Employee or contractor? Payroll tax is not the only issue

February 2020

The classification of a locum/associate practitioner as a common law employee or an independent contractor is not only relevant when determining a practice’s potential payroll tax obligations.

Further employer obligations with respect to pay as you go (PAYG) withholding tax, superannuation, workers compensation and leave entitlements can also be called in to question.

Correct structuring when engaging locum/associate practitioners can reduce the practices exposure to these employer obligations.

The determination as to whether a locum/associate practitioner is an employee or a contractor is one of fact. There are, however, a few key factors to consider in determining the correct classification for employer obligation purposes:

  • The nature of the relationship: what is the relationship between the locum/associate practitioner and the practice? Can the relationship be classified as a master servant, typical of an employee relationship or is the relationship one of principal and agent, typical of contractor relationships?
  • The contractual relationship: has the practice contracted with the locum/associate practitioner for services or has the locum/associate practitioner engaged the practice for services? Practices must be acutely aware that incorrect structuring of the engagement may lead the locum/ associate practitioner to be classified as an employee and leave the practice inadvertently liable for a range of employer obligations.

The payroll tax audit activity as part of the Optical Super Store appeal and the Homefront Nursing case has given rise to increased scrutiny by all bodies over employee vs contractor relationships.  Now is the time to review to ensure your practice is covered in this space for all potential lurking obligations.

Not sure if your practice is protected? Contact one of our trusted advisors today to discuss your concerns.(02) 4928 8500 or cnmail@cutcher.com.au.

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Topics: Accounting, medical accounting, payroll tax

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