Should I come become a Contractor/subcontractor, Contract Employee (casual employee), or an Employee.

Question

Accepted Answer

Contractor/subcontractor
First thing is to fully understand the PSI implications of a contractor/subcontractor.

Personal Services Income - is income produced, mainly from your personal skills or efforts as an individual. When working out if your income is PSI, you need to look at the income received from each separate contract or invoice. It is common for Sole Traders or individuals through an interposed entity to earn PSI, and thus be subject to PSI rules and structures.

There are four tests you should consider when determining if your income is subject to PSI. If you meet one or more of these tests, your PSI income will be considered a result of conducting a Personal Services Business. Moreover, if the PSI income is paid to your trust, partnership, or company, rather than directly to you, then the entity will be considered your personal services entity which provides the tax benefits discussed in the previous email to you.

If you aren't able to pass any of these tests, then the PSI rules may apply to you. This means:

• You won't be able to claim certain deductions against the PSI. This includes deductions for     rent, mortgage interest, land tax, rates, and certain payments to associates.
 • You will find there are some restrictions on super payments for associates.
 • You will need to meet certain obligations for reporting your taxes.

Below is a summary of the particulars involved in each test.

Test 1: The Results Test
If you receive any personal services income, you will meet the results test for a given year if, for at least 75% of this income:

• You are paid to achieve a specific outcome or result under a contract or agreement and will only be paid when that result is achieved.
 • You have to provide your own tools, materials, and/or equipment (if any) to do the work. If no tools, materials, and/or equipment is required, answer "yes" to this question.
 • You are completely liable for rectifying any defects in your work (at your own time & cost).

If your answer is yes to all of these questions, then you pass this test and the PSI rules do not apply. If you don't pass the results test, you can only move onto the next test if less than

80% of your PSI comes from a single client. If more than 80% of your income comes from a single client, the PSI rules apply to you unless you request a special determination from the ATO.

Test 2: Unrelated Clients Test
You'll satisfy this second test if you answer yes to all of these questions:

• Do you receive PSI from at least two unrelated clients?
 • Do you provide services as a direct result of inviting or making offers to the public?

Note that "unrelated" clients are not directed or controlled by the same entity or individual. If you can't answer yes to both of these questions, you need to look at the employment test.

Test 3: Employment Test
You'll satisfy this third test if you can answer yes to at least one of these questions:

• Do the partners, employees, or contractors perform at least 20% of your principal work (determined by market value)? Don't include incidental work like issuing invoices, bookkeeping, or running the home office.
 • Do you have at least one apprentice for more than half the income year?

If you don't pass this test or the unrelated clients test, you need to pass the business premises test. Otherwise, the PSI rules will apply to you.

Test 4: Business Premises Test
If you can answer "yes" to all of these questions, you will pass the business premises test for a given income year.

For all times of the income year, were your premises:

• Leased or owned by you;
 • Used for personal services at least 51% of the time;
 • Used exclusively by you;
 • Physically separate from your residence and the residence(s) of your associate(s);
 • Physically separate from the business address of your clients and their associates.           
 • If you can answer yes to all of these questions, the PSI rules do not apply to you.

If you are interested in becoming a subcontractor, following steps are a guideline to start the process.()
1. ABN - https://www.abr.gov.au/business-super-funds-charities/applying-abn(https://www.abr.gov.au/business-super-funds-charities/applying-abn)
2. TFN - If you're operating your business as a sole trader, then you can use your personal TFN. For other business structures, you can get a TFN when you apply for an ABN.
3. Directors ID   - https://asic.gov.au/for-business/running-a-company/company-officeholder-duties/director-identification-number
4. Register Company   - https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company(https://asic.gov.au/for-business/registering-a-company/steps-to-register-a-company)
5. Business name  -  https://asic.gov.au/for-business/registering-a-business-name/steps-to-register-your-business-name(https://asic.gov.au/for-business/registering-a-business-name/steps-to-register-your-business-name)
6. GST registration - Once you have an ABN, you can register for GST. https://www.ato.gov.au/Business/GST/Registering-for-GST/#Howtoregister
7. Insurance – Professional indemnity and public liability insurance are indispensable for contractors and subcontractors. It's crucial that both types of insurance policies are active and valid from the initial day of work. These insurances protect against liabilities and risks associated with professional services and public interactions, ensuring comprehensive coverage from the outset of engagements.

Contract Employee 
In the context of our employment structure, a contract employee is akin to a casual employee. At SENSE, we extend fixed-term casual employment, the duration of which depends on the specific task requiring professional services.

Our payment system is structured around billable hours, representing the time allocated to business projects billable to clients at an agreed-upon rate. Please note, as part of our casual positions, there are no provisions for sick leave or annual leave entitlements.

Information to be provided:
 • Full Name
 • Residential Address
 • DOB
 • Bank Account
 • Superannuation Fund

Employee
Sense engaged employees as a salaried employee – as a salaried employee, you'll receive a fixed amount of pay on a regular basis.

The standard hours of work typically amount to 40 hours per week. However, you might be required to work additional hours beyond this if it's necessary to fulfill your duties or as requested by the employer, within reasonable bounds.

Employee entitlements encompass various aspects such as wages or salary (your pay), annual leave, long service leave, sick leave, redundancy pay, superannuation, and other associated benefits. These factors contribute to the comprehensive compensation and benefits package provided to employees.

All employer obligations will be IAW “Fair Work Act 2009”

Information to be provided:
 • Full Name
 • Residential Address
 • DOB
 • Bank Account
 • Superannuation Fund

Careers