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Hi, my husbands runs a small business as a contractor to a number of builders and developers and I do the books, He has had to bring on subcontractors to complete the work on time and we want to check about how we pay them, do they need a ABN, do we pay GST on their invoices, what about super, our accountant is away so any help would be great?

2 weeks ago

Responses

Hi Sophie,

Yes anyone performing services (if not an employee) must have an ABN number. The contractors are only required to registered for GST once their turnover reaches or is likely to reach $75,000 per annum. The Australia Business Register https://abr.gov.au, has a lookup tool you can use to check if a an entity is registered for GST or not.

There are many aspects to consider when utilising a contractor for building services for example insurance do they have their own liability insurance(s) or workers compensation cover or is that something you need to provide.

Superannuation, is the contractor an independant contract or deemed to be an employee for superannuation purposes. The ATO has specific tools available to help you decide.

Do you have to provide a TPAR (Taxbale Payments Annual Report) to the ATO.

If you would like to discuss your specific scenario further then please give us a call.

Thanks
Steph

Hi Sophie,
Stephanie has covered the main issues for you:
1: your subbies MUST have an ABN, otherwise you MUST withhold tax at the highest marginal rate
2: you must ensure that if your subbies issue an invoice including GST, that they ARE registered for GST
3:workers comp: if the subbie is a "deemed employee" then you are up for workers comp on the payments
4: super: if the subbie is a "deemed employee" then you are up for super too
5:You ABSOLUTELY have to lodge a TPAR, you are in the building and construction industry, you have no choice in the matter

https://www.sira.nsw.gov.au/__data/assets/pdf_file/0004/385717/Wages-Definition-Manual_2018.pdf

Get this, read it, and make sure you understand what it means. It is the tool that you use to protect yourself against the inevitable workers comp and super guarantee audits that you WILL have. Trust me, Murphy's Law states that the liklihood of a workers comp audit is directly linked to how poor your records are.

ANd when you get a workers comp audit, you can be 150% certain that a super guarantee audit will follow soon after.

I dont want to be all "doom and gloom" on you but your subbies wont be coming out of the woodwork to help you when the auditors are there.....you have to cover your own backside.

Which brings me to my next point: are you conducting your business in the correct structure to protect yourself???? If your husband is operating as a sole trader or even in a partnership with you, then ALL your personal assets are at risk!!!! If this is the case then I STRONGLY recommend you find yourselves a good CPA or CA who can help you with ALLL of this and heaps more besides.

good luck
bc

Brendan Curran has covered it all! Only add is the ATO website - contractor vs employee decision tool. Can be a little simplistic, or text book scenario, but still worth reviewing.

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