Hidden Liabilities In Contractor Arrangements

For many businesses, engaging workers as subcontractors is part of the operating model.

The worker has an ABN; they submit an invoice; there is a contractor agreement in place. The business does not withhold PAYG, pay superannuation, include those payments in its payroll tax calculations, or provide for annual leave and the like.

On its face, the arrangement looks straightforward. But what happens when the ATO or a state revenue authority takes a different view?

We have seen businesses, particularly those operating in labour hire and labour-intensive industries, accumulate significant liabilities after arrangements they believed were genuine subcontractor relationships were reviewed and found to give rise to employee/ATO obligations.