Home' OsteoLife : OsteoLife Autumn 2013 Contents 20 Australian Osteopathic Association
As a financial planner, we see many
allied health business owners who
are challenged in two areas of
• how to engage a worker, whether
through employment or contracting; and
• understanding your accounts/financials.
Most osteopaths operate as a sole trader/
practitioner either in their own clinic or
offer their services as a contractor, with
the minority running a business under a
company structure or partnership.
If you are the owner of a clinic, you have
to be careful to adhere to the Fair Work Act,
taxation and superannuation legislation
when it comes to how you engage people
to work with you.
Tough penalties apply, and you will need
to meet different obligations depending
on whether your worker is an employee
1WHO IS AN EMPLOYEE AND
WHO IS A CONTRACTOR?
An employee works in your business and is
part of your business, whereas a contractor
is running their own business. They provide
services to your business and are free to
accept or refuse additional work.
There is no one factor that distinguishes
an employee from a contractor. It is
more about the type of relationship that
exists in the workplace and you need to
consider all aspects as a whole.
In examining the working arrangement,
some of the following factors could be
Degree of control over how work is
performed. An employee performs work
under the direction and control of their
employer in an ongoing way, whereas a
contractor has a high level of control over
the work performed. They decide how to
do their work and what skills they need
to do it. A contractor can in fact employ
someone else to do the work.
Hours of work. An employee generally
works standard or set hours, whereas a
contractor under agreement decides on the
hours to complete the task.
Expectation of work. An employee
usually has an ongoing expectation of
work, whereas a contractor is engaged for a
specific task/result and for a specified time.
Risk. An employee bears no financial risk
or professional indemnity risk (this is the
responsibility of their employer), whereas
a contractor carries the risk of making the
task pay appropriately and pays for their
own professional indemnity insurance in
case of negligence. Contractors will also
carry their own public liability insurance and
cover the cost of workcover.
Superannuation Guarantee (SG). An
employee is entitled to have superannuation
contributions (9 per cent currently, 9.25
per cent proposed from July 2013) paid
into a nominated superannuation fund
by their employer, whereas a contractor
can be responsible for paying their own
superannuation. The definition of contractor
for superannuation purposes is more liberal.
A person who receives a payment for
work under a contract, wholly or principally
for labour, is an employee for SG purposes.
If the contract is not wholly or principally
for labour (including physical work and
intellectual and artistic efforts), then the
person providing the services is treated as
a contractor, rather than an employee, and
the employer is not required to provide
A contract is principally for labour if more
than half the value of the contract is for
labour. In the ATO's view, a contractor -- as
distinct from an employee -- is someone who:
• is contracted to perform a specific task
within a specific time frame for an agreed
amount of money;
• has freedom in how the task is performed;
• may have the labour performed by
• renders accounts payable by invoice;
• does not have the normal entitlements
of employees such as long service leave,
annual leave, sick leave etc;
• bears responsibility and liability for losses;
• is generally not eligible for workers
compensation from the principal; and
• is generally available to perform services
for the public at large.
Tools and equipment. An employer
provides tools and equipment to the
employee, whereas a contractor is required
to provide their own tax -- it's an employer's
obligation to deduct PAYG (pay as you go)
tax for an employee, whereas a contractor
is responsible for paying their own tax to
Method of payment. An employee is
paid regularly either weekly/fortnightly/
monthly, whereas a contractor (who has
obtained an Australian Business Number
[ABN]) submits an invoice for their work.
Leave. Annual leave, personal/carers leave
and long service leave is paid to an employee
(casual employees receive a loading in lieu
of leave entitlements), whereas a contractor
does not receive paid leave.
Please note: none of the following
makes a worker a contractor:
• when your business only needs them for
short term or irregular work;
FOCUS ON PRIVATE PRACTICE
Two important areas of private practice are under the microscope: how to engage a
worker, and understanding accounts and financials.
BY Michelle Tate-Lovery, Managing Director and Principal Financial Adviser,
Unified Financial Services
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