Finance - FAQs
Why Wavelength pay on-hire Doctors as employees
We are often asked why we insist on paying our on-hire Doctors as employees, tax their wages and take out superannuation from their daily/hourly rate when they are already set up as an ABN Sole Trader. We hope the following information sheds light on this subject.
I am an ABN Sole Trader. Why does Wavelength tax my daily or hourly rate?
The decision to tax your wages comes from the Australian Taxation Office (ATO) as a statutory legal requirement for all on-hire agencies operating in Australia. Wavelength is therefore following its lawful obligation as a labour hire company.
The Australian Taxation Office website clearly defines our position as a labour-hire company and our requirement to withhold PAYG tax from payments to individual workers, including both contractors and employees.
The arrangement is shown below:
Labour-hire can be called different names, including:
- employment agent/agency
- contract management
- recruitment services
- group training organisations (where your business is referred to as the host employer).
Regardless of how the activity is described, if you supply the workers to another business, you must withhold from payments you make to individual workers.
Another on-hire agency pays my invoice as a ABN Sole Trader, why can’t Wavelength?
Unfortunately we hear this often. If they are a labour-hire agency on-hiring your services and not taxing your wages, they are most likely breaching tax law either knowingly or unknowingly. It is every business owner’s responsibility to ensure they and their staff remain compliant and pay necessary taxes. Ignorance of taxation law is not an excuse to not apply tax where due. In the event of an audit or inquiry from the ATO to your business or the labour hire company, the potential fines, tax recovery and interest can quite literally ruin your day, your year, or even years if the incorrect tax application is longstanding.
Amount to withhold
It is important to remember that you need to withhold tax from individual workers under a labour-hire arrangement whether they are an employee or independent contractor.
I am set up as a Company or Trust, therefore I want to be paid via Invoice with NO PAYG Tax or Superannuation deducted from my daily or hourly rate.
If you have this arrangement operating, either as a company (Pty Ltd or Ltd) or trust – then you can be paid via invoice. We will not deduct PAYG tax nor superannuation. The previous ATO link outlines the payment arrangement for this scenario too, specifically –
Where you provide labour-hire workers who are operating as companies, partnerships or trusts, you do not have to withhold amounts from payments you make to them, unless they do not provide you with their ABN.
I don’t want to pay PAYG tax… How can I avoid this?
We understand that no one wants their wages taxed, however if you are an on-hired worker from an on-hire agency there is no avoiding it. Wavelength goes to great lengths to ensure we remain compliant. We invest heavily in internal training and audits and in no circumstance will we compromise doing the right thing to save a few bucks. If you are involved either directly or indirectly in an audit and the labour hire company finds out they have not taxed you correctly, they have legal grounds to pursue you for the return of overpaid wages. This is a situation everyone should try to avoid. We are available to answer questions regarding how payroll applies to you as an individual worker, and we also suggest making contact with your Accountant. It’s their job to know your business, understand your personal and professional financial needs and to advise you regarding tax savings strategies.
How do I get paid?
There are a number of factors that determine how Locum Doctors are paid. The available option(s) are nominated by the Client and are based on their on-hire practices. Once the Client has provided Wavelength with the option(s) available for this assignment, the
Doctor is advised. If more than one option is available, the Doctor selects which one is most appropriate.
The available options are:
- PAYG Employee of Wavelength
- Pty Ltd Contractor of Wavelength
- ABN Sole Trader, (only available if) paid direct by Client
- PAYG Employee of Client
If a Locum Doctor is hired to work for a Client who does not provide payroll services and requires Wavelength to provide this service, then the only options available are as a PAYG Employee or a Pty Ltd Contractor of Wavelength. Wavelength is not permitted by law to on-hire ABN Sole Traders. Wavelength’s PAYG Employees are paid wages and taxed at the time of payment, and Superannuation (if applicable) is paid as per legislation requirements.
Wages are paid fortnightly and payslips will be emailed to the Locum Doctor once processed. Wavelength’s Pty Ltd Contractors are required to submit a Tax Invoice (as well as timesheets) and are also paid fortnightly. If you have worked previously as an ABN Sole Trader for a Client, this is no guarantee that your next assignment will be under the same payment arrangement.
How do I pay tax?
All doctors working in Australia require a Tax File Number (TFN). New Zealand doctors coming to work in Australia
must apply for a Tax File Number. Here are some useful points to remember:
- You can only apply for a TFN after you have arrived in Australia
- TFN’s can take up to 28 days to be approved
- You may be taxed at a higher emergency rate by your employer until your TFN is approved
How do I pay tax as a contractor?
All doctors working as a contractor must set up an Australian Business Number (ABN).
- It is possible to apply for an ABN before your TFN is approved.