Sole trader

B

Brian84

I had an apprentice who just turned tradesman last month, I was going to make him get an abn and become a sole trader if he wanted to stay on.

Who pays the super, tax, insurance, annual leave and sick leave?

Do I have to pay it or does the tradesman?

I'm trying to make it easier for myself so I just pay him an amount each week and he pays everything himself, and also if we have rain days or a bit slow on work I won't have to pay him if he isn't at work.
 
If he works for you >80% of the time, then you will have to pay.

The correct term is Personal Services Income. I just checked the ATO link isnt working, but if you do a search, you will find the rules relating to PSI.


pinkboy
 
Brian84 said:
I had an apprentice who just turned tradesman last month, I was going to make him get an abn and become a sole trader if he wanted to stay on.

Who pays the super, tax, insurance, annual leave and sick leave?

Do I have to pay it or does the tradesman?

I'm trying to make it easier for myself so I just pay him an amount each week and he pays everything himself, and also if we have rain days or a bit slow on work I won't have to pay him if he isn't at work.
Click to expand...

Get legal advice as he probably will still be an employee and you will still be responsible for the lot.
 
I just wanted something easier for myself by him paying all his own stuff. And also paying a tradesman to sit at home if I don't have work or rain days and holiday pay quickly adds up
 
If you want to go the route of using him as a sole trader all he will need is an ABN not a company, however as mentioned he can only earn a max of 80% of his income with you, the rest he will have to source elsewhere. Also any work will need to be on a contract basis not hourly.

Hourly = Employee

Most guys get around it by invoicing for an amount only and specify work done (I have myself) but under the requirements of the law the person being employed has the rights to '"employee benefits" if the situation is clearly not a sub-contract scenario.

If the hours aren't consistently 38-40 hrs week you may get away with a part-time employment, allowing you more flexibility.
Check the award or if you are with HIA or MBA they may be able to help you.

Also bear in mind that if he subbies the hourly rate will probably be $35hr compared to $25 or so (check award).
 
Nope can't do the ABN thing anymore (especially not in construction). (well you can but is it a very dangerous minefield)

If you want to "not employ" him. Look at an employment service. I have all our guys through www.haycroft.com.au We choose the staff, pay them what we want to (as long as it is the award or more ). No hassles of payroll, super is everything legal. I just fill in the time sheets for Haycroft online, they pay all the boys and I get one bill that is paid with our credit card.

Simple..
 
Last time I looked Moyjos is right :)

Be very careful here, get it wrong and 5 years from now the ATO may be nailing your rear to the wall, back taxes, penalties and interest for them and a huge back pay award for your employee !
 
moyjos said:
Nope can't do the ABN thing anymore (especially not in construction). (well you can but is it a very dangerous minefield)
.
Click to expand...

When did this change? Isn't that the purpose of having an ABN?
I haven't been notified of any changes (that I'm aware of) I'm pretty sure I could quote on a 'frame erection' or 'fitout' job just using my ABN.
I believe the turn over for GST exemption is still < $75k

https://www.ato.gov.au/Business/Sta...Choosing-your-business-structure/Sole-trader/
 
SK Investments said:
When did this change? Isn't that the purpose of having an ABN?
I haven't been notified of any changes (that I'm aware of) I'm pretty sure I could quote on a 'frame erection' or 'fitout' job just using my ABN.
I believe the turn over for GST exemption is still < $75k

https://www.ato.gov.au/Business/Sta...Choosing-your-business-structure/Sole-trader/
Click to expand...

And that is where you may come unstuck.

Also you don't get 'notified' - you yourself have to keep up to date.


pinkboy
 
There is a lot of misinformation above so you need to get proper advice. There are several different definitions of 'employee' - the definition for super purposes may be different from taxation purposes and both different to the legal definition.

Of course it is still possible to contract with anything to do particular jobs.
 
pinkboy said:
And that is where you may come unstuck.

Also you don't get 'notified' - you yourself have to keep up to date.


pinkboy
Click to expand...

I receive fair trading licence changes notifications, ATO not so sure about that. I still can't find anything online to say any different re: the sole trader scenario, if you are a true sole trader (quoted, contracted job, not hourly <80%).

There is major confusion around the employee/contractor scenario though when there doesn't need to be. It should be straight forward. But from what I've read the responsibility and cost falls on the employer if they get it wrong, not the employee.

I keep my licence solely for my own IP's now. Makes it simple and easy.
Everyone wants to pay you like a contractor and treat you like an employee.
 
There is major confusion around the employee/contractor scenario though when there doesn't need to be. It should be straight forward. But from what I've read the responsibility and cost falls on the employer if they get it wrong, not the employee.
Click to expand...

Sort of... There have been cases where the "employer" has been stuck for not paying super, tax etc etc etc. THEN the ATO goes to the "contractor" and says "hey you know all those business deductions you have been making? ...well they are not business deductions because you are an employee...pay up"

I will try and find a couple of links to post.
Knew there was a case here on Somersoft recently :(
http://somersoft.com/forums/showpost.php?p=1205297&postcount=10
 
Last edited:
This whole area is a dogs breakfast as there are different rules for super, PAYG and workers compensation. I find the ATO do not even know how to interpret the rules. Another major concern is the misconception out there (including accountants) regarding the Personal Services Income rules. People think if they past the results test or the 80/20 rule they can form companies, trusts etc and split income as much as they like. This is not true as all this means is you have passed the rules and are operating a personal services business. this allows you to pay a market wage to a spouse and claim home office expenses. To be able to split income (or retain profits in a company) as a personal services business you must employ/contract someone (not family) doing as many hours as the key person in the business.
 
Brian84 said:
Thanks for the advice guys, I think I will contact fair work to get the 100% advice I need
Click to expand...

Keep in mind they will only be advising from an employer perspective. Try the ATO as well for the superannuation perspective and seek a lawyer about the contractual issues and vicarious liability issues. Also consider the insurance side.
 
Don't know if this helps, but if you're a small biz/employer, I'd highly recommend a service like this:
http://www.employsure.com.au/

No small to medium sized biz has the resources to commit full attention to such matters, continually getting updated and revised.
We use the services in the link above and find it extremely useful to have up to date rulings and provide services instantly, such as draft up custom letters to employees for all work/employment related matters, disciplinary warnings, etc.
They are only a phone call away, 24/7, and answers/advice are usually instant.
They also offer the correct proceedings to deal with matters, you can't just make this stuff up and searching for the answers yourself is out of the question.
If they provide the wrong advice, or we are sued by employees as a result, there is insurance cover.
They recently drafted up a letter to excuse an employee from Jury Duty, and it worked.
Little things like this save a lot of headache.
Who has time for this stuff when trying to run other areas of business?
 
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