employees v subcontractors and gst credits

[tig24]

My first thread since joining and look forward to being involved, I am in transport and looking at employees v subcontractors and gst credits.

After payroll on-costs (25%) we pay our employees about the same as subcontractors (~$40 per hour) however one thing I didn’t allow for was GST credits.

Can someone confirm the below basic calculations are correct with subcontractors (assuming they are registered for gst) that we get a 10% gst credit but not employees who are exempt. Meaning I am $4.00 better off using subcontractors as I get a gst credit.

Employees Subcontractors
Revenue 80.00 80.00
Subbie Payments 0.00 40.00
Payroll 32.00 0.00
On Costs 8.00 0.00
Net Profit Before Tax 40.00 40.00
Tax 30% 12.00 12.00
GST Owing 8.00 4.00
Net Profit After Tax 20.00 24.00

Thanks for any feedback.

[Paul – FS Concierge]

Hi and welcome [USER=115767]@tig24[/USER] ,

A simple tip to make calculations easier to do in your head is to completely disregard GST.

If you have sufficient cash reserves, GST Out then In always equals zero.

Your basic calculations look correct but using contractors can be very complicated and there is a lot of information you have not given.

For those reasons, consulting an Accountant will be well worth your while.

Cheers

[Author]

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