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Subcontracting – How to Avoid Penalities


If your marketing is going well, there will come a time in your business that you will need to bring in some help.  Your first instinct will be to hire a friend, neighbour or another stay-at-home Mum.  This article is to explain the risks that you take in doing this and in going down the subcontracting path.  If the person you bring in to help is not set up properly, even though they have an ABN, you will incur penalties and have to provide back payments on Super, Tax and other benefits.  It could become an expensive exercise because you didn’t take time to learn more about it.  Remember, the ATO can come back to you a few years later when the friendship or neighbour has moved on.

Sub-contracting safely as a virtual assistant in Australia can be a complex problem.  The definition of an employee vs contractor is based on a lot of factors but comes down to the overall relationship.

Before you hire a subbie, you should consider how the sub-contractor is set up and if they meet all the requirements in the regards to being considered a contractor by the ATO.  Not doing this could cause you a lot of grief and penalties.  This video from the ATO should help.  I encourage you to use the ATO’s business tool and print off the results to keep as part of your tax records to avoid non-compliance.

Go To ATO Decision Tool

What If I Sub-Contract Overseas?

There is no guarantee of safety just because you hire someone offshore.  As an employee in Australia, you are still responsible for things like Occupational Health and Safety and Privacy of Information.  Is the sub-contractor working in a safe and ergononmic environment?  Are they keeping your information safe as required by the Privacy Legislation?

Offshore virtual assistants who work under your direction and work more than 20 hours a week are more likely to be classified as employees and as an employer you have certain responsibilities under Australian legislation to do the right thing.

If you hire someone to do a project that has a start and end date and it’s a one-off activity then you are at less risk.

If you hire someone on for instance, you pay them once for a service, template or product then you aren’t at risk.  It’s when you have a regular arrangement that you have to be sure you are meeting all your requirements under Australian law.

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