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News Bulletin : ADA News Bulletin June 2011
35 JUNE 20 11 Fair Work Ombudsman and the Australian Taxation Office addressing SHAM CONTRACTS Currently, the Fair Work Ombudsman (FWO) and the Australian Taxation Office (ATO) are taking steps to identify and minimise employers entering sham contracting arrangements particularly in the health industry. WHAT ARE SHAM CONTRACTING ARRANGEMENTS? Sham contracting is an attempt by an employer to misrepresent or disguise an employment relationship as an independent contracting arrangement. Often these arrangements are set up to avoid having to give an employee their proper work entitlements, such as minimum rates of pay and leave entitlements. Employers often require workers to obtain an Australian Business Number (ABN) in an attempt to portray the underlying employment relationship as a contract with a business operator. PROVISIONS UNDER THE FAIR WORK ACT 2009 The Fair Work Act 2009 prohibits an employer from dismissing or threatening to dismiss an individual in order to re-engage them as a contractor performing substantially the same work and making representations which are false to persuade an employee to become an independent contractor. Employers can avoid a contravention of the sham contracting provisions if they can contend that at the time the representation was made, they did not know that it was a contract of employment, rather than a contract for services. It must also be proved that the intention was not reckless. ROLE OF THE FAIR WORK OMBUDSMAN Fair Work inspectors aim to educate thousands of workers around the country by setting up an education campaign to target sham contracting arrangements. They will also audit employers in sectors at risk of breaching sham contracting provisions. ROLE OF THE AUSTRALIAN TAX OFFICE The ATO will make visits to employers in order to assist their understanding of contracting. The ATO has been collecting and examining data that has enabled it to gain an understanding on how businesses are using contractors and how the contractors are engaging in the tax system. The ATO has recently completed about 1,500 field cases, and expects that an additional 3,000 audits will be completed by 30 June 2013. CONSEQUENCES OF A BREACH IN SHAM CONTRACTING Employers can face civil penalties of up to $33,000 per offence if prosecuted. Persons entering into sham contracting may also be held accountable if involved in the breach, they will be liable for a civil penalty of up to $6,000 per offence. Further, employers can be held liable for tax fraud implications. SHAM CONTRACTING PREVENTIONS • Ensure there is a written contract outlining the terms and conditions of the contractor arrangement. • Review any arrangements within the business with independent contractors to determine if they are genuine. Just because a worker has an ABN or provides an invoice for payment may not necessary make them an independent contractor. • Ensure that independent contractors are provided with some degree of flexibility in performing their work. • Ensure that you have read through the checklist on determining whether they are a contractor or employee. To determine if your worker is engaged as a contractor or employee the ADA HR advisory service provides a checklist and sample contractor agreements, please contact the ADA HR advisory service to access these resources. For more information or assistance, please contact the friendly team at the ADA HR Advisory Service on: Phone: 1300 ADA INC (1300 232 462) Fax: 02 8448 3299 Email: email@example.com The ADA HR Advisory Service is available from 8.30 am--5.30 pm (AEST) Monday to Friday. 'The answer could be just a phone call away'
ADA News Bulletin May 2011
ADA News Bulletin July 2011