When hiring a Domestic Worker, such as a Nanny, Housekeeper, Cleaner or Caregiver, there are a number of key areas that you need to be mindful of to make sure you are not breaking the law and that you are being fair to your staff member, who is doing valued and important work for you and your family.
Employee vs Contractor?
If your worker is classified as an employee, you need to register with the ATO and withhold tax on pay. You need to make sure you are paying the appropriate Superannuation and are in compliance with Fair Work and Insurance requirements. You need to provide a payslip and you may need to comply with the ATO’s Single Touch Payroll (STP) requirements by using electronic payroll software.
To determine whether your worker is an employee or contractor, you can use the ATO’s decision tool. If you determine that your worker is a contractor, they will need to provide you a proper tax invoice showing their ABN. If you are unsure, call the ATO or seek professional advice.
My worker is an Employee, what next?
You will need to determine whether your employee is a Casual or Permanent employee. The main difference between the two classifications is that Casual work patterns are irregular. Casual staff are not guaranteed hours and do not accrue annual or sick leave. For this reason, the minimum wage is 25% higher for Casual Staff.
You should put in place an appropriate employment contract, signed by both parties. You need to make sure that the rate of pay is above the minimum award rate. Domestic Workers are covered under the Miscellaneous Workers Award. NDIS and Nursing staff are covered under other Awards.
When onboarding your employee, they will need to complete A Tax File Declaration and Super Choice Form.
Superannuation considerations
Super is 10% of wages and where your employee is over 18, it is compulsory to pay when they earn more than $450 per month. The big exception to is for Domestic Workers (but not nurses or NDIS workers), where super is only compulsory when employees work more than 30 hours per week.
In the case that superannuation is not compulsory, you should discuss this with your employee and consider together whether you will be paying super on a voluntary basis (perhaps, by reducing your employee’s hourly rate)
Payroll compliance
Your employee will need to record the number of hours worked, any expense reimbursement and any leave taken. Once you approve this, you will need to pay your employee the post-tax amount and update their leave balances. We recommend the use of an electronic payroll system to pay your employee so that you do not have to manually keep a record of hours and leave.
Single Touch Payroll (STP) is an ATO compliance requirement. After each pay period, information must be transmitted to the ATO electronically through approved payroll software. STP is not yet required for employers who employ in their own individual names. The latest advice is that this will be in place for 1 July 2022, so it is worthwhile to be prepared.
Quarterly and Year end tasks
Each quarter:
- The Activity Statement of the employer will need to be submitted to the ATO and any tax withheld paid.
- Superstream reporting requirements will have to be submitted and any super payable transmitted to the employee’s superannuation fund.
Each year end:
- If STP is applicable, you will need to use your payroll software to finalise STP to the ATO.
- If STP is not applicable, you will need to issue PAYG payment summaries, either through your payroll software or by using the ATO paper form, in duplicate.
Insurance
Each Australian State and Territory has different Employer’s insurance requirements, known as either “Work Cover” or “Workers Compensation Insurance”. These are compulsory insurances that cover you if your worker is injured in their workplace (your home). The cost of this insurance runs from very cheap ($50 for 2 years in Queensland) to outrageously expensive ($1,000 + p/a in the ACT). They are tied to you as the employer and are not linked to any single employee, so you can change your employee without needing a new policy.
Deductibility of Costs
This is a question we get asked regularly. Unfortunately, there is very limited scope to claim as a tax deduction or rebate any of your employee’s pay or associated costs.
Where can I get help or guidance with managing my nanny or domestic payroll?
CarePayCo is payroll service with clients across Australia. We facilitate the employee / employer relationship and handle all the tasks described in this article for you. It is not at all daunting with us at your side.
For more information or to get started go to: https://carepayco.com.au/
