Whoever said, “You can never have too much insurance” obviously never had to pay the premiums. Still, there’s no denying the fact you need it to protect your business and its assets.
So you probably have building and contents, public liability and public indemnity insurance. But what else should you get cover for? What else can you get cover for?
Continue reading “Business owners, so you think you’re insured properly: 5 things to check”
In a lot of situations, hiring a contractor to get a particular job done makes perfect sense. It may require expertise or skills none of your employees has. You may only need someone for a short timeframe to clear a backlog of work. Or maybe you just want to avoid having to go through a formal recruitment process.
But be careful. Even though you hired them as a contractor, the Australian Taxation Office (ATO) may actually see them as an employee. And the penalties for disguising an employee as an independent contractor (known as “sham contracting”) can be up to $51,000 per instance.
So how can you tell whether your latest recruit is an employee or a contractor? Well, here are some of the major differences between the two.
An employee is considered part of the business, and in most cases works on the premises (unless they’re telecommuting). They generally have to accept any work assigned to them, and can’t ask someone else. And they have do the work themselves.
A contractor, on the other hand, runs their own business. And while they may be asked to work on the premises, they can work pretty much anywhere they can get the work done. They can also sub-contract or delegate the work to someone else.
Employees are paid regularly for the time they work, by the item or activity they complete, and/or a commission.
Contractors have a contract stating the work they’ll do (but not how they’ll do it), and for how much. And while they can ask for partial payment up-front, they’re generally paid when that work is completed.
Employees are given all the tools they need to do their job, whether it’s computers, earthmoving equipment or anything in between. If they need something else to do their job, the employer either buys it, reimburses them or gives them an allowance.
A contractor will have their own set of tools, which they use to perform the work they’ve been asked to do. If they feel they need another tool, either to complete the job or to do it more efficiently, they use their own money to purchase it.
Employees aren’t under any financial risk while they’re working. They don’t make a profit or a loss–the company does.
But contractors can make a profit or a loss on every job they do. If they finish the job quickly, they’ll still be paid the same amount than if they took their time. But if the job takes longer, or they have to put in more work because the job was done poorly, they could well make a loss.
Employees are entitled to receive superannuation contributions from their employer, which gets paid into a nominated superannuation fund. They are also entitled to paid leave (e.g. annual leave, personal/carer’s leave, long service leave), or a loading in lieu of leave entitlements if they’re casual employees.
Contractors are generally responsible for paying their own superannuation, although in certain situations they may be entitled to receive superannuation contributions. And they don’t receive any paid leave.
Employees have tax deducted from their pay by their employer, whereas contractors pay their own tax (including GST) directly to the ATO.
Of course, the distinction between employee and contractor isn’t always so cut-and-dried. A contractor may have all of their equipment supplied, or get paid every fortnight. They may even receive superannuation contributions.
Fortunately the ATO has come up with an Employee/Contractor Decision Tool to help make the distinction. By answering a series of questions, you can quickly see whether the ATO sees your latest recruit as an employee or a contractor.
Paying someone as a contractor when they’re actually an employee can have serious consequences for your business. As well as the financial penalties, your business may end up with a bad reputation that drives both customers and potential employees away.
So use the ATO’s decision tool and if still in doubt, get in touch and we’ll help you make sure your contractor isn’t really an employee.
Another year has almost passed and many businesses are considering audits.
Here we look at a few of the most common mistakes companies make with their management rights audit… but first a quick industry update.
Management rights: Industry update
From our perspective the industry is still maintaining a healthy level of activity.
I think everyone would agree it has subsided from the lofty heights of the past couple of years but this reduction in activity has been driven by a number of factors: in particular, banks have tightened their lending criteria.
Purchasers can still get finance but the process seems to be a little longer and purchaser analysis is more stringent – not necessarily a bad thing.
Body corporates have become more aware of their power in the purchasing process and are exercising it more readily now. Some would say ‘over zealously’ at time, but this is the world we live in now.
Lastly, the oversupply to the market, especially in the inner city suburbs of Brisbane, has forced a slowdown. This was expected and will rectify in time. However, there will be casualties along the way. If you are located in these areas, get ready to bunker down for the long run!
4 common mistakes with a management rights audit
Audit is sometimes regarded as just something we have to do to maintain our licence. But taking the right approach to a management rights audit is important; otherwise it can waste a lot of your time.
Licensees have various opinions and approaches to audits and audit visits. We believe it should be a very positive process that allows for education as well as compliance outcomes.
Most of our lessons come from mistakes we have made and as long as we learn from these we can move forward.
So we have compiled a list of the most common mistakes we are finding with management rights audits this year:
Funds collected into the trust account that do not relate to the agency relationship between you as manager and the owner of the unit are classed as ‘non-trust money’.
These funds must be withdrawn from the trust account to your general account within 14 days of receipt.
An example of this is gardening charges that you charge a tenant, which they deposit as part of the weekly rent.
(Act reference – Agents Financial and Administration Act 2014 section 18 No other payments to trust account).
Your EOM reconciliation must be prepared within five days after the end of the following month. The date for the end of month reconciliation must also be the last day of the month – not the day the reconciliation is prepared.
(Act reference – AFA Regulation 2014 section 17 Trust Account Cash Book Reconciliation)
We find many cases of bank transaction receipts not being printed when funds are disbursed from the trust account. A bank transaction receipt must be printed and filed for auditing purposes.
(Act reference – AFA Regulation 2014 section 14 Payments By Electronic Funds Transfer)
Licensees are forgetting to sign the receipt upon completion and a lot of the receipts are missing two dates on the receipt: when the trust money was received and when the trust account receipt was completed.
(Section 9 – AFA Regulation 2014)
If you would like to discuss your upcoming management rights audit or any of issues relating to your business or the industry, please don’t hesitate to contact your auditor or our management rights team: 07 3421 3421.
