James asks: My boss has asked me to obtain an ABN. Since then I have done so, but I don’t understand why I need to have an ABN if I am working for his business.
Is he just trying to cover his butt as I am not currently on the books but I really want to be. What should I do? I do not want to own my own business at this stage of my life. Should I be finding another job?
James, the cynic in me says you’re absolutely right when you say your boss wants you to get an ABN number because he wants to avoid paying you superannuation, holiday pay, sick pay etc. if he puts you on the books. (Just as a side issue, he’s already done the wrong thing by paying you cash in hand.)
Sham contracting is the term used to describe what he’s trying to do – employ you as an independent contractor, complete with your ABN number, when really you’re an employee and as such should be paid the entitlements owed to employees.
A true independent contractor (for example someone who runs their own plumbing business):
• Is usually hired for a specific job or time period.
• Has a high level of control over how the work is done and can also can hire other people to assist.
• Pay their own tax, GST and superannuation.
• Can turn down work or offer an alternative time when work is done
• Agree to the hours required to do the job.
• Has an ABN and submits invoices.
On the other hand, employees:
• Have their work directed and controlled by their boss.
• Have work set and standard hours (although casual hours can vary from week to week).
• Are told where to work.
• Have tax deducted from their pay by their employer.
• Should receive the appropriate superannuation, and paid leave from their employer (or casual loadings if applicable).
The big test is really how much autonomy do you have? If you have to follow a roster, and work where, when and how you’re told then chances are you are actually an employee and the suggestion you get an ABN is an attempt on the part of your employer to save money by not paying you your entitlements – and that is unlawful.
I can’t recommend whether you leave your job or not – that is your decision. Why don’t you give the Australian Unions team a call on1300 486 466 so you can find out more about what your rights are as an employee versus a contractor so you can make your decision more easily.