TPB provides a view on whether contractors must be registered - According to the TPB (TPB Information sheet 13/2012)
We have extracted the key information clauses. The full information sheet is available here.
Circumstances where a contractor does not need to register as a tax agent or BAS agent
The contractor provides services for a registered agent as an employee (including as someone who the law regards as an employee, despite describing oneself as an independent contractor), and the registered agent receives the fee or other reward for the provision of the services.
The obligations of the contractor are to procure tax-related advice from a registered tax agent or BAS agent and that registered agent will be responsible to the client in relation to that advice.
Circumstances where a contractor may need to register as a tax agent or BAS agent
The contractor provides services to a client or to a registered tax agent or BAS agent for a fee or other reward, and the client or registered agent relies on the service. The Board considers that a contractor who provides services to a client or to a registered tax agent or BAS agent, and receives a fee or other reward for the service (other than a salary or similar payment) is providing services in their own right. In this case, if the services provided fall within the definition of ‘tax agent service’, and if the client or registered agent relies on the service, the contractor most likely will need to be registered.
The contractor provides services through a registered agent. The Board considers that a contractor who provides services to a client, for a fee or other reward, through a registered tax agent or BAS agent will be required to register if the service provided falls within the definition of ‘tax agent service’, and the client relies on the service. It does not matter whether the registered agent also receives a fee or other reward in relation to the service provided. A common example is where a contractor lodges a Business Activity Statement (BAS) for a client through a registered agent.
For partnership or company registration, this does not necessarily require the person providing the service, for example the employee, to be registered in their own right. The partnership or company can be registered if they have a sufficient number of registered individuals, being registered agents, to provide services to a competent standard and to carry out necessary supervisory arrangements.
The contractor could work for a registered tax agent or BAS agent [and therefore not be required to register themselves] This requires the contractor to perform services for the registered agent who then provides services to the client for a fee or other reward. The registered agent must comply with its obligations under the Code, including ensuring that any tax agent service it provides, or that is provided on its behalf, is provided competently. In addition, the registered agent must also ensure all civil penalty obligations under the TASA are met including that they supervise and control relevant work that the contractor does.
Employees of registered tax agents or BAS agents are not necessarily required to be registered with the Board. A registered tax agent or BAS agent company or partnership might need or choose to have some of its employees registered under the TASA in order to meet the “sufficient numbers requirement” of the company or partnership.
ICB Comments and Questions
The above information is extracted from a full information sheet released by the TPB during July (PDF of the TPB information sheet is available here). We are now seeking to clarify some of the examples as while we appreciate some aspects of the Boards information we see implications we do not believe were intended.
For the TPB response to ICB - Use of contractors and offshoring, click here