The updated tool is designed to help businesses correctly meet their tax and super obligations for their workers in the wake of what the ATO says are “many myths” about employee/contractor arrangements.
“It is important for all businesses to get the distinction right,” said Deputy Commissioner Steve Vesperman.
“We know from our own field work that many businesses are getting the employee or contractor decision wrong, and often this is just not knowing what determines one from the other.
“Any business owner who uses this tool will be in no doubt about how to meet the tax and super obligations for their workers.”
According to the ATO, incorrectly treating employees as contractors is a problem in many industries, in particular the building and construction, cleaning, road transport and security industries.
Vesperman said while most business tried to do the right thing, “some businesses deliberately treated their employees as contractors to illegally lower their labour costs by not withholding tax or paying the super guarantee”.
“In the long-run it just isn’t worth risking penalties that may apply - this tool will help you get it right.”
The ATO cautions, “Don’t get caught by employee/contractor myths” and provides the following advice
Myth # 1: If the worker has an ABN, they’re a contractor
Fact: Having an ABN makes no difference, and will not make your worker a contractor for a job. If the working arrangement is employment, whether your worker has or quotes an ABN will not make them a contractor.
Myth #2: If the worker only works for short periods, they’re a contractor
Fact: Just because work is short term or irregular makes no difference and will not make your worker a contractor for a job. The working arrangement determines whether they are an employee or a contractor, not the amount of time they work for you.
Myth #3: If others in my industry are doing the same, then my worker is a contractor
Fact: Industry practices make no difference and will not make any of your workers a contractor for a job. Don’t assume other businesses have worked it out correctly – it’s your working arrangement that determines if your workers are employees or contractors.
Myth 4: If the contract or agreement says so, the worker is a contractor
Fact: A contact or agreement makes no difference and will not make your worker a contractor for a job. If the working arrangement is employment, a contract or agreement stating the worker is a contractor won’t override this employment arrangement or change the obligations you need to meet.
Myth #5: If the worker submits an invoice, they are a contractor
Fact: Submitting an invoice for work done or being 'paid on invoice' makes no difference and will not make your worker a contractor for a job. The working arrangement determines whether they are an employee or a contractor, not whether they submit an invoice.