The ATO is warning businesses that if they incorrectly treat an employee as an independent contractor, then they risk receiving penalties and charges, including:
- PAYG withholding penalty for failing to deduct tax from worker payments and send it to the ATO;
- Super guarantee charge (‘SGC’), which is more than the super that would have been paid if the worker was classified correctly. SGC consists of a super guarantee shortfall amount, nominal interest, and an administration fee; and
- Additional SG penalties, including a penalty amount of up to 200% of the SGC.
‘Sham contracting’ may also contravene the Fair Work Act 2009. Courts can impose penalties against a business or person that incorrectly informs an employee that they are an independent contractor.