The Commissioner of Taxation has advised that there would be increased audit activity targeting sham contracting over the coming year. The ATO is concerned that the practice allows employers to avoid various obligations to their workers including PAYG withholding, superannuation, insurance requirements and workplace entitlements. In other such cases, it may also allow the employee to avoid detection by regulatory authorities (e.g. Centrelink).
The Commissioner said funding had been obtained to target sham contracting and the ATO envisages that by the end of 2013, at total of 4,304 field audits will be completed in relation to the project. The ATO also reports that from 1 July 2009 to 31 December 2010, 1,474 field audits were completed, with an average adjustment of $24,078 per case.
The audits will obviously be focused in areas such as building & construction, engineering and mining. Business owners should review both their contractual agreements and the actual circumstances under which people are working in their business. The distinction as to whether a person working in your business is an employee or not is often blurred and employers should be mindful of the associated obligations.
Should you be concerned about your current arrangements with those people working in your business please contact Murray Howlett on (07) 3023 1300.