Our Employment Taxes Update series is an exclusive event tailored for the Corporate, NFP and Government sectors. In each session, our experts will delve deeper into the ever-evolving world of employment taxes, offering you a unique opportunity to stay well informed to empower your organisation to navigate the complexities of the current tax landscape with confidence.

Session details

Session 1: Payday Super – What you need to know ahead of 1 July

A significant reform to superannuation means the super guarantee will need to be paid in line with salary and wages from 1 July 2026. With the ATO taking a proactive compliance approach, this change will require updates to your payroll processes, systems and internal controls to ensure you remain compliant.

This session will help you understand what these changes mean for your business. Get insights into the broader implications, learn a practical roadmap to help you prepare and walk through the latest compliance details released by the ATO.

Hear from Paul Hum, Tax Director and Employment & Payroll Tax Specialist, who has guided organisations through complex payroll reviews and regulatory changes.

Session 2: FBT update

In this session, our experts Jason Ch’ng and Rahul Sanghani will provide you with an update on:

• New and topical developments including:
  • Grandfathering provisions for Plug-in Hybrid Electric VehiclesCourt case – benefits provided to owners
  • ATO compliance activity including employee contributions
• FBT recap and savings opportunities for cars, dual cabs, carparking, entertainment, exemptions, combining business & personal travel and exemptions & rebates for not-for-profits
• Use of FBT software to streamline FBT Return preparation process.

Date

Session 3: Employee share schemes and reporting obligations, incentives, ESAS

This informative session will provide the benefits of employee share schemes, including different plan structures, designs and alternatives, tax reporting obligations and the employee shares scheme start-up concessions. Kurt Tiam of Dentons Australia Limited will join our tax expert Justin Batticciotto for a discussion on how to design and implement an effective ESS plan and the key terms to consider.

Session 4: Employee vs contractor

Our tax expert Paul Hum and Vanessa Priest will walk through the latest employment tax and income tax developments, including how the rules treat contractors and what this means for your business. We will touch on current audit activity, the Fair Work and common law changes affecting employee vs contractor assessments, and the practical issues we see when clients get reviewed.

We will also discuss the Commissioner’s updated personal services income guidance, providing context that may assist you when negotiating terms or engaging labour‑based contractors.

We will demonstrate how technology can support better contractor governance, from improving data matching to strengthening review processes and reducing manual work.

This session will provide the latest developments in legislation and case law, regulator practices and leveraging technology to assist with compliance.

Who should attend?

• Tax managers and their support staff
• Human resource management/remuneration and benefits managers
• Other staff interested in employer tax compliance, such as CFOs, financial controllers, CEOs and directors

Expert speakers

Stephen O’Flynn
Director
SW

Paul Hum
Director
SW

Vanessa Priest
Director 
SW

Kirsty McDonnell
Director
SW

Rahul Sanghani
Associate Director 
SW

Jason Ch’ng
Head of Tax Information Solutions
SW

Justin Batticciotto
Associate Director 
SW

The post Employment Taxes Update series 2026 appeared first on SW Accountants & Advisors.

The ATO’s Decision Impact Statement regarding the Full Federal Court’s decision in JMC Pty Ltd v FC of T [2023] FCAFC 76 highlights the importance of including genuine rights to subcontract, delegate or assign services in contracts between independent contractors and engaging entities if this aligns with commercial objectives.

Employers should review current contractual arrangements to ensure certainty over the application of extended meaning of employee under section 12(3) of the SGAA.

The Commissioner stated that if a contract includes such a right, the contract is not considered to be wholly or principally for the labour of the worker. This is not within the extended definition of “employee” under section 12(3) of the SGAA provided the contractual right is not challenged as being a sham, having been varied by the parties or unenforceable. Where the contract does not make it clear the ATO will form its position based on the available evidence of the contractual arrangement.

While the ATO Decision Impact Statement does not have the same force of law as a public ruling, it marks the first time since the JMC Case that the ATO has stated explicitly that the existence of a right to delegate, subcontract or assign will exclude a worker from the extended definition of “employee” under section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

The JMC Pty Ltd Case

In this case the appellant (JMC), a provider of higher education programs, engaged Mr H under a number of short-term contracts between 1 April 2013 and 30 June 2016 as well as between 1 July 2017 and 31 March 2018 to provide teaching services.

The contracts between JMC and Mr H included the following terms and conditions:

• Mr H would be paid an hourly rate for delivering lectures and marking exams
• Mr H would submit invoices specifying the teaching services provided along with timesheets and signed weekly lesson plans
• JMC would have a degree of oversight / control over Mr H (through JMC’s managing academic officer)
• Mr H was given the ability to subcontract or assign performance of services under the contracts, subject to written approval from JMC and
• JMC would have a right to deduct costs associated with a failure to give a timetabled lecture.

