ATO and Fairwork's Contradictory - Rules for Contractor
I recently started working as a Contractor through recruitment agency. Being new I started inquire about setting up company vs PAYG format through various sources. It surprise me that how ATO defines contractor when it comes to TAX time is different to how Fairwork defines contractor when it comes to giving employment benefit.
As per ATO 80/20 rules, I am no different to any other employee working for the company for purpose of calculation of TAX. I can create company but still I pay tax as an individual and I cannot claim any deduction more than what an employee can claim. I went through various tool that are on ATO website to check if I can qualify for contractor or not, but every time result came back negative. So I have to pay tax similar to an employee employed permanent at the same company.
Then I checked with fairwork and they define me as a contractor. The reason being the company contract recruitment firm who then contract me as a casual employee of the firm through a contract which states that my pay rate includes my leave allowances and they can get rid of me anytime without reason/redundancy payment.
Yes the day rate that I get is higher than equivalent person within the company, however if I add annual leave, long service leave, RDO/ADO allowance, overtime allowance, penalty rates, long services leave allowance, sick leave allowance, public holiday allowance, family leave allowance to permanent employee's pay rate then they will be making more money than contractor !!!
SO issue it ATO creates tool to make sure then define as many as possible as employee so then can recover maximum tax, they create PSI, PSB, 80/20 and many other rules probably to maximise amount of tax they recover, hence they change system to their benefit.
Fairwork doesn't create any such tool and allows employer to exploit individual on the name of contract engagement!!
So basically contractors are Monkey in the eye of ATO but Fairwork see them as Donkey but in reality they are just little mouse!!!
So the question is how come government allows two of its body to define same individual differently? The way ATO is creating tool/test to make sure contractors pay tax as an employee then why not fairwork creates test for employer that if they hire someone through recruitment company / company /labour hire firm and if the individual is provided with work tools/equipment to carry out their work and individual has 80% income coming from the same company then those individuals to be classify as temporary employee with benefit similar to permanent employee irrespective of their pay scale.
If ATO is right then those people irrespective of their pay rate should be provided benefit of the permanent employee get. And if Fairwork is right then ATO should allow those employees (contractor) to claim deduction and tax rate as per company rate.
(p.s. - I heard about Umbrella Company and Trust creation which some people use to reduce the tax however question here is why we need to go through different route and why government can define same person differently to their benefit).