In my current job I have recently got, I have been hired as a contractor, I will have the option to go to full time or stay as a contractor. It is in IT, doing programming. Does it make it harder if you a a contractor to borrow money? Does it make any difference to the banks if in this industry if you a full time employee or a full time contractor?
being a contractor
- Thread starter Nicholas H
- Start date
Hi Nicholas,
Welcome to the club. I've been in IT contracting for a number of years. Are you contracting through your own structure (a company or a trust) or you are on payroll through an agency ("labour hire")? In the former case after 2 years of tax returns you will have banks queuing up with attractive individually crafted offers. In the latter case you are a permanent employee of the agency and getting a loan will be easy given you have a good employment history. But back to the former case - until you establish a history of financial reports your options are:
a) go lo-doc
b) get a good mortgage broker (such as Rolf) who is dealing with self-employed people on a regular basis
If you have a signed term IT services contract, make sure the lender has a copy - it will show not only the amount, but also the nature of your company's income (personal services).
Don't hesitate sending me a private message if you have further questions.
Say cheese
Lotana
Welcome to the club. I've been in IT contracting for a number of years. Are you contracting through your own structure (a company or a trust) or you are on payroll through an agency ("labour hire")? In the former case after 2 years of tax returns you will have banks queuing up with attractive individually crafted offers. In the latter case you are a permanent employee of the agency and getting a loan will be easy given you have a good employment history. But back to the former case - until you establish a history of financial reports your options are:
a) go lo-doc
b) get a good mortgage broker (such as Rolf) who is dealing with self-employed people on a regular basis
If you have a signed term IT services contract, make sure the lender has a copy - it will show not only the amount, but also the nature of your company's income (personal services).
Don't hesitate sending me a private message if you have further questions.
Say cheese
Lotana
I am just a sole trader, I have to double check things I am presuming the contract will be for a year, full time .. it basicly is I am an employee really .. I work in there office, use there equipment. I just bring skills to the table.
Do they deduct your PAYG taxes? If they do then you are an employee on a fixed term contract (this form of employment is typical for universities, some banks, etc). In this case you should be covered by the employer’s workers compensation and public liability insurances, you don't need professional indemnity insurance, and everything you create at work belongs to the employer (including intellectual property, they will own the copyright on the code and documentation you create).
If they pay you gross fees you must have an ABN, be registered for GST, you would need an accountant that the lenders can talk to. If you are not using an employment agent, make sure you have a signed contract with the client that addresses liability and intellectual property issues. This is more important than it might look. Without proper insurance, if you drop a monitor on your foot you may find yourself liable for equipment damage rather than been compensated for your injury.
I didn't mean to scary you off mate, just be aware that sometimes things may go wrong and it is better to be safe than sorry.
Say cheese
Lotana
If they pay you gross fees you must have an ABN, be registered for GST, you would need an accountant that the lenders can talk to. If you are not using an employment agent, make sure you have a signed contract with the client that addresses liability and intellectual property issues. This is more important than it might look. Without proper insurance, if you drop a monitor on your foot you may find yourself liable for equipment damage rather than been compensated for your injury.
I didn't mean to scary you off mate, just be aware that sometimes things may go wrong and it is better to be safe than sorry.
Say cheese
Lotana
I can not be scared off .. just finding out what is my exact situation and what is best to do .. I have an abn and am registered for gst. I get my tax payed to me, have to fill out a bas every 3 months. I give them a Invoice every two weeks, they put the money in to my account. I can not remember what it is the contract for insurance, I can back and look .. as I am just sitting at a desk all day, I am not sure much about insurance, as I am not likely to have any problems. I am pretty sure in the contract they own the intellectual property. There are about another 20 programmers here, so it is a long term position.
I am currently on a trial period .. which was set up a contract position. I have the option of going as a full time employee or staying a contractor, but I have a bit over another month before the trial finishes and I need to fix up for the other contract or being an employee .. hence trying to find out the best thing to do now.
once the trial period is over I would like to look at borrowing money to buy my first investment property. I have not been able to compare what I will be offered, but I am assuming I get more money in my pocket from being contractor, I do not get super or such .. but as I am young, I do not care, nor want to relie on it.
I am currently on a trial period .. which was set up a contract position. I have the option of going as a full time employee or staying a contractor, but I have a bit over another month before the trial finishes and I need to fix up for the other contract or being an employee .. hence trying to find out the best thing to do now.
once the trial period is over I would like to look at borrowing money to buy my first investment property. I have not been able to compare what I will be offered, but I am assuming I get more money in my pocket from being contractor, I do not get super or such .. but as I am young, I do not care, nor want to relie on it.
Another problem you have, on top of all of those Lotana mentioned is the 80/20 rule.
Tax office says that if 80% of your income comes from one source, you aren't a company, and have to pay individaul tax rates. They put it in a while ago to stop people earns heaps of money from one place. They say if you're an employee, you pay like one.
Jas
Tax office says that if 80% of your income comes from one source, you aren't a company, and have to pay individaul tax rates. They put it in a while ago to stop people earns heaps of money from one place. They say if you're an employee, you pay like one.
Jas
yer I know, that is why I just set my self up as a sole trader for this, as there was no real benifit, since they treat me the same .. so being a contractor has no benifits over being an employee that way.
I was more looking at do the banks treat it any different then a normal job, are they treating you like a business, eg two years of tax returns, or they can say you are really just an employee and treat you the same as if you were a payg ..
I was more looking at do the banks treat it any different then a normal job, are they treating you like a business, eg two years of tax returns, or they can say you are really just an employee and treat you the same as if you were a payg ..
