Top 10 Must Dos you need to consider while contracting
So you have chosen to become a contractor in your industry? Great work! Contractors run their own business and so you can make a lot of money becoming a contractor. However, with great reward it does come with a lot more responsibilities. Here is a guide on the top 10 contractor must dos that you may or may not be doing:
1. Paying the required tax
As a contractor you must report your income and pay the required tax. The taxes that maybe applicable are GST, income tax, PAYG withholding and payroll tax. You can find more information about this on our tax guide.
2. Issue tax invoices to your clients
Tax invoices issued to your clients must be provided within 28 days of their request. They also require the following information:
- It must state that it is a tax invoice
- Your (the sellers) details
- Your ABN
- Date of issue
- Brief description of service provided or rate of pay and duration
- GST amount
- Clients details
- Any expenses you incurred under the contract (if applicable)
- Payment details
3. Register your business name
If you are operating under a new business name, you must register this name with the Australian Business Register. This is not a costly exercise and quite easy to do. Just visit the ABR website to register or otherwise contact Box Advisory Services and we can assist you.
4. Register your Australian Business Number
If you are running a business as a consultant, contractor, freelancer or locum you must have an Australian Business Number or your client may legally withhold the highest tax rate plus medicare from your payments (i.e 49%)
5. Setup compulsory registrations & licenses
Depending on your industry you may have to get compulsory registrations, permits, certificates and licenses required to run your contracting business. There is a number of ways to figure this out if you require registration & license.
- Search your industry on Australian Business Licence and Information Service (ABLIS) to find out which licenses or permits are applicable to your business.
- Contact relevant industry associations or bodies related to your industry. For example, as an accountant we have a few known associations in our industry. The Institute of Chartered Accountants provide detailed information for accountants and their members on what licenses and registrations are required to run our accounting practices.
- Contact your accountant or Box Advisory Services
6. Good Workplace Health and Safety
as a contractor you required to comply with the duties set out in the Workplace Health & Safety Act. You need to ensure that your business doesn’t create health and safety problems for your employees, contractors, volunteers, visitors, customers or the public. For more information, please visit the link – Workplace Health and Safety
7. Employers Obligations
When you start to hire employees you must ensure you do the following:
- Maintain current workers’ compensation insurance
- Pay for employee’s compulsory superannuation on time
- Withhold income tax from employees’ wages
- Ensure your employees receive the correct leave & redundancy entitlements
8. Good record keeping
Under tax law you are required to keep evidence to support your business income and expenses for at least five years. This can include use of an accounting software, receipts, invoices and bank statements. The records can be kept either electronically or as a hard copy.
9. Issuing contracts
As a contractor you will most likely be requested to provide a contract of your services. A good contract should consider the following information:
- The parties involved
- Result to be achieved and the services to be performed
- Timing and payment details
- Insurances required
- Intellectual property rights
- Termination of the contract details
- Terms and conditions
- Confidentiality obligations
- Dispute resolution
- Provision of expenses (including equipment and fees)
- Defects liability and rectification
Check out our guide regarding contracts here.
10. Pricing your services
Setting the price for your work is no easy task. You can either charge per hour or a fixed quote per project. To ensure you cover the costs you must take in consideration the following:
- Leave entitlements
- Workers compensation
- Fees for professional services such as accounting fees
- Fees for subcontractors & consultants for the project
- Training and licensing fees
- Profit margin
Please note that the above list of contractor must dos is not exhaustive and includes most of the general contractor obligations when starting your contractor business.
Please note that every effort has been made to ensure that information provided in this guide is accurate. You should note however, that the information is intended as a guide only, providing an overview of general information available to contractors and small businesses. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal or tax advice. You should, where necessary, seek your own advice for any legal or tax issues raised in your business affairs.