The test for employment

The fundamental question remains whether there is a relationship of master and servant.

Compulsory superannuation and payroll tax

Individuals who are genuine contractors may still be entitled to compulsory superannuation.

Businesses may also be liable to payroll tax for payments made to genuine contractors – regardless of whether they are individuals or companies, partnerships or trusts.

Contractors who are individuals

The first step is to review the current agreements. If there are currently no written agreements setting out the terms for how a contractor is providing services, the business needs to put these written agreements in place.

The parties should consider making it clear:

  1. whether payment is conditional on the contractor achieving a particular result – and if so, the nature of that result.
  2. whether the contractor is entitled to delegate.
  3. whether the price has been calculated on the basis that the contractor will look after their own tax and superannuation liabilities – and if so, an indemnity to prevent the contractor from double dipping by making a claim for superannuation after the agreement has been completed or terminated.

The second step is to review whether the written agreements, over time, continue to reflect what happens in reality. Circumstances often change – it is critical to make sure those changes do not result in unexpected exposures for either party.

For more information please contact your Client Relationship Manager.