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  • #995012
    Caron
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    Specifically for VA’s and Business Coaches/Advisors –

    I’ve been doing some research on what makes a sole trader/sole proprietor an employee versus a contractor. See: https://www.ato.gov.au/Business/Employee-or-contractor/How-to-determine-if-workers-are-employees-or-contractors/Difference-between-employees-and-contractors/

    I understand the differences and I fall under the contractor definition, however, I do not think my contract or the way I invoice accurately portrays this. I have clients who are contracted on an ongoing basis. By that definition alone, I am an employee, however, we agree upon the scope of the contract – that is as a virtual assistant, business accountability facilitator (facilitating the action of a strategy) – but we do not set a duration to that contract, it’s simply ongoing, paid monthly, review bi-annually.

    What, if anything do I need to do to ensure I, and my clients, are not liable for incorrectly hiring my services?
    – Do I need to write something specific in the contract?
    – Do I need to write something specific on the invoice?
    – When the outcome is simply services rendered (as an assistant for example) how do I then stipulate payment in accordance to the ATO rule for Basis of Payment, “the worker is paid for a result achieved based on the quote they provided,” when the result achieved is not clear from the outset?

    What do the VA’s and coaches in this community do to make this clear in their contracts?

    #1199540
    Paul – FS Concierge
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    If you were incorporated, ie, ran the business through a company, both sides would be protected.

    I do not know of an administrative way to not fall within the ATO definition – perhaps a lawyer or accountant could give some advice.

    Cheers

    #1199541
    Taxopia
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    Ok you have four main issues across four different pieces of legislation.

    1. PAYG withholding requirements imposed on the payer. (tax administration legislation).
    Basically if the services are wholly or principally for labour with an ongoing relationship then there may be an exposure. The payer is responsible for this. The failure to withholding penalty is the highest marginal rate against the gross income paid. Significant.

    2. Employer Superannuation Guarantee Contributions (super legislation)
    If the person is a deemed employee, then the 9.5% super obligation will exist as well. Again the payer is at risk.
    3. Workplace insurance. (State workplace safety legislation)
    Employers have to cover all deemed employees based on their remuneration.
    4. Payroll tax (State based tax legislation)
    Depending on the size of the payer payroll they may have an exposure here as well.

    Items 1 and 2 above can generally be dealt with by interposing a company in the mix. Ie the payee operates as a company (potentially with PSI issues limiting income splitting). Items 3 and 4 are harder because those pieces of legislation contain contractor’s provisions which can extend to other entities.
    So a good start would be for you to find an accountant (something affordable like Taxopia :) ) and consider establishing a company or trust. You cannot contract out of these responsibilities
    Hope that helps.
    Alex

    #1199542
    Caron
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    Guys, thanks for your help, I appreciate you both, however, you’ve not actually answered my questions. I am not interested at this time to set myself up as a company. I want to remain a contractor because it suits my needs.

    The questions are specifically for how I can manage the relationship as a contractor with my clients – in any case, I’ve added a new clause to my contract that clearly breaks this down so there can be no confusion and reminds the client of their responsibilities.

    #1199543
    Taxopia
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    Caron, post: 236295, member: 53728 wrote:
    Guys, thanks for your help, I appreciate you both, however, you’ve not actually answered my questions. I am not interested at this time to set myself up as a company. I want to remain a contractor because it suits my needs.

    The questions are specifically for how I can manage the relationship as a contractor with my clients – in any case, I’ve added a new clause to my contract that clearly breaks this down so there can be no confusion and reminds the client of their responsibilities.

    Yes I gathered that was your preference but in many cases (possibly including yours) there is no other option but to incorporate or become an employee. The terms in the contract will often have little effect during an ATO contractor audit. Its very much a substance over form approach. For example a lot of people have contracts drafted that clearly attempt to circumvent the PSI regulations and the ATO simply looks past it.

    The good news for you is that this is largely your clients compliance issue and not yours. Warning them is commendable but at the end of the day its their problem.

    #1199544
    bb1
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    #1199545
    Taxopia
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    bb1, post: 236338, member: 53375 wrote:
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