Generally, independent contractors are their own boss as a sole trader or working on their own company, trust or partnership. A contractor often uses their own methods and tools to complete work, negotiate their fee and work for more than one client simultaneously.
Tax for contractors
If you have a worker that’s a contractor, they are responsible for their tax obligations and you don’t need to withhold payments unless they don’t provide their ABN or you have agreed with them to withhold tax from their payments.
It is unlawful to treat an employee as a contractor, so if you do, penalties may apply.
Superannuation for contractors
If you’re a contractor and earn more than the tax-free threshold, you need to pay income tax and the more you earn, the higher your tax rate is. As a business owner, prepare for this and know your tax rate.
You are advised to make superannuation contributions when self-employed, so you set aside money for your retirement. As an incentive, the Government is offering a co-contribution scheme to increase retirement savings. Low or middle-income earners who make personal, after-tax contributions to their super fund will receive a maximum amount of $500 from the government.
If you’re registered for GST, your services will be subject to GST. If your business has a GST turnover or $75,000 or more, your non-profit org has $150,000 or more GST turnover or you want to claim fuel tax credits for your business, you would need to register for GST.
Personal services income is produced from personal skills as an individual. To know if your income is PSI, analyse your income from each contract or invoice and see if more then 50% of your income was for your labour, expertise or skills. If it is, then all your income is PSI.
As you look for different ways to grow and improve your business, seeking professional advice could prove to be an important and helpful decision.
You can click here to speak to a business, accounting and bookkeeping firm. We also offer hospitality business consultation and mortgage services. We will give you a call to know more about your needs. We will explain to you how we can improve your business.
We would love to help you formulate investment strategies and streamline your processes to take your business to the next level. Our goal is to help you grow your business, find ways to invest more and increase your productivity.
Phone: 1300 328 855
Office Address: 902 Howitt Street, Wendouree, Victoria 3355, Australia
Postal Address: PO Box 2234, Bakery Hill, Victoria 3354
Sky Accountants Gisborne & Macedon Ranges
Phone: 03 97444522
Office Address: 45 Hamilton Street, Gisborne, Victoria 3437, Australia
Postal Address: PO Box 270 Gisborne Victoria 3437