Strategies for Managing Subcontractor Tax Obligations

Getting the Classification Right

Before you worry about tax, you must be 100% sure your worker is actually a subcontractor and not an employee. Misclassifying an employee as a contractor is a common trap that leads to hefty back-payments for superannuation and payroll tax. Use our checklist to review your current agreements.

• They have their own ABN and business insurance
• They provide their own tools and equipment
• They have the freedom to accept or refuse work
• They are paid for a specific result rather than an hourly rate

Your Tax Reporting Obligations

1. Collect a valid invoice from every contractor for every job.
2. Check that their ABN is valid through the ABR Lookup tool.
3. Prepare the Taxable Payments Annual Report (TPAR) by August 28 each year.
4. Keep all records for at least five years in case of an audit.