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  • Contractor – checklist

    Employers can use this checklist to meet your tax and super obligations when you hire contractors.

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    Contractor starts

    If the contractor is a company, partnership or trust, go to contractor working for you.

    If the contractor is an individual:

    • If this is the first time you've hired a worker, complete the checklist Hiring workers for the first time before continuing.
    • Check your working arrangements to know whether the person will be a contractor or employee – if the person is really an employee, use the employee checklist.
    • The contractor may wish to enter a voluntary agreement for you to deduct PAYG withholding amounts from their payments. This arrangement helps the contractor manage their tax by making contributions towards their expected income tax liability.

    If you pay the contractor mainly for their labour, they are employees for super guarantee purposes and are eligible to choose a super fund.

    You need to:  

    • give the contractor a Standard choice form (or equivalent) within 28 days of them starting, so they can choose their preferred super fund
    • check that the fund they've chosen is a complying fund
    • set up an electronic system to report and pay your super contributions using SuperStream.
    • Start keeping records about the contractor – you'll need these to meet your tax and any super obligations.

    If they have not chosen a fund and they:

    • started working for you before 1 November 2021 – you can pay their super contributions into your default fund or other fund that meets the choice of fund rules
    • start working for you on or after 1 November 2021 – you may need to use ATO online services to request details of a stapled super fund to make contributions into. If we advise there is no stapled super fund you can pay their super contributions into your default fund or other fund that meets the choice of fund rules

    You must give the contractors' tax file number to their super fund if they have given it to you. This should be within 14 days or the next time you make a payment for them – whichever is later.

    Contractor working for you

    See how the following impact contractors working for you:

    PAYG

    If the contractor doesn't provide you with their ABN:

    If the contractor is an individual who has a PAYG withholding voluntary agreement with you:

    If you have to withhold PAYG amounts for any reason:

    • if you haven't withheld before you need to register for PAYG withholding straightaway
    • report and pay the PAYG withholding amounts to us in your BAS which is usually quarterly or monthly for most businesses. Businesses withholding more than $1 million per year report and pay more often.

    Super

    If the contractor is an individual and eligible for super:

    • work out how much super to pay
    • use SuperStream to report and pay super contributions by the due date electronically
    • pay their super into their chosen account
    • if they didn't choose a super fund, and started working for you on or after 1 November 2021, you may need to use Online services to check if they have an existing super account, known as a stapled super fund.
    • you may have to pay the super guarantee charge if you don't pay enough super for an eligible contractor by the due date, or pay an additional super guarantee charge if you do not pay into a fund that complies with the choice of fund rules
    • contractors can ask to change their choice of super fund
    • if the contractor gives you their tax file number, you must give it to their super fund the next time you make a payment for them, or within 14 days, whichever is later.

    Taxable payments annual report

    The Taxable payments annual report (TPAR) tells us about payments that you make to contractors for providing services.

    You may need to lodge a TPAR by 28 August each year if you are a:

    Other obligations

    You will have other obligations when employing people including:

    To find out more about your obligations as an employer, visit the Australian Human Rights Commission's employer resourcesExternal Link.

    Contractor leaves

    For contractors who don't provide you with their ABN:

    When the contractor is an individual who has a PAYG withholding voluntary agreement with you:

    If the contractor is an individual who is eligible for super guarantee, work out how much super to pay as normal and pay the final contribution by the due date, usually 28 days after the end of the quarter. You can use the No longer hiring workers – checklist to help you.

    Ensure the reason and manner your contractor leaves complies with anti-discrimination laws.

    Keep records of all of the above.

    Last modified: 19 Nov 2021QC 47990