    Messages:
    3
    Likes Received:
    3
    Trophy Points:
    3
    The accountant has no idea, it is not legal. Bricklayers and labourers are high on the list of targets.
    A lot of companies on commercial sites employ workers on EBA rates not the award. The rate is lower but it can be another option.
    A company will cost you money to set up, yearly tax returns etc. An advantage is you can often write off the cost of running a vehicle with a company as long as the whole setup is legit of course. It sounds like the bricklayer contractors days are very numbered to me. Also be aware that all builders now have to report to the tax office the yearly payments to all subcontractors, this started last year. The ATO checks this information and also shares it with bodies like workers comp, payroll tax etc.
    Sorry if this is not what you want to hear.
    1 person likes this.
  9. Greg_M

    Greg_M Well-Known Member

    Messages:
    1,096
    Likes Received:
    694
    Trophy Points:
    113
    This is home territory for me, I have run gangs of up to 20 trowels, and most of my estimating work was for major subcontract bricklayers in the commercial sector.

    First up, even if you're accountant reckons it's legal, it's still thinly disguised sham contracting.

    Fairwork Australia have been hammering bricklaying contractors, I have an associate with a 30k bill to prove it. The ATO aren't far behind them either ... industry rumour is there's one builder a week going to the wall at the moment, many pushed by the ATO.

    One who I won't name went down last week, taking a local bricklaying contractor for around 400k, and a landscaper I know for 300k (he'll lose his house).

    You can't employ tradesmen in this country at the moment on wages (except for the very elite tier one sector-and there going down just as fast), the real cost of putting a man on a job (in Vic at least) is around $80 an hour, without profit.

    Pricing is back at decade old levels, if you have men on wages your losing big time on every job ... that assumes that you even get paid.

    Pyramid subcontracting is the only way to survive, so if you want to keep working, I'd say a company is probably the best option (the only option maybe).

    The goody two shoes will say it sucks, that you're missing out on the hidden benefits, that it's a grey area of the law ... the fact is many workers prefer to work as contractors. Most think they're making more money, a false supposition when you add up the benefits of a wage (and especially if you don't pay your tax). The other reason is, that if you're paid an "all in rate" at least you have all your money.

    Very often, too often, workers in construction on wages find builders or contractors going broke ... and none of the hidden extras, including tax, have actually been paid ... this makes subbying very attractive after you've been burnt a couple of times.

    For the "lead dog" at the top of the pyramid it's your only hope of winning a job and maybe dragging a living out of it ... most aren't ATM, they're making less than the guy's they've engaged, but are too stupid to work it out.

    Bricklaying is one of the worst because it's still very labour intensive ... to win a job, you have to have the manpower to deliver to program.

    The so called subcontract payment guarantees are little more than a sham, most commercial builders happily sign the stat dec claiming they've paid everyone ... BS.

    If it wasn't a public forum, I could name several builders including at tier one, doing government, and statutory body work, that regularly sign false stat decs to get paid before they've paid anyone else, they rely on subcontractors as hidden project finance.

    The labour laws in this country really need a major overhaul as well. We now have a major disconnect between bargaining agreements, actual productivity and supply and demand. Ordinary people shouldn't need to have to form companies to make a living wage (unless they choose too).

    Your fella is actually lucky he has a job ATM ( I know lot's that don't). I'd bite the bullet, fix your tax and play on till something better turns up.

    End of rant (you can tell I'm over the industry).
  10. POC

    POC New Member

    Messages:
    3
    Likes Received:
    3
    Trophy Points:
    3
    I couldn't agree more.

    Back to topic as advised sort the tax out, think long term.

    If your fiancé likes the industry maybe look at up skilling or training. Straight out bulk type bricklaying is hard on the body especially when you get older.
    grubette and (deleted member) like this.
  11. grubette

    grubette New Member

    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Wow! Thank you very very much for this information. Very helpful, I will show my partner and he can ask these questions on monday.

    The constructiSorting out his tax is no 1 priority than we can question where do we go from here.
  12. Divert To Mobile

    Divert To Mobile Well-Known Member

    Messages:
    2,633
    Likes Received:
    1,199
    Trophy Points:
    113
    Hi grubette,

    When you see the accountant work hard at maximising deductions. There are many expenses that you can fully and partly claim as a business owner. Percentage of rent (if your renting), percentage of electricity, water, phone, internet, car expenses, bank fees. The list goes on.

    Steve
  13. Greg_M

    Greg_M Well-Known Member

    Messages:
    1,096
    Likes Received:
    694
    Trophy Points:
    113
    Did I stray off topic? Sorry bout that.

    This is very good advice, think long term.

    It is hard on the body, as a 40+ year veteran, I'd be in a lot worse state if I hadn't diversified and skilled up, into other roles within the industry.

    Steve's advice to make sure your expenditure is maximised is very good too. Even after all the years I've been doing it, accountants always manage to surprise me with something I've missed. The tax laws are always changing slightly, you need a pro that is always at the leading edge, to get the best result ... I can never understand why some still try to do it themselves.

    At the risk of going off topic again, it'd be a good idea to check on your workers comp requirements or liabilities. Sounds like his boss's primary aim is to avoid work cover requirements. From my experience his strategy won't work (or wouldn't in Vic). Especially if he's already crossed them ... but you don't want to get caught with no cover at all, a company can hold it's own policy, an individual can't cover "themselves", only those employed by them.

    Good luck with it.
    grubette likes this.
  14. grubette

    grubette New Member

    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    Thank you all very much. The sham contracting was very helpful info. Accountant app tomorrow to get tax sorted.
    1 person likes this.
  15. grubette

    grubette New Member

    Messages:
    6
    Likes Received:
    1
    Trophy Points:
    3
    UPDATE- Tax has been sorted. He received a very nice return & no fines or money owing.
    As for the company, hes established it now due to his boss getting out of paying insurances & workers comp. Even the labourer had to go company, poor guy is on $30ph plus hes gotta take out his tax, gst insurance & workers comp.

Share This Page