Using contractors as an alternative labour hire arrangement is common in Australian business and with this comes a certain diligence for your payroll team.
The ATO makes it quite clear that it is the business owner’s responsibility to ensure payroll payments are compliant.
When a contractor issues an invoice with an ABN, it is the payer’s obligation to make sure the ABN is valid and registered for GST. If when verifying the ABN and proves to be invalid, then the payer must withhold tax at the top rate.
If the contractor issues an invoice with GST included and has an invalid ABN or is not registered for GST, the ATO will disallow the claim for GST credit and potentially recover the amount, with interest.
We encourage your payroll team to have a process in place to check the ABN of every contractor invoice. The easiest way for them is to check is the Australian Business Register online.
As it is the obligation of the business owner to pay a correct contractor invoice, so is ensuring employer superannuation contribution payments are made to a complying fund. To meet the SGC requirements, ask your payroll team check Super Fund Lookup online.
Please contact Hall Chadwick for further assistance if needed 03 9820 6400.