The Australian Taxation Office's Deputy Commisioner, Mr Quigley, said that “when times are tough, businesses may be tempted to cut corners to stay afloat or prop up their cash flow. This is especially relevant when it comes to employer obligations.”

The ATO’s strategy for tackling non-compliance in this area focuses on businesses that do not withhold from payments to workers as required and fail to make superannuation guarantee contributions.

This can be through deliberate and straight-forward non-compliance by payment of cash wages and can also involve using an Australian Business Number (ABN) to mask underlying employment relationships.

“Increasingly it seems that employers prefer to treat workers as contractors as it can enable them to cut costs in terms of workers compensation, payroll taxes and superannuation guarantee. They can also negotiate pay rates outside of normal wages and conditions and do not withhold tax.”

The following case study looks at a case that is non-compliant with the current law.

Evidence suggests that the current tighter economic conditions have increased the prevalence of such arrangements as more businesses feel the need to cut costs, and labour market conditions can make employees more vulnerable to these practices.

Case Study
A telemarketing business claims that its several hundred workers are all independent contractors. They are required to quote an ABN. No tax is withheld under PAYG and Superannuation guarantee is not paid.

Workers are contracted to perform the work personally at the premises of the business, using equipment and information supplied by the business.

The telemarketers do not provide any assets and they have very limited control over how they perform their duties.

The telemarketers are not contracted to achieve a specific result or outcome by working in their own account or in their own business, but are contracted to work in and are paid on an hourly basis.