I am currently transitioning jobs and I have been asked if I would prefer PAYG or to be paid as a Sole Trader.
Can you please tell me if I am financially better to PAYG or be a Sole trader?
Rate per day I will be earning is $550 including super.
Any advise would be greatly appreciated!
Do you want to do paperwork? Quick answer is no your are not.You provide personal services income which means you cannot get lower taxes by splitting income or claiming home office expense.
Even if you were to be a sole trader they are STILL obligated to pay your super DIRECTLY to your super fund.
I would think the PAYG option would make your life easier as any tax would be paid for you. As a sole trader you’ll have to worry about the tax yourself & make sure you’ve set enough money aside.
Depending on your industry, there might be more claimable items as a sole trader - the accountants on here will be able to provide better advice here.
I have found that in every case where an employer wants to report an employee as a "subcontractor" the real reason has nothing to do with making things "convenient" or "flexible" for you.
Its because the employer wants to avoid paying workers comp and super. And it saves them the trouble and inconvenience os paying your PAYG W every three months.
So as a subbie, you will get a dirty great big tax bill at the end of the year: as a rough guide bank on around 25% of your gross income: so $80k total income will get you a $20k bill next July.
And you wont be covered if you get injured
And you wont be getting any super
And you have no rights as an employee: so you can get punted at any time for no reason
Oh, yeah no sick leave, and no holidays.
All in all its a crap deal dressed up as something its not.
Sometimes you have no choice. Sometimes the only work going around is as a subcontractor and sometimes you have to take a shitty deal rather than no deal.
But if you DO have a choice make sure you take into account all the things you might be missing out on.
Whilst I am not an accountant and you haven’t provided any details around the type of work or possible expenses involved, I agree with Brendan. An employer that wants you to be a contractor isn’t doing it to help you out.
The work and time involved and the discipline to pay everything on time yourself is a pain in the rear.
Don’t be fooled into thinking you will pay less tax, the only way that happens is if you make less money
Best of luck with the new role