In the latest advisory from the ATO, Solomons Accountants & Advisers reminds you that simply labelling a worker as an independent contractor in an agreement doesn’t automatically classify them as such for tax and superannuation purposes. It’s important to understand the true nature of the working relationship to determine the correct classification.
When a written contract labels a worker as an independent contractor, it’s essential that the contract’s terms genuinely support such a relationship for tax and superannuation considerations. Holding an ABN alone doesn’t automatically qualify a worker as a contractor. The key distinction lies in the nature of the work:
- An employee works within an employer’s business.
- An independent contractor operates their own business, providing services without being an integral part of the client’s business.
Contracts Over Time
The ATO emphasizes that the nature of a contracting agreement can evolve over time. For instance, if a contractor’s initial project concludes but they continue working with the company, it’s necessary to reassess their classification. This change in circumstances might shift the relationship from a contractual to an employment status.
No Contract?
In situations where no formal contract is present, it’s crucial to carefully assess the actual form and substance of the working relationship. This analysis will help in determining whether the arrangement truly constitutes employment or a contractor relationship, based on the real-world dynamics and interactions between the parties involved.
Quote of The Month
“…no matter what life throws at you, seek out opportunities to contribute, to participate and to action change….have a crack, and as I like to say, don’t just lean in, leap in.”
Joint Australian of the Year 2024 Richard Scolyer
