Labour Hire company PSI

Question

 · Accepted Answer

PayrollDeanne · Answer

Fortunately, the ATO has explicit guidance on exactly this topic in their excellent and extensive STP2 Employer Guidance for Income Types (https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/single-touch-payroll/in-detail/single-touch-payroll-phase-2-employer-reporting-guidelines/reporting-the-amounts-you-have-paid/income-types). You will see the definition of LAB: Use this income type to report payments by a labour hire firm (https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/payg-withholding/payments-you-need-to-withhold-from/labour-hire-firms-and-their-workers) that arranges for persons to perform work or services, or performances, directly for their clients. This income type relates to contractors only. It doesn't include amounts paid to employees of labour hire firms. Employees of labour hire firms should be reported as the relevant income type, such as SAW. Additionally, you will note that because income type LAB is for contractors only, it is only permissible to report () payment types of Gross and PAYGW for the contractors. That isn't your situation for these employees. You must correct the reported income from LAB to SAW for employees to ensure their income is treated correctly for their tax returns. Seek assistance from your payroll product provider if you need to understand the business process you should use in their product to achieve this outcome. Deanne

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