There’s a lot of upside to being a contractor,
but it’s important to keep in mind the
benefits you may not be getting to make
sure you’re not short changed in
retirement. If you’re a contractor, or know
someone who is, here’s some food for
thought to help clean up your finances!
Q: Are you a contractor or an employee?
Q: What’s the upside to contracting?
You’re contracted for a set task or project. You
submit invoices for the hours you work. If this
sounds like you, you may be one of Australia’s
980,000 independent contractors[1]. About 8.5
per cent of Australian workers are employed on
this basis[2].
Contracting can be a great experience,
particularly if you’re after more control over how
much you work, or what you’re working on. By
forgoing some of the benefits of permanent
employees, you can also earn more money.
Not all contractors are the same and everyone’s
situation is different.
If you’re not sure about your exact employment
status, you can use the Australian Taxation
Office’s Employee/contractor decision tool.
Then you can use the Superannuation
guarantee eligibility decision tool to work out if
you’re entitled to super. Both tools can be
accessed at ato.gov.au.
Your classification has important implications for
your tax and superannuation. Determining
whether an individual contractor is an employee
for Superannuation Guarantee purposes is a
tax issue for the individual or the entity
contracting the individual. It’s a complex area
and it’s a good idea to consult a tax adviser.
Similarly, if you’re coming back from a career
break or joining the workforce for the first time,
securing a contract role can often be easier,
and sometimes lead to permanent employment.
Q: That’s great. But what’s the downside?
If you’re sick, you will not get paid sick leave.
And when it comes to super you may not have
any super contributions made for you.
Employees have superannuation contributions
paid into a nominated superannuation fund by
their employer. But as an independent
contractor you might be on your own. You’re
responsible for funding your own super, just as
you’re responsible for paying your own tax.
980,000 – number of independent contractors in Australia
8.5% – percentage of Australians employed as contractors