What you need to know working as a contractor

With many Australians looking for avenues that offer flexible working arrangements, working as a contractor can be an appealing option to pursue. But before you venture into the contracting world, it pays to understand the basics including your responsibilities. We have put together a quick guide to help you navigate the process.

What is a contractor?

A contractor is an independent person who completes work for clients under their own Australian Business Number (ABN).

What is a contractor agreement?

When you work as a contractor, you work with different clients. Setting expectations for each engagement is crucial and so it’s important to have a contractor agreement in place. An agreement will dictate payment terms, fees and charges, confidentiality requirements, termination clauses and more.

What are my responsibilities as a contractor?

As a contractor, you need to consider your obligations for invoicing, superannuation, tax and insurance. Here are some key points to consider.

Taxation

How you approach tax, will depend on the services you contract for and how much income you earn. For example, if you earn above the tax threshold ($18,201), you will need to pay income tax and if your business has a turnover of $75,000 or more, you will need to register for the Goods and Services Tax (GST). Depending on your income, you may need to register for PAYG withholding, so you can pay tax to the Australian Taxation Office (ATO) as you go, rather than in one lump sum.

As a contractor, you may also be eligible for the company hiring you to withhold tax for you.

With taxation, it pays to talk to a professional who can help set the record straight and give you informed advice relevant to your income and contracting arrangements. Chat with your Accountant.

Invoicing

As a contractor, you will be required to invoice clients for the work completed. To help maintain a healthy cashflow, it pays to develop systems and processes to support this and to maintain accurate records.

Depending on your business, you may opt to engage a bookkeeper to assist with this process or manage it yourself. Again, having a chat with your Accountant can help you make sound and informed decisions, including ensuring that your invoices contain the required information. This often includes:

· Your identity and ABN.

· The date of issue.

· A description of the items sold.

· GST payable (if applicable).

· The buyer’s identity and ABN (if over $1,000).

For more information about Tax Invoices, visit the ATO website.

Superannuation

Typically, employers are not required to pay superannuation to contractors. Making voluntary payments is something to consider and to factor into your contractor rate.

Insurance

As a contractor, you are not entitled to the same benefits as an employee and you are liable for the professional advice and services you provide. For this reason, having insurance is crucial. Make sure you do your research and seek informed advice about insurance that’s relevant to you and your business. For example, business insurance, professional indemnity, income protection and revenue insurance.

When setting your contractor rate, do your research and make sure you factor in the employee benefits you miss out on (e.g sick leave, annual leave, superannuation etc…) as-well-as the administration time that goes into running your business, such as invoicing. Do some market research to make sure you are competitive but still earning a fair wage.

Do you need some legal help navigating the contractor landscape? Here at Jensen & Co Lawyers, we offer flexible services at competitive rates. Get in touch with our team for a confidential discussion.




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