An individual employee working for salary or wages for a company.
A labour hire arrangement is a situation where the user of labour (the client) typically contracts with a labour hire firm for the provision of labour of a specified kind. The labour hire firm does not contract to perform the work, it merely contracts with you as the worker and pays you. You are not an employee of the client and there is no contract between you and the client. You may or may not be an employee of the labour hire firm.
For example, Amy is registered with XYZ Recruitment. XYZ keeps a database of people who are willing to provide their services to third parties. Corporate Pty Ltd approaches XYZ to provide secretarial services in return for payment. XYZ arranges with Amy for her to do secretarial work for Corporate. XYZ is responsible for paying Amy under the arrangement.
Pay as you go (PAYG) voluntary agreements are written agreements between a business (the payer) and you as a contract worker (the payee) to enable businesses to withhold amounts from payments they make to you to help you meet your income tax liability.
To 'withhold' means to deduct amounts from the gross payments made to you and send the deducted amounts to the Australian Taxation Office (ATO).
You must be an individual with an Australian business number (ABN), and the payments must not be subject to any other specific PAYG withholding category. Examples of other PAYG withholding categories are payments to you as an employee or under a labour hire arrangement. You as an independent contractor should only be using the estimator where you have signed a voluntary agreement with your payer. This means that you have asked your payer to withhold an amount from any payment that you receive.
For example, Brian works as a building contractor. While working for ABC Construction, Brian signs an agreement with ABC Construction so that ABC will withhold amounts from the payments he receives. The withholding rate is a flat rate of 20% or his Commissioners instalment rate (CIR) if he has been advised of one by the ATO.
If you have a voluntary agreement with your payer, your payer must withhold an amount from your payment at the withholding rate. The withholding rate will be either your Commissionerís instalment rate (CIR) or a flat rate of 20%.
If your CIR is greater than 20%, your CIR will be the withholding rate. If your CIR is less than or equal to 20%, your payer must withhold at 20% unless you both agree that your CIR will apply. If your CIR is not known at the time of the agreement, the flat rate of 20% applies.
It is your responsibility to notify your CIR to your payer in your 'voluntary agreement'. Agreement forms are available from the ATO (NAT 2772) or you can develop your own voluntary agreement with your payer provided it contains the same information as the ATO form.
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