XBert Type: Standard
Accounting Software: Xero, MYOB, QuickBooks
Country Restriction: AU only
Risk Type: Payroll Risk
Business Function: Payroll
Overview
The "Contractor or Employee" XBert identifies contacts classified as Individual/Sole Traders who receive regular payments for services such as consulting, contracting, or labor. This pattern may indicate an employer-employee relationship rather than a genuine contractor arrangement, potentially exposing the business to tax, superannuation, and Fair Work compliance risks.
What it does
This XBert analyzes:
Contacts with an Australian Business Number (ABN) registered as Individual/Sole Trader.
Bills allocated to account codes containing terms like "consult," "contract," or "labour."
The frequency and regularity of bill dates to assess consistent payment patterns.
If a contact meets these criteria and exhibits a consistent billing pattern, XBert raises an alert suggesting a review of the arrangement to ensure compliance with ATO and Fair Work guidelines.
How it works
XBert evaluates:
The contact's ABN type to confirm Individual/Sole Trader status.
Allocation of bills to relevant account codes indicating labor-related services.
The regularity of bill dates to identify patterns resembling employee payment schedules.
If these conditions are met, XBert generates an alert highlighting the potential misclassification.
Example/Use Case
Bob operates a construction company and hires several workers as contractors to maintain flexibility. One such contractor, Jane, submits invoices bi-weekly for labor services. XBert detects that Jane is an Individual/Sole Trader receiving regular payments for labor-related services, suggesting that her role may align more closely with that of an employee. This prompts Bob to reassess Jane's classification to ensure compliance with relevant regulations.
Accounting software
This XBert is compatible with:
Xero
MYOB
QuickBooks Online
Which countries it supports
Australia only.
Processes
This XBert falls under the Payroll Services category.
To action:
Review the contact's ABN status to confirm Individual/Sole Trader classification.
Examine the nature of services provided and the regularity of payments.
Assess whether the working arrangement aligns more closely with that of an employee.
If necessary, reclassify the worker and update payroll records to reflect the correct status.
If the arrangement is appropriate, file the XBert to dismiss the alert.
Regularly reviewing contractor arrangements helps ensure compliance with ATO and Fair Work requirements, mitigating potential legal and financial risks.
For more information, refer to the ATO's guidance on Employee or independent contractor.