The ATO and Fair Work Ombudsman have announced a joint crackdown on sham contracting, with investigations already underway in the construction and road transport sectors.
What is Sham Contracting?
Sham contracting occurs when a worker is labelled as an independent contractor when they are genuinely an employee – often to avoid paying super, leave and workers compensation entitlements.
Key Points
Here is what businesses need to know:
- It’s not enough to simply call someone a contractor. The substance of the arrangement matters.
- Penalties for sham contracting under the Fair Work Act can reach $495,000 (or three times the underpayment amount for larger businesses).
- Additional ATO charges may apply – including PAYG withholding penalties and the superannuation guarantee charge.
- Data matching through taxable payments annual reporting (TPAR) gives the ATO visibility over $507 billion in contractor payments annually.
- Nearly 1000 community tip offs are received every week.
A copy of the joint statement by the Fair Work Ombudsman and the ATO last Friday can be found here Sham contracting in the spotlight – Fair Work Ombudsman.
If you have any questions about sham contracting or need your contractual arrangements reviewed, please contact the O’Sullivan Sneddon Law employment law team.