Contracting v. Salaried Employment

[JohnK]

Income tax is just as easily abused.

Income tax is a strange one and not very consistent.

What's the difference between a salaried computer programmer and a sole trader/contracted computer programmer paid the same to work in an office?

One pays more tax than the other which is a joke.

 

[serfty]

One pays more tax than the other which is a joke.

In that case I have been joking* since 1986 ...

*all "jokes" legitimate!

 

[RooFlyer]

And I’ve been having a great laugh for 20 years or so ( not in IT) But the joke isn’t on me .....

 

[Cynicor]

Income tax is a strange one and not very consistent.

What's the difference between a salaried computer programmer and a sole trader/contracted computer programmer paid the same to work in an office?

One pays more tax than the other which is a joke.

Do they? Doesn't PSI mean that they pay the same tax? The concept was created to avoid this issue, and it's why most medical trusts/companies (outside of those who own practices) can't income split anymore either.

 

[burmans]

What's the difference between a salaried computer programmer and a sole trader/contracted computer programmer paid the same to work in an office?

One has the considerable protections of our employment law which makes it considerably harder to get rid of a salaried employee than a contractor (sorry your contract has ended - good bye). One has to just turn up and it's hard to get rid of them, one has to consistently perform to keep their job and/or get a new one.

Sorry, I've done both of these, and have heard the whinging from the permanent employees about the contractors but am very glad I'm now in the first category, the second is way harder than those who have never tried it make out.

 

[opusman]

Not to mention paid public holidays, paid sick leave, paid annual leave, ...

 

[JohnK]

Do they? Doesn't PSI mean that they pay the same tax? The concept was created to avoid this issue, and it's why most medical trusts/companies (outside of those who own practices) can't income split anymore either.

A contractor can claim more than a PAYG employee.

According to the ATO I live in Brisbane. But my investments are in Sydney. And I can't claim the costs of airfares and accommodation to inspect my investment properties, attend AGMs and general meetings with property managers.

 

[sjk]

What's the difference between a salaried computer programmer and a sole trader/contracted computer programmer paid the same to work in an office?

There must be a difference or those purportedly at a disadvantage would simply switch.

"Survival of the fittest" tends to apply more to one category than the other, just for starters.

 

[Daver6]

A contractor can claim more than a PAYG employee.

According to the ATO I live in Brisbane. But my investments are in Sydney. And I can't claim the costs of airfares and accommodation to inspect my investment properties, attend AGMs and general meetings with property managers.

Not any more (1st July 2017) you cant, in relation to travel to investment properties.

 

[JohnK]

Not any more (1st July 2017) you cant, in relation to travel to investment properties.

I haven't been able to for 10 years. Government wants everything their way.

 

[serfty]

A contractor can claim more than a PAYG employee.

According to the ATO I live in Brisbane. But my investments are in Sydney. And I can't claim the costs of airfares and accommodation to inspect my investment properties, attend AGMs and general meetings with property managers.

I haven't been able to for 10 years. Government wants everything their way.

We have had this discussion before and my final comment on the matter is that if I had been in your situation, I would have changed to a different accountant early on in that decade since the advice they appear to give you is inadequate.

Your choice, your cost - don't complain and blame someone/thing else such as "Government".

 

[RooFlyer]

As a contractor, I live on my wits and reputation to keep employed, and have done for 20 years without a gap. I am paid well, but I provide a high level of service - for instance when I interrupted my holiday in Sth America to fly to Canada the next day to attend to a critical client problem. Would you do that JohnK?

No? Then don't complain that I, as a contractor, get a better deal. I have a good accountant, but don't claim anything that isn't allowable in black and white and easily accessible to all in my situation.

 

[Daver6]

I haven't been able to for 10 years. Government wants everything their way.

My apologies @JohnK I read your initial post as "can" not "can't". </sheepish>

 

[JohnK]

We have had this discussion before and my final comment on the matter is that if I had been in your situation, I would have changed to a different accountant early on in that decade since the advice they appear to give you is inadequate.

Your choice, your cost - don't complain and blame someone/thing else such as "Government".

Yes we have had that discussion many times. I am a PAYG employee. My employer does not want to employee a contractor. I cannot get any job that I want.

Maybe I should have setup a computer services company and employed myself and claimed travel costs but that should not be the case. We should be able to claim costs related to employment. Some people live 5 minutes from work, others live 2 hours from work and spend $100 on travel to/from work and others live even further and spend even more.

 

[RooFlyer]

And some of us pay for what employers might ordinarily pay for - such as travel to overseas conferences, my laptop, internet costs, books, phone costs, marketing travel ... It goes on. I get a deduction for these, just as your employer would if they supplied these.

Plenty of work for (IT) contractors, you just have to take a punt on your ability. It's a bit scary at first, but find your niche and it's a great way to go.

Oh, and have yourself a decent accountant

 

[burmans]

Your choice, your cost - don't complain and blame someone/thing else such as "Government".

Well there is a bit of a pattern here, we all know people who blame everyone else but themselves.

 

[Pushka]

Yes we have had that discussion many times. I am a PAYG employee. My employer does not want to employee a contractor. I cannot get any job that I want.

Maybe I should have setup a computer services company and employed myself and claimed travel costs but that should not be the case. We should be able to claim costs related to employment. Some people live 5 minutes from work, others live 2 hours from work and spend $100 on travel to/from work and others live even further and spend even more.

Where you live is purely your choice so why should the tax office supplement your choice? As a contractor you get no superannuation, annual leave or sick leave, nor long service leave. You generally pay your own expenses, work cover and other insurances.

My brother has just left his employment work in IT. He is 66. He did not retire but simply put a comment on his LinkedIn profile he was seeking work. He was gobsmacked that within a week he had an offer of 25 hours per week (or as much as he wanted) as a contractor from the CE of the software company he had been using at work. They do not poach current employers of companies using their software but as soon as he left he was obviously fair game. The software company is based in Ireland and he met the CE last week as he was on a trip to Australia. He starts in April.

 

[serfty]

As a contractor you get no superannuation, annual leave or sick leave, nor long service leave. You generally pay your own expenses, work cover and other insurances.

A contactor should calculate renumeration at 42 weeks per year to get a ballpark idea of equivalent salary.

Then they need to allow another 10% for superannuation.

All work related journey costs need to be documented, rather than just a flat rate allowance based on ATO defined "reasonable" expenditure.

It is still possible to come out ahead in relation to an equivalent employee, but it takes work.

 

[Pushka]

A contactor should calculate renumeration at 42 weeks per year to get a ballpark idea of equivalent salary.

Then they need to allow another 10% for superannuation.

All work related journey costs need to be documented, rather than just a flat rate allowance based on ATO defined "reasonable" expenditure.

It is still possible to come out ahead in relation to an equivalent employee, but it takes work.

Yep. It can work out. Direct comparisons aren’t useful though unless you build in the parameters you mentioned above.

 

[coriander]

As a contractor you get no superannuation, annual leave or sick leave, nor long service leave.

If you're a contractor with only one contract, the employer has to pay super. So in JohnK's workplace, any contractors working along side him would have employer-funded super.