Working as a contractor

My step-Dad has bought a shop amd has asked me to do his accounts, but he wants me to be a contractor rather than an employee. Can anyone give me general advice about how I set this up? Do I need to go to an accountant to set up a business and get an ABN?
Thanks.

Hello,

You need to get an ABN off the internet...i cant remember the name of the site on the top of my head. Just google "abn registration".

It is free and thats all you need to do.

You will need to keep track of what you have been paid from your employer, and pay your own tax accordingly.

HTH :)

You will need an ABN....
And depending on how much you earn, you may have to charge GST and lodge monthly or Quarterly BAS statements.
You will need to pay income tax - and possibly GST as well.
You will not receive superannuation unless you pay yourself
You will not receive sickness or holiday pay.

You do not need an accountant to set up an ABN... you can apply online.
But you should get some information from the Tax department about the GST threshold.
If you don't charge GST - then you can't claim any of the GST on the items you purchase for work.
If you do charge GST, you can claim the GST credits from items you purchase (computers, stationary, travel expenses etc).... but you will have to lodge a BAS statement, and that can be daunting to do yourself... and expensive if you get an accountant to do it.

The ATO are very helpful if you want to phone them and ask advice on setting something like this up. They can tell you all your legal obligations.

It would be so much easier for you if your Step-Dad hired you on a casual pay basis so you wouldn't have to worry about all the tax implications. But then he would have to pay you superannuation (no holidays or sick pay though).
You really should charge a HIGH rate - higher than casual rates - to cover all the expenses and time that you will incur by doing this.

If you don't charge a high rate - you may end up regretting that you started it and spend more time with all the bookwork and taxation than it's worth.

Good luck with it though!
If you do become a contractor - you could look for other jobs to make it worth your while!

Please, please see an accountant, there is more than just GST to worry about when starting a business.

First you need to work out what type of business structure is best for you to work under (Company, Partnership, Trust or Sole Trader). Each has there own advantages and disadvantages.

Depending on your business structure and they amount of wages you will be paying yourself you may be liable for workcover. Also don't forget about superannuation, depending on the business structure this has to be paid once wages are over a certain threshold, even if there is no obligation it is something that should look at doing anyway. Anyway an accountant should be able to discuss all this with you.

I agree with Jodie about charging a higher rate. Don't be happy with the same as what you get as an employee as there is a lot more hassle on your end to do with your own paperwork. Goodluck.

You should also take into account that any income you earn will affect any benefits you receive from the government. So factor that into your rate of pay too!!!

Don't forget the 80% rule :) If the only person you are doing work for is your step-dad, or more than 80% of your income is from him, then you forfeit the benefits of being a 'business'. You can't claim a lot of the expenses and the tax office basically looks at you as if you're his employee anyway.

My opinion is he just doesn't want the hassle of you on the "books" so he's not lumped with super & workers comp etc. As was said in another thread, their cracking down on bookkeepers and their work, and them preparing tax documents (BAS etc), so in some ways it would be easier if you were his 'employee' coz then there isn't the hassle of you charging a fee for doing his tax work.. you're his employee doing what you are asked to do.

Definitely seek advice from a professional... does your stepdad have an accountant you could talk to?

ETA: DON'T get the accountant to setup the ABN for you - just get their advice. They'll charge you big $$ for it, and like the others said, you can just do it yourself online. I was horrified when the GST came in what accountants were charging for registering their clients for ABNs etc. It was outright robbery.

Also you step-dad could still be liable to pay super for you depending on the work you and doing and your business set-up. The same with work cover and payroll tax (assuming his payroll is high enough). The ATO, Workcover and state governments are used to businesses putting on contractors to "avoid" liabilities, so they change the rules to catch them. So the reasons for putting you on as a contractor may not be applicable.

Maybe find out if it is his accountant that has advised to you on as a contractor.

Thanks heaps ladies, you've given me heaps to think about. I'll corner my Step-Dad and find out why he wants me to be a contractor and see where I'll go from here.

Your help is much appreciated.