Independent contractors operating as sole traders have different tax and superannuation obligations than those that are paid as labour hire employees. They must keep records of their income and business expenses. They have to report and pay GST on their activity statement if registered. Contractors must register for GST if their annual income exceeds $75,000.
The Australian Taxation Office explicitly distinguishes between contractors and employees. Contractors must possess an Australian Business Number (ABN). In addition, they also receive payments differently than employees. Employees receive recurring payments since they are salaried workers. Meanwhile, contractors don’t receive recurring payments. Instead, they’re usually paid price-per-item or hourly rates, often weeks or months after the work has been performed.
The ATO also notes that contractors have different tax and superannuation obligations than employees.
However, some contractors might be entitled to superannuation contributions under the same rules as employees. These contractors must be paid wholly or principally for their labour. In addition, the contractor must have a direct contract with their client, not through a labour-hire company or a partnership.
Since contractors are responsible for handling their own tax and superannuation contributions, managing these can become challenging. That’s where a payroll management processor like Achieve Corp can help contractors.
How Achieve Corp Helps Independent and IT Contractors
A payroll processing company can also help contractors with tax allowances, like LAHFA. LAHFA is an abbreviation for Living Away From Home Allowance, and it covers three primary components: food, relocation expenses, and accommodation. IT contractors living away from their usual residence to provide services to clients are eligible for this tax allowance.
Contractors, especially those operating through an entity, company, partnership, or trust, might also be caught by Personal Services Income rules. A payroll management company can help independent contractors deduce if their income is classified as Personal Services Income (PSI) by the Australian Taxation Office. The ATO considers your income as PSI if over 50 percent of your income was for your labour. PSI must be wholly attributed to the person performing the work, which means that splitting income with your spouse or adult children is not allowed.
Achieve Corp also helps independent contractors and IT contractors by offering customised salary packaging and BYO contract options. In addition, we offer weekly payment options through our Payment Accelerator Plus program. Utilising our payroll services will also entitle you to have your basic individual tax return completed by our experienced team of accountantss to make taxation simpler for contractors.
Get Started with Achieve Corp
Are you a contractor looking to partner with a payroll management company to ease your obligations? Consider moving your administration to a payroll management specialist.
If you’re looking for assistance with payroll management and legal tax minimisation, Achieve Corp can help you. The company is one of the top-rated Australian payroll service providers and specialises in payroll services for contractors.
The team at Achieve Corp has the experience and capabilities to meet each contractor’s unique needs. It doesn’t matter whether you’re an IT or an independent contractor. We’ve got you covered. We have over 20 years of experience and have cemented ourselves as a leading payroll services provider for contractors. Contact us today to find out how they can help you.
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