If you are about to hire your first staff member(s), here is a short write up about what you should be aware of.
Before you enter into any form of employment agreement, you must:
- Ensure they are allowed to work in Australia:
- Australian citizens and Permanent Resident visa holders, plus New Zealand citizens are all allowed to work in Australia;
- Foreign visitors (except for New Zealand citizens) must have a visa that entitles them to work whilst in Australia (sub-class 417 or 462).
NOTE: It is YOUR responsibility to confirm this eligibility to work by registering with VEVO – you will receive an email advising of any work restrictions attached to a visa. If you are caught employing foreigners illegally, you could be subject to substantial fines (please refer to our blog on ‘Employing Temporary Foreign Workers).
- Determine whether they will be classified as an employee or a contractor – this will affect your tax, superannuation and other obligations so it is important. Each situation will be different, so the Australian Tax Office (ATO) has prepared a Decision Tool that provides a report outlining whether the individual is an employee or a contractor, as well as what obligations you have.
Note: The following variables on their own do NOT guarantee a contractor relationship with someone – that person having an Australian Business Number (“ABN”); the assignment is a short-term work requirement; that person provides an invoice for work done or stating in your contract that it is a Contractor relationship.
If you get this wrong, it’s not too late – rectify it with the help of the ATO before you potentially become liable for penalties.
- If you have not already done so, register for Pay As You Go Withholding (PAYG) in respect of:
- Withholding tax from an employee’s wages; and
- Withholding tax from a contractor’s payments where an ABN has not been provided OR you have a voluntary PAYG Agreement.
- Where you are employing eligible foreign temporary workers, register as an ‘Employer of Working Holiday Makers’ to qualify for the lower withholding tax percentage of 15% (up to $37,000 in earnings), then 32.5% on earnings up to $87,000 per year.
Note: If you do not register, you are obliged to withhold tax at 32.5% from the outset
- Most employees and some contractors are eligible for Superannuation. The general rule is where you pay someone over 18-years old (under 18, there is an additional criteria that they must work a minimum of 30-hours per week) more than $450 before tax per calendar month, you must pay ‘Super Guarantee’ on top of their wages – irrespective of whether they are full-time, part-time or casual employees. For a contractor to be eligible for Superannuation, there must be an ‘Employer-Employee Relationship’. The ATO have a ‘Super Guarantee Eligibility Tool’ in case you are unsure. For all those people that are eligible, you need to:
- Ensure you have systems and procedures in place to manage payments and keep records on behalf of your staff members in respect of PAYG, Superannuation and other amounts withheld.
- Where you plan on providing benefits to an employee – including the employee’s family or other associates, you will need to register for Fringe Benefits Tax (FBT).
If you would like to read more topics related to starting your small business in Australia, or how our new mobile accounting app might assist you, please refer to our website at www.liadaccounting.com.au
Disclaimer: Any advice provided on this blog is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consult your accountant or professional advisor.