The ATO is increasing its audit focus on businesses that use
contractors. The risk is that if the ATO concludes that individuals
are employees rather than contractors, the client will be exposed
to shortfalls of superannuation and PAYG. There is also the
additional risk of interest and penalties.
Where the ATO has raised assessments, we have seen substantial
amounts involved. This is often because the issue is systemic in
the business and the assessments are made across multiple income
In some cases, the ATO identifies the audit target due to the
industry: e.g. building and construction, cleaning, fishing. In
other cases, the ATO has been tipped off by disgruntled
We have resolved disputes that clients have had with the ATO on
employee/contractor issues. This has been done during the course of
the audit, at objection or by successfully appealing to the
Administrative Appeals Tribunal. Our client in
Dominic B Fishing Pty Ltd and Commissioner of Taxation
 AATA 205 recently satisfied the Tribunal that the fishermen
it contracted with were contractors and not employees.
The common issue that arises in these audits and disputes is the
quality of the documentation.
Is the agreement properly documented?
Do the parties' actions reflect the written agreement?
Often we see poor quality (or non-existent) documentation, which
directly affects the client's chances of proving it contracts
with independent contractors rather than employees.
The key is to improve the quality of the documentation. We can
provide assistance by drafting agreements and reviewing other
documentation and processes (e.g. invoicing and payment
arrangements) to maximise the prospects of satisfying the ATO that
you or your client's contractors are not employees.
Alternatively, we can help manage any audit or dispute you or
your client has with the ATO.
Winner – EOWA Employer of Choice for Women Citation 2009,
2010, 2011 and 2012
Winner – ALB Gold Employer of Choice 2011 and 2012
Finalist – ALB Australasian Law Awards 2008, 2010, 2011 and
2012 (Best Brisbane Firm)
Winner – BRW Client Choice Awards 2009 and 2010 - Best
Australian Law Firm (revenue less than $50m)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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