Some businesses are breaking the law by incorrectly treating their employees as contractors and avoiding their required tax and super obligations.
By incorrectly treating their employees as contractors, these businesses illegally reduce their labour costs, allowing them to undercut compliant businesses and obtain an unfair competitive advantage.
Often these businesses will request or pressure their employees to obtain an Australian business number (ABN) to create the appearance the workers are conducting their own business as contractors.
The workers who are forced to become contractors can be disadvantaged as they can miss out on their employee rights and entitlements such as super, workers compensation and award wages and conditions.
This practice of businesses incorrectly treating their employees as contractors occurs in a wide range of industries and is affecting many different sectors of our community.
What we are doing
To tackle the issue of businesses incorrectly treating their employees as contractors, the ATO uses a combination of education and compliance.
The ATO supports businesses that want to do the right thing, helping them understand and fulfil their obligations to their workers.
The ATO use a range of compliance strategies to identify and take action against businesses that want to avoid their obligations to their workers.
It is their aim is to promote a level playing field that is fair for all.
The ATO is undertaking an awareness campaign to ensure businesses understand how to correctly determine whether their workers are employees or contractors and the obligations they need to meet.
As part of this campaign, the ATO are also working with industry associations and peak bodies to help raise awareness and address the issue.
The ATO identifies and takes action against businesses that avoid their tax and super obligations by incorrectly treating their employees as contractors.
The ATO uses a variety of factors to identify high-risk businesses. These include:
- data matching
- comparing business information
- reports from the community
- information provided by other government agencies.
The ATO contacts and visits high-risk businesses to review how they have set up their employment and contracting arrangements.
Where businesses have incorrectly treated their employees as contractors, the ATO takes action to ensure these businesses engage the workers as employees and meet their tax and super obligations. These businesses also face penalties and other charges for not meeting their obligations for their workers.
The ATO also monitor high-risk businesses they have previously visited to ensure they continue to meet their obligations to their workers.
ATO compliance activities cover all types of businesses across all industries and in all capital cities and regional areas.
Work with the Australian Business Register
As part of the ATO’s compliance activities, they also work with the Australian Business Register (ABR).
Where the ATO finds workers being incorrectly treated as contractors (when they are employees), they send the details to the ABR to review whether their ABN should be cancelled.
Workers who have made false or misleading statements on their ABN application can face penalties.
The ABR also regularly reviews registrations and cancels the ABNs of those who are not entitled to an ABN.
The ATO uses information from the ABR about workers trying to register for an ABN when they appear to be employees to help identify and take action against businesses that are incorrectly treating these workers as contractors.
What you can do about businesses incorrectly treating employees as contractors
If you suspect, or know of, a business that is incorrectly treating their employees as contractors it is important you let the ATO know. The details you provide are an essential source of information to help the ATO address the issue.