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TomD's avatar
TomD
Trusted Cover User
3 years ago

how to pay a non-employee?

Have a new issue and would like some advice.  We recently invited someone for an interview and subsequently to an assessment day. We said we would pay for that day if the candidate took the job. Total amount is about $ 200.

The candidate subsequently declined the offer with made-up excuses but still wants to be paid. I am not interested in a fight, so am willing to pay him and feel glad to have dodged a bullet. Not sure though how to make that payment. He is not an employee, never was, so STP is not applicable.  He was not a contractor and of course there is no invoice for services rendered. I do have a TFN.  Anyone with a suggestion?

  • Tracey_H's avatar
    Tracey_H
    Former Staff
    3 years ago

    Hi TomD 

     

    Thanks for your post, it sounds like you did dodge a bullet. I'd recommend checking with your accountant or the ATO on this one, if the candidate needs to declare the payment as income you might need to report it through STP. 

     

    Otherwise, you could record a Spend money transaction and allocate to an applicable expense account.

     

    Let me know how you go.

     

    If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

    • TomD's avatar
      TomD
      Trusted Cover User
      3 years ago

      thanks Tracey,

       

      I contacted both the ATO and my accountant and got the feeling that the ATO support while friendly and curious,

      was not fully sure, seemed to indicate that the person never really got hired, so STP would not apply. I still had to run this as wages but with a payment summary. All this was fairly unclear to me.

       

      My accountant was sure that payments made to individuals for their time spent in an assessment or interview process, even if they do not end up taking the job, are still considered taxable income in Australia and are subject to Pay As You Go (PAYG) withholding.
      As the “employer” (even though you did not become one), you would also be required to withhold tax from the payment and report it to the ATO through the STP. If they do not provide Tax File Number the withholding rate is 47%.
      Regarding Superannuation, if the individual is considered an employee for tax purposes, the employer would be required to make superannuation contributions on their behalf, even if the individual does not end up taking the job.

       

      So, that's what I did in this case - lot's of work for a dud interviewee but I am still glad we discovered this problem early and don't have to deal with him later on.

      • Tracey_H's avatar
        Tracey_H
        Former Staff
        3 years ago

        Hi TomD 

         

        I'm glad to hear you were able to get clear advice from your accountant on this. I suspected this was the case, however, we're not permitted to provide accounting advice so I appreciate you posting that information here for the benefit of other users.

         

        I agree it's a lot of work for someone you're not going to hire, but at least you've met your ATO obligations and you found out the candidate wasn't suitable before he was hired.

         

        Good luck with future candidates!

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