Contractor agreements: the recent tax case of Dr Moffet
Dr Moffet is a dentist, and he sold his dental business to a big corporation (called "Dental Corporation") and stayed on as a contractor working for them. He did not enjoy the new work arrangement, so he decided to leave. After leaving Dr Moffet sued Dental Corporation for unpaid leave and unpaid super.
Dental Corporation claimed that because Dr Moffet was a contractor there was no need to pay leave or super. Dr Moffet said that he was not really a contractor, but an employee "dressed up as a contractor", so he was actually entitled to all employee benefits. This dispute ended up in the Federal Court twice, once for the initial complaint and then again on appeal.
On appeal, the Full Federal Court agreed with the trial judge. The outcome concluded that Dr Moffet was considered a contractor, and thus was not an employee.
On the face of it, this might appear to be good news for Dental Corporation. However, although Dr Moffet was a contractor, he was still under an "employment-like" arrangement. In particular, under superannuation guarantee laws you only need to be in an "employment-like arrangement" to be entitled to superannuation. Therefore, Dental Corporation is now required to pay superannuation on top of all the payments they had previously made to Dr Moffet.
It could also be read into that they are required to pay superannuation for all their dental contractors, which will have other, much larger repercussions throughout the country for all medical centres with contractual doctors. This could clearly also extend to other industries.
There is a very fine line between contractors and employees. Getting it wrong could result in large financial repercussions. If you have contractors working for you want to revisit your contractor agreements – please contact our office if you require any assistance.
Director Identification Number regime starts to be rolled out
Registering a company today is done through ASIC. A Tax File Number (TFN) and an Australian Business Number (ABN) must be obtained from the ATO. In total, there may be up to 31 different business registers that a business/company may need to be registered with that are part of ASIC. There is also the Australian Business Register with the Australian Taxation Office (ATO).
Some of these registers are now being brought together, in what will be known as the Australian Business Registry Services (ABRS). The Commissioner of Taxation has just been appointed as the Commonwealth Registrar of the ABRS. In the future, registering a company will be done through the ABRS instead of ASIC. This is a part of the Federal Government's move towards a more efficient digital economy.
A significant change in this transition from ASIC to the ABRS is the introduction of a Director Identification Number (DIN). Every company director in Australia will be required to have a DIN before 30 November 2022, receivable through their MyGov account. Directors of Indigenous Corporations have additional time to adhere, until 30 November 2023.
It is expected that around 10% of all Australians will need a DIN. This has been brought in to stop phoenix directors from being appointed to companies, who then rack up massive debts that no one is held accountable for.
Following the DIN, the ARBS will then take over the Australian Company Register, the Business Names Register, and the Australian Business Numbers (currently on the Australian Business Register).
It is understood that this change will make the process cheaper, faster, and easier, as companies will no longer need to be first set up through ASIC before dealing with the ATO for an ABN and TFN.
If you currently have a company and do not already possess a MyGov account, it may now be time to rectify this in preparation for the move towards Director Identification Numbers.
Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.