Your obligations for contractors
When your worker is a contractor there are certain things you may need to do in relation to:
You will not have any FBT obligations.
Generally, contractors will look after their own tax obligations and you usually do not have to withhold amounts from payments you make to them.
However, you may be required to withhold from payments if:
If you withhold from a payment, you will need to:
If a contractor does not quote a valid ABN, you should withhold 49% from payments you make to them. You can check if an ABN is valid by using the ABN Lookup toolExternal Link.
Your super obligations include:
If you pay a contractor under a contract that is wholly or principally for their labour, you will have to pay super contributions for them.
If you do not meet your super obligations, you will need to pay a super guarantee charge (SGC).
Fringe benefits tax
You will not have fringe benefits tax (FBT) obligations for your contractor.
FBT only applies to benefits provided by an employer to their employee. FBT does not apply to benefits provided by a business to their contractor.
Concessional FBT rules such as those relating to living-away-from-home allowance or salary sacrificing arrangements do not apply to a contractor arrangement. The value of any payment or benefit you provide to a contractor needs to be included as income in the contractor's tax return.
Taxable payments reporting
If you are a business in the building and construction industry, you need to report the total payments you make to each contractor for building and construction services each year.
You need to report if all of the following apply:
- you are a business that is in the building and construction industry
- you make payments to contractors for building and construction services
- you have an ABN.
You need to report these payments on the Taxable payments annual report. The report is due by 28 August each year.
The details you need to report will generally be contained in the invoices you receive from your contractors.