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The exception to this is contractors who work under a company ABN. Such contractors are not required to have tax withheld from payments that they receive. For more information, see Company Tax Type below. Because LAB payees are subject to PAYG withholding, payments they receive and any associated tax withheld is reported to the ATO via STP. However, payments made to LAB payees are considered business income as opposed to personal income. Because of that, financial year-to-date gross payments made to INB payees are reported in STP as an aggregated gross amount and are not itemised by category of payment in the way that they are for INB payees. LAB payees may have a personal Australian Business Number (ABN). However, their earnings are reported to the ATO under their tax file number and not their ABN. |
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The tax type of Company applies to payees who are engaged by your business as contractors and work under a company ABN or they are supplied by an Umbrella or 3rd Tier Agency. Such payees are not subject to PAYG withholding and therefore are excluded from STP reporting.
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Contractors who are sole traders may have a personal ABN as opposed to a company ABN. Such contractors are required to have tax withheld and should be categorised as LAB payees and not Company contractors. For more information, see PAYG Tax Type above. |
There are no separate payee/income types for payees with a tax type of Company and as such the payee type setting for this type of payee is defaulted to CompanyWhere payees are supplied by a 3rd Tier Agency or an Umbrella company, the payee type needs to be selected to define where the payee is being supplied from. For more information, see Overview of Supplied Payees. The available payee types are:
Company - This is the default payee type for tax type Company and is applied where the contractor is working under their company ABN.
3rd Tier Agency - Where the payee is being supplied from another agency.
Umbrella - Where the payee’s tax affairs are managed by an Umbrella company.