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  • #978924
    CG
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    A member of my family has been working as a contractor for a company for several years now, with an ABN for labour only at an hourly rate to which GST is added.* He works 4 days a week, usually full-time on those days, with virtually no flexibility.

    His employer has just written to inform him that ‘because of newly introduced legislation’ they are required to treat him as an employee for super guarantee contributions, and they will accordingly be deducting 9% from his hourly rate from now on for this purpose so would he please give them details of his super fund, membership number etc. .(emphasis mine)

    I’ve been telling him for ages that they should should have been paying 9% super for him. But to force a decrease in pay to cover it seems absolutely wrong. I’m not sure if they are just trying it on, hoping that he is ignorant, or whether they really fail to understand their obligations as may be indicated by their apparently thinking this is a newly introduced requirement. Are they in fact allowed to do this?

    What course of action would you advise? Any help will be much appreciated.

    * (He reports this income to the ATO on the quarterly BAS with the income from his sole trader business, and pays the GST on it then.)

    #1110709
    StellarScott
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    CG, post: 123173 wrote:
    * He works 4 days a week, usually full-time on those days, with virtually no flexibility.

    Hi CG

    As I understand the rules that sounds like an employee to me. Might be worth looking at the ATO decision tool here. http://www.ato.gov.au/businesses/content.aspx?doc=/content/00095062.htm&mnu=42711&mfp=001/003

    Clearly the ’employer’ doesnt want to pay increased cost for no benefit. Time for some negotiations to take place..

    #1110710
    CG
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    Thanks, Scott.

    Yes, I’d already checked all that on the ATO site. He did start off genuinely freelancing for them from home on his own computer but as the nature of the work changed it was agreed that it needed to be done on site, with access to their database and interacting with other staff, and the hours gradually increased. So his status as contractor rather than employee could be a historical accident, but more likely they want to be able to pay him a fixed hourly rate, irrespective of award rates and with no leave or holiday pay.

    But what they are now asking is more like salary sacrifice into super than an employer’s statutory super contribution for an employee. For the moment he’s stalling by delaying giving his super fund details, but what legal rights does he have not to be forced into new terms of contract that are to his detriment, by an employer manipulating their statutory responsibility?

    #1110711
    James Millar
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    CG, post: 123173 wrote:
    A member of my family has been working as a contractor for a company for several years now, with an ABN for labour only at an hourly rate to which GST is added.* He works 4 days a week, usually full-time on those days, with virtually no flexibility.

    His employer has just written to inform him that ‘because of newly introduced legislation’ they are required to treat him as an employee for super guarantee contributions, and they will accordingly be deducting 9% from his hourly rate from now on for this purpose so would he please give them details of his super fund, membership number etc. .(emphasis mine)

    I’ve been telling him for ages that they should should have been paying 9% super for him. But to force a decrease in pay to cover it seems absolutely wrong. I’m not sure if they are just trying it on, hoping that he is ignorant, or whether they really fail to understand their obligations as may be indicated by their apparently thinking this is a newly introduced requirement. Are they in fact allowed to do this?

    What course of action would you advise? Any help will be much appreciated.

    * (He reports this income to the ATO on the quarterly BAS with the income from his sole trader business, and pays the GST on it then.)

    Completely depends on his contract with them. If he has no contract or the contract can be revised or terminated then it may be the case of like or lump it. Keep in mind that super is still considered remuneration just in a different form.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
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