The Inspector-General of Taxation (IGT) Ali Noroozi has recently released his report into the ATO’s employer obligations audits.
Conducted over more than a year, the IGT also took on board submissions from stakeholders and representative bodies (including Tax & Super Australia — see our submission on this page).
A key concern has been the classification of workers as either “employees” or “contractors”, with the IGT recognising that any misclassification may result in unexpected liabilities for employers (even going back a number of years) or result in employees missing out on their entitlements.
Our own submission had a similar focus, based solidly on member interactions. For example, through our Helpline service we had found that many members often requested our assistance in applying the employee/contractor classification tests to real life scenarios, seeking our guidance to supplement the publicly available information produced by the ATO.
“Key recommendations in the report seek to provide improved tools for making the correct worker classification as early as possible and, where more certainty is required, a binding certification process through which the ATO confirms worker status upfront,” Noroozi says. The ATO has not agreed to this upfront certification.
There are various legal obligations, other than for ATO purposes, that the employee/contractor distinction has an influence upon. In preparing our submission, we asked members to tell us about non-ATO obligations for which they consider the distinction an issue.
The most common were found to be:
Insurance policies (67%)Employment law (65%)Payroll (60%), andWork safety, OH&S (60%).
Only 10% of members consider the employee/contractor distinction for ATO purposes only.
See IGT’s executive summary here, and the list of recommendations here.
The IGT has also proposed that the government consider expanding the Taxable Payment Reporting System (TPRS) to the engagement of contractors across all industries and ultimately for reporting to be automated.
The IGT report as also the topic discussed in the Tax Wrap podcast, episode 125.
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