Types of workers
Workers in your not-for-profit organisation can be employees, independent contractors or volunteers. The status of a worker may affect the tax treatment of dealings between your organisation and that worker.
Employee
Generally, a person is an employee if they:
- can't pay someone to do the work they are contracted to perform (that is they cannot delegate or subcontract their work to another
- receive payments either
- for the amount of time (normally hours or shifts) they work
- for each item or activity they do
- on a commission basis
- have work hours set by an agreement or award
- use tools, equipment or other assets to complete their work that either
- the employer gives them
- they provide themselves, but the employer either gives them an allowance or pays them back for the cost of the items
- receive paid leave, for example, sick, annual, recreation or long service leave
- don't personally pay for mistakes made performing their work, the employer is responsible if they make a mistake and the employer pays for the cost of fixing it
- follow any reasonable work requests their supervisor or employer makes
- are seen to be part of the business carried on by the employer and aren't independent from it
- are recognised as a part of (or an 'emanation' of) your organisation's business
- don't take commercial risks and can't make a profit or loss from the work performed.
Independent contractor
Generally, an entity (such as an individual, partnership, trust or company) is an independent contractor if they:
- can delegate or subcontract the work they are engaged to perform to another entity and are responsible for paying that other entity for the work undertaken on their behalf
- receive all, or the majority, of the amount of their quote once they finish the work to an agreed standard
- supply an invoice before they are paid
- bring to the job all or most of the things (tools, equipment and materials) needed to do the work
- buy or hire tools of trade or any equipment needed to do the work at their own expense
- don't receive paid leave, for example, sick, annual, recreation or long service leave
- are responsible for fixing their own mistakes at their own expense
- can do the work in any way they like as long as the work is completed to
- an agreed standard
- the specific terms in the contract or agreement
- could be operating their own business independently, which means they
- complete the tasks or services as agreed to in the contract or agreement
- are free to accept or refuse extra work.
Volunteer
Although there is no legal definition of 'volunteer' for tax purposes, a volunteer doesn't work under a contractual obligation for remuneration and would not be an employee or independent contractor.
Reporting and paying tax
Your not-for-profit organisation has similar reporting obligations to businesses, covering its income tax (if not exempt) and other obligations.
For example, your organisation uses activity statements to report and pay a number of tax obligations, including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax. Learn more about statements and returns.
There are a range of options for paying your tax. If you can’t pay on time, it’s important to contact us straight away to make appropriate arrangements to pay your tax debt. If you’re due for a refund we can pay it directly into your nominated account.
Keeping records
Keeping employment and payroll records for employees and contractor is an essential part of running your not-for-profit organisation. You must keep your records in an accessible form (either printed or electronic) for 5 years and they must be in English.
The Not-for-Profit LawExternal Link service can provide legal information and advice about these topics.