QUT's obligations to pay PAYG tax - important points concerning the engagement of contractors and consultants
Since 1 July 2000 Pay As You Go (PAYG) replaces the old Pay As You Earn (PAYE) system. Under the new tax system, it is important to determine whether a payee is classified as an employee or an independent contractor for tax purposes. The University must first determine this point.
Under ABN/PAYG withholding rules payments to an independent contractor would normally require the payee to provide a Tax invoice/Australian Business Number (ABN) for services provided. Under the new withholding provisions, where the payee fails to provide an ABN, QUT is required to withhold 46.5% from the payment and remit it to the tax office. QUT must withhold PAYG tax from salary, wages, commissions, bonuses or allowances paid to any individual as an employee.
For further details refer to:
Financial Management Practice and Procedures Manual Section 4(D) Payments to External Consultant/Contractor (Not QUT Staff).
ATO Publication - PAYG withholding guide no 2 - How to determine if workers are employees or independent contractors. http://www.ato.gov.au/businesses/content.asp?doc=/content/4540.htm