It is an exciting time when new workers join your business. Meanwhile, it is crucial to determine if they are an employee or contractor before entering into an agreement or contract. Your business will need to keep records to support your decision on whether your worker is an employee or contractor and the factors you relied on. You may face penalties and charges if you incorrectly treat an employee as a contractor and don’t meet your obligations.


When you engage a new employee, your business has the following obligations:

1.    Provide a Tax File Number (TFN) declaration form to your new employees. It must be completed and signed by the employee at commencement of their employment. You should note whether they claim the free-tax threshold or not;

Then you must send the completed original of the TFN declaration to the ATO within 14 days of the employee’s start date (please note that the form is reviewed annually);

2.    Check if the employee is eligible for the superannuation guarantee and if they are eligible to choose a superannuation fund and which superannuation fund to use;

3.    Determine the employee’s ordinary time earnings and amount of superannuation contribution;

4.    Ask the new employee to complete an application which includes providing next of kin details;

5.    If any fringe benefits will be provided to the employee, check if your company can access fringe benefit tax (FBT) concessions.

Remember to always keep the necessary PAYG withholding records, superannuation guarantee and superannuation choice records and the required FBT records.

When you engage a contractor you should obtain the following:

1.    Contractor’s Australian Business Number (ABN). It is advisable to verify the ABN details in the Australian Business Register (ABR) via the ABN lookup website: http://abr.business.gov.au/

2.    Workers compensation policy or certificate of currency (if applicable)

3.    Professional indemnity insurance; and

4.    A valid invoice (if a contractor is not registered for GST) or a tax invoice (if registered for GST) when appropriate.

To ensure your business is adhering to the requirements, contact The Quinn Group. Call us on 02 9223 9166 or submit an online enquiry here.