Mistaking an employee for a contractor

When is a contractor not a contractor?

Mistaking an employee for a contractor can devastate any business, with fines of up to $63,000 per breach.

contractorThere's nothing temporary about it: contract work is on the rise.  In Australia, 23 per cent of employers say they now regularly engage contract or temporary staff – with another 44 per cent employing them for special projects – according to the 2017 Hays Salary Guide. 

The Australian Bureau of Statistics estimates there are one million independent contractors currently working in Australia, representing about 9 per cent of the workforce – an increase of 2 per cent in six years.

Why contract?
As businesses look for lower overheads and greater flexibility, contracting appears to be a great solution. In theory, employers can hire the resources they need, when they need them, without taking on the associated infrastructure and taxation overheads required for permanent employees. In Australia, that means employers of contract workers don't need to meet pay-as-you-go (PAYG) tax, payroll tax, fringe benefits tax, workers' compensation insurance or the superannuation guarantee. 

It sounds like a no-brainer, but there's much more to consider than just whether a contractor should be issued an invitation to the staff Christmas party. 

Nick Ruskin, a partner at K&L Gates and employment law and labour relations specialist, says the so-called "gig" and "sharing economies" are legal minefields that need to be carefully navigated. 

"With all these Uber arrangements and the like, a greater proportion of people are being placed into [agreements] which are not employer-employee arrangements," Ruskin says. "I don't think the law properly accommodates the changing nature of work in Australia or, indeed, overseas." 

Eyes on you 
As the number of independent contractors continues to rise, so too does close scrutiny of it by watchdog agencies such as the Fair Work Ombudsman (FWO) and Australian Taxation Office (ATO). 

In 2018, the FWO has reported that the misclassification of employees as contractors is a persistent issue within many industries in Australia. 

According to an FWO spokesperson, the FWO has found exploitative cases of sham contracting, where businesses deliberately engaged workers as independent contractors, when they were actually part- or full-time employees. The cases involved "very serious, deliberate and systemic behaviour used to gain an advantage over competitors and resulted in large underpayments". Migrant and young workers, in particular, may find themselves the target of sham contracting due to a number of factors, including reluctance to reach out for help for fear of losing their job, lack of awareness of workplace rights, or language barriers to properly confirm their working agreement. 

Some instances of misclassifications of workers, though, have been unwitting. For instance, arrangements were either formed in partial ignorance, or began as true contractor engagements that slowly changed – unobserved and undeclared – from contractor to employee. 

What are the consequences?
"If someone has been engaged as an independent contractor, and the court or the Fair Work Ombudsman determines they're really an employee, there are provisions under the Fair Work Act 2009, which enable you to be prosecuted for breach of the award," Ruskin warns. 

"There's a maximum fine under the Fair Work Act 2009 for a breach of the Act – up to $63,000 per breach." 

However, the buck doesn't stop there. Businesses may also be held legally responsible, through accessorial liability laws, if a contractor – or subcontractor – is found to be underpaying staff. 

"It's not just direct employers who can be held liable for contraventions such as underpayments," the FWO spokesperson warns. "Any person or entity knowingly involved in contraventions could be found legally responsible." 

"In one case, there was a human resources manager who was told by their employer to make a contracting arrangement with a group of the company's existing employees," Ruskin says. In that case, the HR manager objected to the change, citing the new classification as not being representative of the actual working arrangement. 

"The company was prosecuted, and so was the human resources manager for aiding and abetting," Ruskin says. "If an accountant or lawyer was involved, they could also be prosecuted for aiding and abetting." 

Professional Development: Deciding between an employee or a contractor (recorded webinar). Do you understand the difference between an employee and a contractor? This recorded webinar will examine what makes an individual an employee or a contractor at law, and how courts decide.

Put it to the test 

Unfortunately for businesses and workers alike, the distinction between employees and independent contractors is rarely immediately clear.

According to the FWO, there is "not a singular factor used to determine whether a worker is an employee or an independent contractor. For example, just because a worker has an Australian Business Number (ABN) or issues invoices, doesn't automatically make the worker an independent contractor."

