A contractor providing an ABN does not automatically mean being a ‘non-employee’ for superannuation purposes. If you pay your contractors under a contract that is wholly or principally for labour, they may be considered employees for superannuation purposes which means you may have to pay super contributions for them. The ATO has a few web-based tools to help you work out if someone is an employee or contractor as well as if super contribution applies.
If a contractor failed to quote a valid ABN, you are required to withhold tax (49%). You can also withhold tax from contractor payments if you and the contractor have a voluntary agreement to do so. If you are withholding tax for your contractors, you are required to report the pays and amounts withheld to the Taxation Office on your activity statements and annual payment summaries.
Payment to some contractors could be considered to be wages. The provisions under Division 7, Part 3 of the Payroll Tax Act 2007 initially capture contracts which are principally for labour and predominantly for one employer.
You are required to assess whether your contractors should be considered workers for workcover purposes. If they are, it means you are their employer for workcover insurance purposes and you are required to report their remuneration.
By Sharon Saurty