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  • Hiring a new worker

    When hiring a new worker, there are a few things you need to do to meet your tax and super obligations.

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    Determine your worker's classification

    You must firstly determine whether your worker is an employee or contractor.

    It's important to do this as it affects:

    • your tax, super and other obligations (such as workers compensation insurance)
    • your workers' entitlements.

    To classify workers, you need to consider the whole working relationship. Some key things to remember:

    • An employee works for you in your business, while a contractor is running their own business.
    • Apprentices, trainees, labourers and trade assistants are always employees, never contractors.
    • You may still have to pay super for individual contractors if their contract is principally for labour.
    • It's against the law to wrongly treat an employee as a contractor, so you need to check that you've got it right.

    When determining a worker's classification, you need to consider other key differences between employees and contractors.

    Confirm they can work in Australia

    You'll need to confirm your new worker is legally allowed to work in Australia. Australian citizens, permanent residents and New Zealand citizens are legally allowed to work here.

    If you believe the worker is a foreign national (other than a New Zealander), you must confirm they have a visa with permission to work. More information about employing migrant workers is available on the Department of Home Affairs websiteExternal Link.

    Working holiday makers

    If you're hiring someone on a working holiday visa (subclass 417 or 462), you must also register as an employer of working holiday makers. You need to do this before paying them.

    Tax and super obligations

    When inducting your new employee, you'll need to ask them to complete the following forms:

    This will allow you to work out how much tax to withhold, and how much super to pay them.

    Online commencement forms

    Online commencement forms are available for new employees to complete in ATO online services. These forms are an alternative to your employee completing a Tax file number declaration and Superannuation standard choice form to obtain their details.

    If your employee chooses to complete the online commencement forms, this needs to be done within 28 days of them starting.

    Once completed, they can submit the information directly to us and provide you with a printed copy. In this instance, you won't need to return the forms to the ATO. Instead, you can simply input the information into your business systems and they're ready to go.

    Tax file number declaration

    Your employee's Tax file number declaration tells you:

    • their tax file number (TFN)
    • their residency status
    • whether they have any government study loan debts
    • whether they are claiming the tax-free threshold.

    You'll need these details to work out how much tax to withhold from payments you make to them.

    Your employee can complete a Tax file number declaration:

    • through ATO online services (when it's linked to their myGov account) – they will need to print the completed form summary and return it to you. You don't need to return this to us
    • electronically from a computer by downloading and completing the Tax file number declaration. After completing the form, they need to print a signed and dated copy, and return it to you
    • on paper by downloading the Tax file number declaration – if you don't use STP Phase 2-enabled software, you must send the completed form to us within 14 days after it is signed by the employee or completed by you.

    If an employee doesn’t provide you with their TFN or claim a valid exemption, you must withhold at the top rate of tax (plus Medicare).

    Standard choice super form

    Most employees and some contractors are entitled to choose their own super fund for their super guarantee payments.

    To enable them to do this, you'll need to provide them with a Standard choice form.

    If your new employee doesn't choose a super fund, you may need to ask us to provide details of their stapled super fund.

    If your employee gives you their TFN, you must provide it to their super fund. You need to do this the next time you make a payment for them, or within 14 days of receiving it, whichever is later.

    Hiring through a labour firm

    As an employer, it's your responsibility to protect the welfare of your workers. This includes a worker you engage through a labour hire firm.

    If your business has a contract with a labour hire firm, then they're responsible for pay as you go (PAYG) withholding, super guarantee and fringe benefits tax obligations.

    Further information is available on the Fair Work Ombudsman websiteExternal Link.

    Other support when hiring workers

    When hiring workers for the first time, you can also use tools and checklists available at business.gov.au:

    Last modified: 22 Feb 2022QC 67962