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Employee vs contracting

Newbie

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I currently have a full-time job, however I have been offered a contract position for a month for another company. I will still be employed with my frirst job during this time. 

 

There have been two ways this job has been offered 

1. as a contractor, where I will have my own abn. 4800 a week plus GST

2. as a casual employee, $4800 with 10% of it towards super.

 

Which option is a favourable option from a tax perpective for me? which will give me more $$$

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Most helpful response

ATO Community Support

Replies 0

Hi @Emma15 

 

I won't be able to provide you with financial advice on which option is better. You may want to discuss that with a tax agent or a financial advisor.

 

I can provide some information that you may want to consider. 

 

For scenario one as a contractor you'll need to handle your own tax affairs. This includes setting aside any tax amounts if you want to cover the amount owing at the end of the year. This will also change the way you lodge your tax return at the end of the year as you'll need to complete the sole trader income section. As you would be running a small business as a contractor you may be able to claim deductions for certain things that relate to running your business. We have a page on our website that runs through business income and deductions. As a contractor you may be entitled to super payments depending on your situation. You can view our page on super for contractors to read more. 

 

If you went with scenario two as a casual employee the employer would withhold tax as usual and this would prefill when you lodge your tax return for the year. The tax rate applied will depend on whether you claim the tax-free threshold with them or not. Claiming the tax-free threshold from two employers at once can result in not enough tax being withheld by the end of the year. You're also entitled to super as an employee. 

 

For more information I recommend having a read through our pages on working as a contractor and working as an employee.

 

Let us know if you have any questions. 

1 REPLY 1

Most helpful response

ATO Community Support

Replies 0

Hi @Emma15 

 

I won't be able to provide you with financial advice on which option is better. You may want to discuss that with a tax agent or a financial advisor.

 

I can provide some information that you may want to consider. 

 

For scenario one as a contractor you'll need to handle your own tax affairs. This includes setting aside any tax amounts if you want to cover the amount owing at the end of the year. This will also change the way you lodge your tax return at the end of the year as you'll need to complete the sole trader income section. As you would be running a small business as a contractor you may be able to claim deductions for certain things that relate to running your business. We have a page on our website that runs through business income and deductions. As a contractor you may be entitled to super payments depending on your situation. You can view our page on super for contractors to read more. 

 

If you went with scenario two as a casual employee the employer would withhold tax as usual and this would prefill when you lodge your tax return for the year. The tax rate applied will depend on whether you claim the tax-free threshold with them or not. Claiming the tax-free threshold from two employers at once can result in not enough tax being withheld by the end of the year. You're also entitled to super as an employee. 

 

For more information I recommend having a read through our pages on working as a contractor and working as an employee.

 

Let us know if you have any questions.