Ruskin reinforces this view. "There's no single test for it," he says. "Australia's employment laws are rather out of date, and [you] need to accommodate how to fairly engage people so that you don't have a situation where people who shouldn't be employees are deemed to be employees and get all the benefits of employment, or people who are independent contractors miss out on a reasonable wage." 

ATO and FWO websites offer further information outlining the differences between employees and contractors, as well as tools to assist in determining whether a worker is an employee or contractor. Whether you're a business or a worker, as models of employment change and contracting increases, they should be essential reading. 

Workers can contact the Fair Work Infoline on 13 13 94. A free interpreter service is also available by calling 13 14 50. 

Fines and penalties
According to the ATO, businesses that don't meet required employer obligations may face penalties and charges including: 
  1. A PAYG withholding penalty for not meeting PAYG withholding obligations 
  2. Super guarantee charges for not meeting super obligations, comprising: super guarantee shortfall amounts (the amount of super contributions that should have been paid into a complying fund); interest; an administration fee; and penalties up to 200 per cent in the most egregious cases.
Article by Tim McGuire. First published by INTHEBLACK 1 July 2018 - https://www.intheblack.com/articles/2018/07/01/when-contractor-not-contractor?utm_source=exacttarget&utm_medium=email&utm_term=All%20Subscribers&utm_content=https%3a%2f%2fwww.intheblack.com%2farticles%2f2018%2f07%2f01%2fwhen-contractor-not-contractor&utm_campaign=INPRACTICE+-+Edition+08+-+August+2018_5-August-2018

Kelly Crethar B Bus, CPA, Xero Certified Advisor

Meet Collins Hume Accountant, Kelly

Accountant Kelly Crethar's Collins Hume start date has a mellifluous ring to it – 17/7/17 – so it's good that the self-confessed 'obsessive number lover and problem solver' can translate most figures into real-world terms.

Kelly CretharKelly is a business services specialist working directly with business owners or supporting the Partners on client planning, acquisitions, valuations and even advising on payroll and fringe benefits matters.

She has a solid grounding in 'doing the books' – first in the family business whilst at university, then graduating to trainee accountant in a firm that allowed her to hone her business services and management accounting skills. In another accounting role, she was exposed to international acquisitions for which the firm was recognised.

She loves being able to interpret financials into information business owners can grasp.

"Everything has a number answer to a degree that is relatable to real life and I love working with people and really like being able to help business owners or couples translate the numbers into language they can understand," says Kelly. 

Recently she was seconded to help Peter Fowler deliver a series of Better Business Workshops and follow up meetings for local business owners.

"Collins Hume's business advice and commitment to helping our community is what I love doing and is why I work here," says Kelly. "Our focus on work/life balance applies to our own business as well as our clients."

Right now Kelly is ensconced in financial year-end tax planning but she looks forward to smashing out more great business solutions in the new financial year – cash flows and business workshops to help business owners understand the concepts to being more commercial.

Being at the new Byron Bay office will be a key part of that.
"With the Northern Rivers region booming, I look forward to getting involved in some exciting projects, part of which means going up to Byron. I can't wait!"

Kelly is a Ballina local who obtained her B Business (Accounting & Business Law) from Southern Cross University before embarking on a career in public practice and qualifying as a Certified Practising Accountant (CPA). She is a Xero Certified Advisor as well as proficient across all Collins Hume's cloud accounting systems

Despite joining Collins Hume in 2017, she is still co-opted to keep the books for her husband's business! Outside of work Kelly loves cooking, the beach and doing anything outdoors she can enjoy with her hubby, three kids and golden retriever, Max.

Copyright 2018. @CollinsHume Ballina and Byron Bay NSW

Testamentary Trusts quick summary

Testamentary Trust Wills

A type of Will that establishes a Trust or Trusts upon the death of the testator. 

trustThey are designed to protect the deceased's assets because they belong to the Trust rather than any individual. This allows flexibility for how capital and income generated by those assets is distributed.

Testamentary trusts are created by a need to provide a greater level of control over the distribution of assets to beneficiaries. There are also tax advantages available through testamentary trusts, making them an effective estate planning tool. 

