2 also use your individual tax file number (TFN). You will need an Australian Business Number (ABN) if you wish to avoid your employer withholding 46.5 per cent of any payments made to you. A sole trader owns all of the business assets and is responsible for all the liabilities of the business. Liability is unlimited and includes all personal assets, including any assets the owner shares with another person, such as a jointly‐owned home or money in a joint bank account. Ensuring you have the right insurance coverage can help to protect you and your business. Company A company has members (shareholders) who own the company and directors who run it. However, if you are an independent contractor you can set up a ‘one person company’ with a sole director and member. It is more expensive to register as a company, so it’s important to be sure that it is the right structure for your needs. A company must have its own TFN and either an ABN or Australian Company Number (ACN) which must be displayed on a range of documents. There are also strict standards and legal obligations to the Australian Securities and Investments Commission (ASIC) that apply to companies. While companies have limited liability, directors can be personally liable under the Corporations Act 2001. There are different company structures including proprietary companies and limited companies, and the rights and responsibilities for each of these arrangements are quite different. It is an individual decision as to which trading structure will best suit your personal situation. Goods and services tax The provision of optometric locum services is a taxable supply for the purposes of Goods and Services Tax (GST). If you anticipate that in a year, you would earn more than $75,0001 gross turnover from this activity, then you must register for GST. In order to register for GST you will also need an ABN. If you provide locum services on an irregular basis and earn other income as a part‐time employee for example, any income you earn as an employee does not count towards the $75,000 threshold. If you expect your annual turnover to be less than $75,000, you may still register for GST. You might wish to do this if you anticipate buying a substantial quantity of goods or services in the course of your business on which you will pay GST. The advantage of being registered is that you can then claim an input tax credit for all these purchases provided, of course, that they are genuinely business‐related. It is important to be aware, however, that the reporting requirements for GST can be onerous. Unless you really think that you will have a reasonable amount of GST that you can
1
This rate is current as at 1 July 2015
4 If you are planning to locum for a reasonable length of time you may want to apply for a separate locum provider number at your business address (which may also be your home address). In instances where you will be providing a locum service for more than 14 days at a particular location, Medicare requires that you obtain a provider number specifically for that location. Superannuation If you are providing locum services as a sole trader you are responsible for your own superannuation arrangements. If as a sole trader you employ others, you will need to make superannuation payments for any eligible employees. If you are providing locum services through a company trading structure, your company must pay superannuation to you, or any other eligible employees. The current rate for superannuation is nine and a half per cent of your usual income. When setting your pay rate for a locum assignment it is important to consider whether you are paying superannuation, and therefore whether this expense needs to be included in the rate. There are a wide range of superannuation funds available, and it is worth shopping around to find the best product to suit your individual circumstances. PAYG tax If you are providing locum services as a sole trader without an ABN, it is highly likely that you will be regarded as an employee for taxation purposes. Therefore your employer will be required to deduct PAYG tax. If you are providing locum services through a company or trust trading structure your employer does not have to deduct PAYG tax. Therefore your company will need to be registered for PAYG tax, and PAYG tax will need to be deducted from the salary that the company pays to you, at the appropriate rate. It is important to note that in the first year of operation as a locum you may incur only minimal PAYG payments. However in the years after this, you will generally be required to make regular, quarterly PAYG payments to the ATO. It is worth taking this into consideration when setting your locum rate. For more information regarding PAYG registration and responsibilities visit the Australian Taxation Office website at www.ato.gov.au or call them on 13 28 66.
Insurance If you have set up a proprietary company for your locum services, you are required to obtain workers compensation insurance for yourself, as the company’s employee. The current rate is about three per cent of the value of the payroll. If you are a sole trader, you cannot insure yourself for workers compensation because you are not anyone’s employee. Income protection insurance may be worth considering in this instance, as it may offer you additional income security.
5 There are a number of companies that offer workers compensation and income protection insurance, and it is worth shopping around to find the best product to suit your individual circumstances.
3. Other considerations
Written agreement Obtaining a written agreement for the provision of locum services will ensure that both parties have a clear understanding of what is expected to happen, and when. While some optometrists will not use formal written agreements, others will find this a necessary and proper requirement. It is important to try and gauge this from either a phone call or (ideally) a visit to the practice and a face to face discussion. Your written agreement can be as simple as an email, which includes: dates, hours and location(s) you have agreed; hourly rate before GST, and payment terms (seven days is standard). This may be appropriate where you have a one off job, or where you know the optometrist very well, and you have had good previous dealings with them. Alternatively formal written contracts may be more appropriate in some circumstances, particularly where the arrangement is: over a long period of time; with an optometrist you have not met before, or with a larger corporate group. Optometry Australia’s (OA) Member Assist Service can provide a locum contract template at the OA discounted member rate. For more information, contact the OA Industrial Relations Hotline Service on 1300 101 391. Financial advice and support A good accountant with tax expertise can be extremely helpful in running your small business. Shop around until you find an accountant with the right expertise to suit your circumstances and needs. Finding work There are a number of different ways to find out about locum work that may be available including: OA online classifieds; agencies that advertise for locum work only for large firms e.g. Specsavers Recruitment Service; agencies that advertise for locum work for independent optometrists; Facebook groups where people post seeking locums, or talking to other locums.6 This guide has been adapted with the kind permission of Optometry NSW/ACT, who developed the original material. Further advice
