Contractor v employee issues abound
It has been a big start to the year for issues focusing on whether workers are employees as opposed to contractors.
The most significant of which are the High Court decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (9 February 2022) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (9 February 2022).
This first case looked at whether a labourer was an employee or a contractor for the purposes of determining whether he had received the correct entitlements and pay pursuant to the Building & Construction General On-site Award 2010.
The court held that the labourer was an employee on the basis that the rights and obligations in the contract between the parties constituted a relationship of employer and employee. That the parties chose the label “contractor” did not change the character of that relationship.
The second case looked at whether two truck drivers were contractors or employees for the purposes of determining their entitlements under the Fair Work Act 2009 , the Superannuation Guarantee (Administration) Act 1992 and the Long Service Leave Act 1955 (NSW).
It was held that the truck drivers were not employees on the basis that the contracts involved the provision of the use of trucks and the services of a driver. The rights and obligations in those contracts did not reflect a relationship of employer and employee.
Additionally, the The Trustee For Virdis Family Trust t/a Rickard Heating Pty Ltd and Commissioner of Taxation (Taxation) [2022] AATA 3 (5 January 2022) case heard in the Administrative Appeals Tribunal looked at whether a contractor was entitled to employer superannuation contributions.
Under Section 12(3), a person is deemed to be an employee where they work under a contract that is wholly or principally for the labour of the person. It was found that this provision applied and that superannuation contributions were payable.
This was notwithstanding the agreement between the parties that the contractor would be responsible for their own superannuation.
These cases highlight that it is the terms of the agreement that are important and not the labels used. Labelling a worker a contractor will not be effective if the terms of the agreement do not reflect a relationship of principal and contractor.
Additionally, they highlight the expanded definition of employee for superannuation purposes and make clear that superannuation obligations will arise even when the parties agree otherwise.
Lastly, these cases highlight the complexity of the employee versus contractor issue.
If you take a multitude of State and Federal laws containing different definitions and add that to the often subjective nature of the tests that must be applied, you end up with mind-bending complexity.
With this in mind, we recommend that businesses take care in engaging contractors to ensure that they do not end up with a nasty issue to deal with. We are here to help those that need support to navigate the complexity.
Superannuation changes are coming
Back in November, we wrote about Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021.
This Bill received Royal Assent on the 22nd of February and enacts a number of changes, including:
- Removing the monthly $450 minimum threshold for mandatory employee super contributions;
- Removing the work test for salary sacrifice and non-concessional (non-deductible) personal contributions made by those aged between 67 and 75;
- Dropping the eligibility age for Downsizer Contributions from 65 to 60; and
- Increasing the limit on the amount that can be released from super under the First Home Super Saver Scheme from $30,000 to $50,000.
The super changes in the Bill commence from the 1st of July 2022.
Additionally, the Bill includes an extension of the Temporary Full Expensing of Depreciating Assets arrangements by 12 months to the 30th of June 2023.
Please get in touch if you require additional information on any of the measures included in the Bill.
Fuel Credit Rates
For those who participate in the Fuel Tax Credit scheme, please be aware that the rates have increased from the 1st of February.
Please ensure that your credits are calculated using the new rates for fuel acquired from the 1st of February onwards.
Fuel tax credits provide businesses with a credit for the fuel tax (excise or customs duty) that’s included in the price of fuel used in:
- machinery
- plant
- equipment
- heavy vehicles
- light vehicles travelling off public roads or on private roads.
If your business does not currently participate in the scheme, and you would like to know more, please get in touch.
Research & Development Tax Incentive
The R&D Tax Incentive offers significant cash benefits to innovative firms, both big & small.
The deadline to register eligible R&D for the 2021 financial year is Tuesday the 3rd of May 2022.
With that date fast approaching, firms need to review their eligibility and start work on their application asap, or risk missing out.
For the 2021 financial year, the R&D Tax Incentive consists of a tax offset for eligible R&D expenditure as follows:
- Firms with annual turnover of less than $20M: A refundable tax offset of 43.5%.
- Firms with annual turnover of $20M or more: A non-refundable tax offset of 38.5%. Any unused offset may be carried forwards.
The tax offset can only be claimed for expenditure incurred in relation to “core activities” and “supporting activities”.
Core activities are experimental activities whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work that:
- is based on principles of established science; and
- proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions; and
- that is conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved materials, products, devices, processes or services).
Supporting activities are activities that do not constitute core activities, but are directly related to core R&D activities.
For further information on the R&D Tax Incentive, please refer to AusIndustry’s Guide to Interpretation or attend one of the upcoming information sessions to be run by AusIndustry throughout March.
If you need more information on the R&D Tax Incentive, or require assistance to complete an application, please get in touch.
Fringe Benefits Tax 2022
Fringe Benefits Tax (FBT) is a tax payable by employers on non-cash benefits provided to employees.
This is essentially any benefit provided to employees beyond their normal salary and superannuation.
Common examples of Fringe Benefits are:
- Private use of vehicles;
- Car parking;
- Provision of entertainment;
- Payment/reimbursement of private expenses;
- Provision of loans;
- Provision of goods/services from the business; and
- Living Away From Home Allowances (LAFHA).
Where an employer provides Fringe Benefits to employees, those benefits must be valued in accordance with the legislation and the employer (not the employee) then pays FBT at the rate of 47% on the “grossed-up” amount.
The effect of this methodology can be a FBT liability that is almost as much as the cost of the benefit provided. For example the FBT on a benefit of $1,000 can be as much as $978.
There are a number of exemptions & concessions that can be accessed by employers to reduce or eliminate the FBT liability. For example, low value benefits (< $300) may be eligible for the Minor Benefits exemption.
There are also specific rules, concessions & exemptions that apply to employers operating in the not-for-profit sector.
With the FBT year ending on the 31st of March 2022, employers should be taking steps to ascertain their FBT position and to prepare to lodge a FBT return where necessary.
If you need assistance to prepare the FBT return for your business, please get in touch.
We can also provide strategic advice on how to manage and legally minimise the FBT exposure of your business.
Federal Budget 2022-23
The Federal Budget will be handed down on the evening of Tuesday the 29th of March 2022.
It is anticipated that the Federal Budget will very much be influenced by the impending Federal Election that must be held no later than the 21st of May 2022.
It will be very interesting to see what gets included in the Budget and also, the response of the Opposition.
As usual, we will provide a comprehensive run-down shortly after the Budget is handed down on the 29th.
Quote of the month
The famous pop artist Andy Warhol once said “being good in business is the most fascinating kind of art. Making money is art and working is art and good business is the best art.”
As bean counters we might be a little biased, but we think he makes a very good point.
To create good art requires vision, creativity, passion, skill and dedication. In our estimation, creating a good business requires exactly the same qualities.
We believe that business is much more than a way to make money. Like art, business is an opportunity to create something truly unique and valuable that enriches the lives of those who interact with it.
With that in mind, we encourage you all to go forth and create as much good art and good business as you can.
Sky Accountants Ballarat
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