The Trustees who decide how the income is distributed can also be beneficiaries of the Trust. However, the Trustees must act in accordance with the provisions set out in the Will for how the Trust is to be managed.

There are two commonly utilised types of Testamentary Trusts: 

  • Discretionary Testamentary Trusts
  • Protective Testamentary Trusts

The beneficiary must take their inheritance via the trust and does not have the option to appoint or remove trustees. This condition may be useful where the beneficiary is not in a position to responsibly manage their inheritance due to age, disability or spendthrift tendencies. 

Why choose a Testamentary Trust Will?
There are many potential benefits of using a Testamentary Trust Will. Testamentary trusts can help protect your assets when they pass to your beneficiaries. A common and sensible objective for all Testators is to ensure that each beneficiary's inheritance is protected and preserved waste, dissipation or claims due to marital or commercial breakdown.

Generally speaking, the Trust is set up to protect the assets that it holds. This is because creditors, divorcing partners and even the beneficiaries (in some cases) generally cannot access the assets in the Trust.

The Trustee or Trustees can also choose to distribute the income generated by the Trust in a way that minimises the tax burden of the beneficiaries. Depending on the assets, a Testamentary Trust can potentially save tens or even hundreds of thousands of dollars over its lifetime.

If a beneficiary takes their inheritance in their personal name, they will pay tax on the income generated from their inheritance at their personal marginal tax rate. 

There may be significant tax advantages in taking an inheritance through a Testamentary Trust. The Trustee or Trustees can distribute the income from the trust in a way that minimises the tax burden on the beneficiaries.

Generally, if a person's estate is small in comparison to the potential life insurance proceeds or other amounts that will be paid to the estate at death, a testamentary trust may be advisable. It is generally inexpensive to include testamentary trust provisions during Will preparation.

Collins Hume is pleased to work with the region's best legal firms to ensure your Testamentary Trust and estate planning needs are structured in the best possible manner. Call us today to discuss the best solution for you and your family.

Connect with @CollinsHume on Facebook Google MyBusiness Instagram LinkedIn Ballina Byron Bay 02 6686 3000

New Giving BHAG

Collins Hume announce new giving 'BHAG'

'BHAG' stands for Big Hairy Audacious Goal – essentially a long-term goal that changes the very nature of a business' existence – and we're excited to announce a BHAG of our own.

researchCommunity contribution is core to our vision at Collins Hume, which is to strive to do our very best and to be generous with charities by supporting our local and broader community. 

Because of our strong community connections, we take our social responsibility very seriously and pride ourselves on the passion and spirit with which we approach our giving. 

Following the amazing efforts of our team, clients and wider community and two standout events in 2017 and 2018 we were able to generate some major charity for local and global causes, so we've decided to up the ante. 

In July, we were on track to smash our previous goal of 10 million giving impacts in 2018, so where do we go from there?

Our new goal is to create 25 million giving impacts by 2025!
One of the most exciting outcomes is that by setting this goal, more local charities will benefit. We'll start by adding Oceanic Research Institute and Ballina Netball Association to our list of beneficiaries, with more to follow.

"At Collins Hume we're on a mission to create 25 million impacts on our world by 2025," says Giving Coordinator David Keith. "We think of it as 25 million smiles – it could be planting more trees, giving children in need access to education or literally hundreds of other donations through our partnership with B1G1."

Our Giving Impact on our website will keep track of our progress with live widget updates. Whilst we have some way to go with this new target, we are super excited about reaching it, which will fundamentally change the very nature of Collins Hume as a business!

Our new giving BHAG also aligns perfectly with the core purpose of our business: to achieve extraordinary results, build stronger communities, change lives and create a better world.

You can help too. 

If you decide to work with us, use one of our services or attend one of our events we will give a contribution, on your behalf, to one of our giving projects. Every time you do business with us, we give. For example by simply lodging a tax return with Collins Hume we will provide a child in Africa with life-saving clean water for life. It's an easy way to get involved.

