With the financial year approaching, businesses in Victoria will be readying their tax documentation with help from experienced accountants in Geelong. However, when it comes to workers, it is important to know the difference between an employee and a contractor or else you risk running into tax compliance issues.
Do you know the difference between the two?
Contractor versus employee: Round One
For all business owners, it is imperative that they know the difference between a contractor and an employee. Failure to do so can lead to major tax compliance issues, not to mention complications with super and other obligations.
The first place to check the status of a worker is during the recruitment process. Any oversight can lead you to treat employees as contractors or vice versa, which can expose you to penalties and other charges.
If you have failed to check whether a new worker is an employee or a contractor, you can still review the arrangement to ensure your previous decision was correct.
Government tool can help
Fortunately, the Australian government has a range of resources that can help you discover if a worker is an employee or contractor. One example is the employee/contractor decision tool.
When using it, you will be asked a number of questions that will explore the arrangements between you and your workers. Following your answers, you will receive a report that will outline the legal, super and tax status of the worker.
It will also outline the details you need to meet to ensure you comply with the tax and super obligations set out by the government. While the tool is a good start, it does leave out a number of considerations, such as payroll tax and WorkCover obligations.
If you would like to learn more about the differences, talk to the business experts today. Contact an experienced representative at WMC Accounting and find out how their expertise can help you avoid any compliance pitfalls.