It can be fairly daunting as a contractor trying to understand the correct choice for processing your pay. The good news is you have 3 choices which all come with a variety of pros and cons depending on your personal circumstances.
- PTY Ltd Company – setting up and running your own company
- Management company – fees associated however the same benefits as a PTY Ltd Company
- PAYG –your recruitment company/agency manages all of the administrative duties associated with being a contractor
PTY Ltd Company
This option offers a significant amount of control and flexibility however does have some costly fees as you initially process your set up.
Your pay is processed via your own proprietary limited company and involves;
- Working with a reputable and established accountant to set up your company
- Registering for GST
- Procure and administer Workers Compensation insurance to the relevant amount required
- Acquire Professional Indemnity and Public Liability insurance.
- Administer your own Superannuation
- Complete BAS statements as required
- Prepare statutory accounts and pay for associated costs
- Contract under the increasing legislative challenges associated with the 80/20 rule
Management companies are a suitable option for contractors who can afford the fees associated and would also like comparable financial benefits of PTY Ltd company’s however not all of the time consuming administrative tasks and associated risks.
Contractor Management companies will;
- Provide you with a company tax structure to work under
- Act as your own tax expert
- Take care of all administration and back office support on your behalf
- Maximise your tax position
- Cover you for Workers Compensation, Public Liability, and Professional Indemnity insurance
PAYG (Pay As You Go/Earn)
PAYG is the right option for you if you prefer the simplicity of having your recruitment company/agency manage all of the administrative and time consuming duties associated with being a PTY Ltd company and also don’t want to absorb the fees associated with a management company.
As a PAYG your recruitment company/agency will;
- Process your pay
- Remitting tax as per your pay cycle
- Administer Superannuation to the fund of your choice
- Issue your group certificate
- Liaise with the ATO
- Cover administration costs for Workers Compensation cover
- Administer all Workers Compensation claims
- Administer $10m of Professional Indemnity and $20m of Public Liability insurance
- Pay payroll tax