As accountants we have the ability to change lives on a daily basis. Not only by helping our clients with the advice we provide, but also by giving to people who are less fortunate than us. At Collins Hume we're here to change lives and we hope you'll join us on this wonderful journey.

Copyright 2018. @CollinsHume Ballina and Byron Bay NSW

Collins Hume's new Byron Bay office

Collins Hume opens new office in Byron Bay
Collins Hume, one of Australia's leading accounting and business advisory firms opened its new Byron Bay office in Fletcher Street.

Byron Bay officeSharing the arcade with Byron Legal and Ausure Insurance Brokers, the new office showcases the mobile and modern working environment Collins Hume has implemented in their Ballina office.

Featuring state-of-the-art client facilities, videoconferencing and mobile printing, the modern design reflects the way people work with each other and with technology. The new location provides the Collins Hume team with outstanding facilities to better serve clients and business partners.

The new office was officially opened by Collins Hume Partner Jamie Doyle who said that the firm welcomed further growth in the region.

Jamie is Collins Hume's small business specialist working with established businesses and start-ups, streamlining their set up, structuring and software so they can realise their full potential. He said that relocation from the former Lawson Street premises is a critical step for Collins Hume's continued presence in Northern NSW.

"We're now a major financial solutions provider to individuals, families and business owners. Our new Byron Bay location puts us closer to our clients and business partners."

"The NSW Northern Rivers region provides an incomparable setting for work, family and play. The diverse range of people and businesses with which we find ourselves working inspires us every day." 

"Our new office provides a welcoming and contemporary space where technology integrates with the way our people serve our clients better.

"Our confidence in making this strategic move is underpinned by the positive support we have received from our clients, business partners and the wider community," Jamie added.

Collins Hume's Byron Bay Office is now located at: 11 Fletcher Street Byron Bay 2481. The arcade is located on the top side of Fletcher street approximately 100 metres away from the Surf Life Saving Club.

Copyright 2018. @CollinsHume Ballina and Byron Bay NSW

Smashing procrastination

6 tips to beat procrastination

In July when Australia Zoo celebrated Bindi Irwin's 20th birthday (can you believe it?), we stumbled across an interview with Terri Irwin in which she described her late husband Steve (the Crocodile Hunter) as the opposite of a procrastinator.

procrastinateTerri spoke of his eagerness to do everything right now and we found ourselves wondering where he found the energy that obviously wasn't just for the camera.

We like to consider ourselves as well organised people and, by and large, non-procrastinators, but let's be honest, we all have everyday tasks (whether they be at work or home) that we tend to put off, in favour of something more enjoyable.

If we find ourselves procrastinating from time to time (or perhaps more often than we would like to admit), it makes sense that business owners also suffer the same curse.

It can be frustrating but, in reality, procrastination has little to do with an apathy for work or an inherent laziness.

In fact, procrastination has long been attributed to a great variety of causes, including low self-confidence, fear of failure, lack of understanding, lack of motivation, perfectionism, trouble concentrating, low energy, lack of goal setting or poor organisational skills.

So what can we do about it and how can we be encouraged to beat it?
We recommend the following tips, based on the work of Pearce (2014):

  1. Break tasks down into smaller parts. 
  2. Eat your veggies first. By doing the hard things first, the rest should be a breeze!
  3. Beware of majoring in minor tasks. Make sure you address the key question of the task, rather than focus on what it looks like. Save any detail for the finishing touches.
  4. Start with the end in mind and communicate your goals to someone who will keep them accountable. This could be your business partner, business colleague, spouse, business adviser or mentor.
  5. Set aside guilt-free time to do whatever you like. Give yourself some downtime to simply relax.
  6. Celebrate small milestones to stay motivated and chunk tasks.

Wishing all business owners a procrastination-free Quarter 1. Remember, treat every day like it's the last before you go on holidays… do you ever wonder how managed to get everything done before you go on leave? It's because you rolled up your sleeves and just did… no procrastination. Jim Rohn said, "You can't hire someone to do your push-ups" so just go ahead and get them done!

Call us on 02 6686 3000 if we can be your sounding board for communicating your goals.

Source: Anita Gibson, Educator