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    Would the arrival of investigators from the ATO, State Revenue Office or Fair Work Commission cause you some concern?

    While this issue may not affect you right now, imagine how you would feel if this happened? Others have actually had this happen and they all say it is an exceptionally unpleasant experience.

    Have you ever considered, from a risk management perspective, how incorrectly classifying an individual as an independent contractor could attract the ire of the ATO or the Fair Work Commission? By the way ignorance of the legislation is not considered an excuse for getting it wrong!
    Did you know that the deeming powers of the State Revenue Offices are such that there is little, if any difference in many cases between employees and contractors when it comes to work cover and payroll tax obligations?
    Most commonly, for reasons of flexibility, productivity and cost, many businesses engage contractors to provide knowledge based, or labour only services in preference to meeting the obligations and pitfalls of direct employment.

    This is perfectly legitimate provided that such engagements pay respect to the appropriate legislation, so if there is nothing intrinsically wrong with engaging contractors why would this create any worry?

    Research clearly indicates the vast majority of companies engaging contractors have little or no knowledge of the compliance testing regime required under the Personal Services Income (PSI) legislation. Even more disturbing is that many companies have been found to be non-compliant in spite of their management believing this was not the case.
    Furthermore many companies do not realise they have to include many contractor payments in their calculations for Payroll Tax, WorkCover and in some cases Superannuation!

    In our experience, many contractors and companies believe that when an individual invoices for their services using an ABN or via a Company or Trust it is automatic that the person is actually running a business – this is not necessarily correct at all. Where the individual is providing labour only or professionally based services such as consulting, then the ATO’s default position is that this individual is an employee or at least should be taxed as employee. The only way these individuals can be considered to be running a Personal Services Business is if the pass the tests prescribed under the Personal Services Income (PSI) legislation.

    This conundrum can create significant risk to the individual contractors and the company using their services
    There is little known solution allowing contractors to be engaged compliantly under a common law based framework, we would rejoice if more lawyers and accountants were aware of this option.

    If you would like to know why and how common law contractor engagement is robust tested and proven just email me at [email protected] and I will send you some interesting information.

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