The Australian Business Register (the ABR) has joined the list of government agencies that are taking a pro-active approach to stop workers being improperly engaged as independent contractors, and is now actively targeting providers of in-home care services.
Along with the Fair Work Ombudsman, the Fair Work Commission and the Australian Tax Office – which are already all involved in ensuring that workers are engaged, paid and taxed correctly – the ABR is revoking ABNs held by people who are not genuine independent contractors.
And once the ABR has identified improper ABNs, there is then only one short data sharing session to the ATO and FWO wanting to look at a provider’s books.
The ABR has targeted in-home care services as it sees more and more providers engaging individuals as contractors who are really just employees in disguise.
So far, the ABR has recognised that this mischaracterisation can be inadvertent. Whether intentional or inadvertent, however, once the ATO or Ombudsman becomes involved the primary issue is that superhas to be paid and award conditions have to be met, so the amount of back pay owed can be crippling.
Leave us alone – everyone’s happy
The courts are full of marriages that were happy until they weren’t. The in-home care sector is no different, for example:
Because of increasing demands for gardening services, the Grand Old Philanthropists decide to pay a couple of their volunteers to start doing that work. Because of the variable amount of work and GOP’s uncertainty about whether the service will be viable, it asks the volunteers to get ABNs so they can work as contractors and perform the work on an “as needed” basis. All they need to start work is to pull their sheers and lawnmower out of their shed, so the former volunteers are happy to use their own tools to do the job and are happy to get what seems to be a mostly tax-free income.
Sam agrees to provide in-home personal care services to her mother’s friend, Bea. Sam agrees she will spend about 5 hours at Bea’s house three or four days each week and undertake odd jobs at Bea’s direction. Bea agrees to pay Sam $250.00 per week and reimburse her for any expenses. Sam decides to obtain an ABN, for tax purposes, although Sam does not provide similar services to any other clients.
Everyone’s happy for a year until GOP discovers it is liable when one of its contractors injures himself and makes a Workcover claim and threatens to take legal action about a year’s worth of Saturday penalty rates and sham contracting. And after Bea tells Sam she has had enough of Sam’s sloppiness and will find someone else to do her odd jobs, she gets a letter from Sam’s solicitor demanding 12 months of superannuation or else she will get the ATO involved.
While there is something obviously naive about GOP’s plan, it may come as a surprise to learn that Bea’s decision to treat Sam as a contractor may mean that she has also breached the same workplace laws.
What to do?
In both the scenarios above, the problem is that the workers are not operating their own business – despite the fact that they have an ABN and are paying their own tax and invoicing for their services.
Pre-planning is all important, and both GOP and Bea could probably have achieved the end result they wanted, in a way fair to everyone involved, without the risk of the ATO, ABR or the Fair Work Ombudsman chasing them for breaches of multiple legal obligations.
It does not take a whole lot of resources, but pre-planning your working arrangements with a little bit of expert guidance can save you the grief that is unfortunately now knocking at the door of many organisations in the sector.
Read more at http://www.crhlaw.com.au/not-for-profit-2/australian-business-register-examining-staffing-arrangements-of-in-home-care-providers/