Understanding how to calculate your contractor's remuneration for the purposes of WorkCover insurance.
Calculating your contractor's remuneration
Calculating remuneration for contractors is different to calculating remuneration for full time or part time employees. With contractors it's important to identify the relevant financial year, and how much you paid them that year.
Identifying the relevant financial year
Each financial year (1 July to 30 June) that the services were provided by the contractor under the contract is considered to be a relevant financial year.
If the contract work started 1 February 2019 and finished 30 June 2019, then the services were provided in the 2018/19 financial year. The relevant financial year would therefore be the 2018/19 financial year (1 July 2018 to 30 June 2019).
If the contract work started 1 August 2017 and finished 1 March 2019, then the services were provided in two consecutive financial years. Therefore, the relevant financial years would be:
The 2017/18 financial year
The 2018/19 financial year (because some of the work was completed in this financial year)
If the contract work started 1 November 2017 and finished 1 December 2020, then the services were provided in four consecutive financial years. Therefore, the relevant financial years would be:
The 2017/18 financial year
The 2018/19 financial year
The 2019/20 financial year
The 2020/21 financial year (because some of the work was completed in this financial year)
Step 1: Calculate the total payment
Calculate the total amount you paid the contractor during the relevant financial year. This includes any labour and non-labour payments (such as payment for materials).
Step 2: Exclude GST
If the contractor charged you GST, do not include this amount in your total.
Step 3: Check if a contractor deduction applies
Some contractor payments might be eligible for a deduction. This depends on a number of different factors, such as whether they’re a sole trader or a company, whether they sub-contract, and how independent their business is from yours. To help you assess this, we have created a helpful flowchart that you can follow.
If your payments to contractors are eligible for deductions, you can deduct an approved non-labour component from the total if the following apply during the relevant financial year:
the contractor falls within one of the professions or trades in the below table
the contractor provides materials, goods or equipment which have not been purchased from you
the amount paid or payable to the contractor during the relevant financial year includes payment for those materials or equipment (non-labour component)
If the contractor does not fall within one of the professions or trades in the table below, but they still satisfy points 2 and 3, you may still be eligible for a deduction. Contact your agent or WorkSafe Advisory for assistance.
Type of contractor
Approved non-labour amount deduction
Building supervisors (who provide their own vehicles and are required to supervise and inspect more than six different building sites each 7 day period)
Driving instructors who provide their own vehicles
Resilient floor layers
Roof tilers or slaters
The approved deduction applies to the entire remuneration amount for that contractor. For example, if the total contract payment made to a cabinet maker during the relevant financial year was $10,000 (excluding GST), once the deduction of 25% is applied the remuneration will now be $7,500 for the purposes of WorkCover insurance.
Step 4: Determine the final remuneration amount
The final remuneration amount is the total contractor payments (excluding GST) minus any prescribed contractor deductions.
If you need more information about calculating contractor remuneration, contact your agent or WorkSafe Advisory.
WorkSafe Advisory Service
WorkSafe's advisory service is available between 7:30am and 6:30pm Monday to Friday. If you need more support, you can also contact WorkSafe using the Translating and Interpreting Service (TIS National) or the National Relay Service.