The Full Federal Court held that Mr H was not an employee of JMC within the ordinary meaning of the term or the extended definition in section 12(3) of the SGAAon the basis that there was a real right to subcontract, delegate or assign performance of services under the contracts despite the fact that the right was subject to written consent.

The ATO’s View

The Commissioner stated that if a contract includes such a right, even subject to consent from the engaging entity, the contract will not be considered to be wholly or principally for the labour of the worker. Therefore, a worker in these circumstances would not fall within the extended definition of “employee” under section 12(3) of the SGAA provided the contractual right is not challenged as being a sham, having been varied by the parties or unenforceable.

The ATO has confirmed that where the contract does not make it clear whether the worker has a right to delegate, subcontract, or assign their work, or is found to be a sham, the ATO will form its position as to the application of section 12(3) of the SGAA 1992 based on the available evidence of the contractual arrangement.

How we can help

The ATO’s Decision Impact Statement on the JMC case highlights the importance of including genuine rights to subcontract, delegate or assign services in contracts between independent contractors and engaging entities if this aligns with commercial objectives.

We suggest employers review current contractual arrangements in place to ensure you have certainty over the application of extended meaning of employee under section 12(3) of the SGAA.

We can assist in ensuring you have appropriate measures in place and make suitable disclosures regarding employment tax obligations where necessary. Get in touch with your SW contact to discuss what this decision and subsequent ATO decision impact statement means for your business.

Contributors

Maxwell Pratt

Rahul Sanghani

The post Employee or contractor | ATO Decision Impact Statement appeared first on SW Accountants & Advisors.

On 15 December 2023, the ATO released the following two draft publications for public comment:

• Draft TR 2022/D3 – Income Tax – PAYG withholding – Who is an employee
• Draft PCG 2022/D5 – Classifying workers as employees or independent contractors – ATO compliance approach.

Draft TR 2022/D3 replaces TR 2005/16 from 15 December 2022 and has mainly been updated to reflect recent court cases.

Key features of ATO draft publications

A business’ employment tax obligations can vary based on how a worker is classified. Correct classification is important to ensure that both the business and the worker satisfy their tax and superannuation obligations correctly.

TR 2022/D3 – Who is an employee?

The draft TR 2022/D3 explains the meaning of “employee” for PAYG withholding purposes. In accordance with the earlier High Courts cases, the Commissioner states:

• the totality of the contractual arrangement between parties will determine the classification of the worker, and
• the substance of the contractual arrangement, rather than the labels used in it, will be of primary importance.

The Commissioner has emphasised that even if a worker is an independent contractor, Superannuation Guarantee (SG) may be payable if the worker satisfies the extended definition of an employee under SG rules.

PCG 2022/D5 – Classification of workers

The draft compliance guide PCG 2022/D3, provides the Commissioner’s approach to audit activity based on a business’s risk profile, where he believes that the classification of workers is not being applied correctly. The key components considered by the Commissioner when determining the risk profile are:

Very Low risk – arrangements that satisfy all the following criteria will be considered low risk and will not attract ATO compliance activity:

• the parties agree on and understand the intended classification
• the substance of the arrangement agrees to the contractual terms
• the classification has been supported by advice from a qualified professional.

It will also be considered very low risk when an employer decides to voluntarily treat all workers as employees.

Low risk – Arrangements that satisfy all the following criteria will be considered low risk and will not attract ATO compliance activity:

• The parties agree on the intended classification.
• The substance of the arrangement agrees to the contractual terms.
• The classification has been supported by advice from a qualified professional.

Medium risk – Arrangements that satisfy the following criteria will be considered medium risk

• The parties agree on the intended outcome.
• The classification has been supported by advice from a qualified professional.

High risk – All arrangements that do not satisfy very low, low or medium risk criteria will be considered high risk. They will also be considered high risk if one of the parties coerced the other to accept the arrangement or one of the parties made false or misleading representations to the other party.

Key takeaways to minimise risk of ATO review

1. It is important for businesses to discuss the tax implications of being an independent contractor with the worker.
2. Obtain professional advice to support the position adopted for the class of workers.
3. When an arrangement with a worker changes, businesses should re-assess their classification.
4. Where disgruntled worker lodge an unpaid superannuation query and the ATO determines that the arrangement is considered:
   • very low risk – they will advise the worker accordingly and not take any further action
   • low risk – the ATO will apply compliance resources to test if that worker satisfied the definition of an employee
   • medium risk – the ATO will apply compliance resources to an arrangement (e.g. for a group of workers)
   • high risk – Compliance resources will be given the highest priority to an arrangement (e.g. for a group of workers) and businesses may be subject to higher penalties.
5. This PCG does not provide employers protection from payroll tax and workcover classification of workers.

How SW can help

Reach out to your SW contact or our team to assist in ensuring your employees are classified correctly to minimise the risk of an ATO review.

Contributors

Rahul Sanghani

Sabrina Camilleri

The post Employees vs Contractor ATO risk ratings now out appeared first on SW Accountants & Advisors.