YL TV: 3 Penalties for Misclassifying Employees

This week on You Legal TV, we take a look at Contractor vs. Employee. If you misclassify your employees as contractors, there can be costly consequences if found out by the ATO! Watch the episode here:

See below for the complete transcript of this episode -

Welcome to You Legal TV.

For many SMEs, contractors are a flexible solution to staffing needs – particularly if you are sourcing very specific skills or expertise. But beware: there can be costly consequences if you misclassify employees as contractors.

If the ATO rules that someone you have engaged as a contractor is, in fact, an employee, you will be liable to pay their PAYG withholding tax for their period of employment and all unpaid superannuation. You might also have to pay additional penalties.

The ATO and the courts will make the distinction between a contractor and an employee by looking at the structures of the working relationship. This includes the control and independence they have over their working hours and location, who shoulders the cost of work equipment, and risk allocation, among other factors.

Visit our blog for more information on tax risk management, or contact us for advice on your legal obligations. We’re always happy to help.

The Danger of Misclassifying Employees

What Should I Do Next?

Contact us if you would like to have more information on classifying an Employee vs a Contractor. Our lawyers at You Legal will be happy to assist you in whatever way we can.

* This blog is for general guidance only. Legal advice should be sought before taking action in relation to any specific issues.