Does your Business Employ Overseas Workers?
Recent updates to Fair Work legislation have emphasised the importance of correctly classifying overseas workers as either employees or independent contractors. Misclassification can result in significant legal and tax liabilities, making it essential for businesses to stay informed.
Here’s some key updates to keep in mind.
Understanding the changes
The Fair Work Act has refined its definition of what constitutes an employee or employer. It’s no longer just about the wording of a contract but the practical reality of how the relationship functions. Employers must evaluate whether the worker is performing tasks “in the business of another” or as part of their own independent enterprise.
Tax and superannuation implications
If a worker is classified as an employee, businesses may be liable for:
- PAYG withholding – deductions from employee wages for tax purposes
- Superannuation Guarantee – obligations to contribute to the employee’s superannuation fund
- Payroll tax – depending on state regulations
For non-residents performing all their work overseas, different rules may apply. It’s critical to understand how double tax agreements (DTAs) influence tax obligations and whether superannuation contributions are required.
Independent contractors vs. employees
Proper classification is key to avoiding legal and financial risks. Genuine independent contractors typically:
- Operate their own business
- Set their own hours and use their own resources
- Invoice for their services rather than receive wages
On the other hand, employees often work under direction, use company resources and are paid a regular salary. Misclassification can lead to unexpected liabilities, including back payments of wages, superannuation and other entitlements.
Navigating the complexities of international worker arrangements requires a thorough understanding of legal and tax requirements.
Our team can assist, helping you determine whether your overseas workers are correctly classified and providing tailored advice. For more information, reach out to your Simmons Livingstone advisor at 1800 618 800 or via email at admin@simmonslivingstone.com.au.
