AND WHAT TO LOOK OUT FOR
So you started freelancing, but you’re not exactly sure what you’re doing. Don’t worry, a lot of early freelancers don’t. But here’s some tips that may help you in the long run.
You’re reaching adulthood and entering the workforce, but nobody has really explained to you much about contracts or taxes. Here’s where I had a big wake up call to the adult world. As an adult, YOU are responsible for things you know, or might not know. Sham contracting is one of them.
What It Is
Sham contracting is when an employer hires you and makes you believe you are their employee, but tries to dodge their tax, super, and insurance liabilities by getting you to sign up for an ABN. Recently, the government cracked down on this by still considering some ABN holders as employees and even created a tool to help you figure it out.
The back story
Back in 2011, I was finishing up with my university studies and found work with a small company. They asked me to register for an ABN through a website so they could pay me. It was so easy, I did it in a few hours and received my ABN through the mail within days. I didn’t know what it really meant, I just wanted to get paid so I agreed with everything.
Unfortunately, an ABN is an Australian Business number which is separate from your TFN (Tax File Number). As an ABN holder, you are seen as your own business and this means you would have to operate as your own, including managing your super and taxes. This is part of becoming a freelancer, although I didn’t know it at the time, I was already screwing up my taxes just to get paid. I ended up owing the ATO some tax bills and had to pay them off slowly.