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A small bouquet for the ATO

Thursday, June 02, 2016

We frequently complain about the way the ATO treats small business people.  And we are very pleased that the Parliamentary Inquiry into ATO scrutiny has recommended keeping the scrutiny of the ATO.

But we have seen some improvement. We’ve long been critical of the ATO’s ‘contractor/employee’ decision-making tool. But it’s been reviewed, modified and is now looking pretty reasonable.

The tool asks a series of questions (here’s a sample) and gives a decision on whether PAYG tax or superannuation is owed by the engaging party. The ATO says you can rely on this. Let’s hope so!

What prompted us to re-look at the ATO’s decision-making tool was a recent Federal Court decision on contractor/employee status. The action was by the Fair Work Ombudsman alleging a shopkeeper working through franchise was an employee. The court found that the person is an independent contractor.

The decision was made using the standard common law approach of a full assessment of the circumstances. Here’s our guide. This commentary on the court decision shows the balancing process required. The ATO can’t do this exhaustive exercise every time, but the ‘decision-making’ tool provides a conclusion on PAYG/Super obligations on which the ATO says you can ‘rely’.

Note: The National Small Business Conference (Melbourne 10-12 August) features presentations by both the ATO and the Inspector-General of Taxation. (The IGT scrutinizes the ATO.) 


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