Hi everyone,
I have a quick question. How does tax work when hiring a subcontractor?
If I was to hire a subcontractor for work, do I pay tax for total gross earnings before paying the contractor or only pay tax for earnings AFTER paying contractor.
Example:
Steve (owner) earns 100k before tax.
Bob (subby) earns 50k
Does steve pay tax on the 100k or only the 50k after paying the subby.
Thank you.
Hi @Quest1
You'll declare your gross income and the payments you make to contractors is claimed as an expense provided all relevant criteria is met. This will reduce your taxable income, and you'll pay tax on the remaining amount.
Using your example:
Steve declares 100k and claims 50k as a deduction in the relevant tax return.
Steve's taxable income will be reduced to 50k and this is what tax is calculated on.
Hi @Quest1
You'll declare your gross income and the payments you make to contractors is claimed as an expense provided all relevant criteria is met. This will reduce your taxable income, and you'll pay tax on the remaining amount.
Using your example:
Steve declares 100k and claims 50k as a deduction in the relevant tax return.
Steve's taxable income will be reduced to 50k and this is what tax is calculated on.
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