Top 3 questions on IT contracting
It’s a good time for IT contractors in Canberra, with exciting and large-scale IT projects rolling out across government and private enterprise.
As we scale-up our tech projects, the need for IT contractors increases allowing projects to scale up and down as required.
So, is it time to start contracting to get your teeth into some exciting work?
Going from a permanent job to a contracting role can be exciting and scary all at the same time. Many people take the leap because of the flexibility, the ability to get into the nitty gritty of an exciting project, or to earn more money for their skills.
Whatever the reason, we see contracting as an exciting career progression. But when you are new to contracting, there are plenty of questions that often aren’t easy to find a straight answer to.
How will you get paid? Do you need to put into Superannuation? What about your expenses? Or insurances? What is salary sacrifice? How do I pay PAYG tax?
It may cause a head spin, but payroll providers can help. They can manage your payroll needs and ensure your super, PAYG and insurances are paid, and they can help you reduce your tax and buy your essential items (like a laptop and smartphone) through salary sacrifice.
Here are the most common questions I get from contractors moving from a permanent role to contracting:
What is a payroll services company and do I need one?
Essentially a payroll services company is there to help you maximize your contracting payroll.
As a permanent employee, you have a Human Resources or Payroll Services team who breakup your pay according to your specifications—including putting into superannuation, withholding tax and paying into specified accounts.
As a contractor, every dollar you earn needs to be managed by you, or a payroll services provider.
Your payroll services provider becomes part of your team, ensuring your deductions are accounted for, paying into your superannuation account, managing any items under salary sacrifice and ensuring you receive regular payslips and a PAYG Summary at the end of the financial year. We save you the hassle of keeping track of your income and tax owing, so that how you are paid becomes relatively similar to how you were paid by your permanent employer.
In short, using a payroll services company means you have hassle-free control over your money.
Can I still salary sacrifice my vehicle?
The answer is yes, you can!
Salary Sacrifice isn’t just for government employees or those in ‘big business’, it’s for contractors too. Salary Sacrifice simply means you remove all business-related expenses (including our fee) and eligible fringe benefit items from your gross wages, and you are taxed on the lesser amount. These expenses can include your car, laptop, even your superannuation.
How do I get a loan as a contractor?
Generally, major lenders view contract workers as potentially risky borrowers. They often consider contract work as unstable and rate the contractor as high-risk, as lenders fear contractors aren’t able to commit to their loan repayments.
The good news is banks do have loans for contractors and other self-employed people. To gain such a loan, you need demonstrate a regular income.
Your payroll services provider can help with this process by providing you with your payslips and a letter of employment.
So, at the end of the day, contracting can be a great option and with a payroll service in your corner, your income management can be hassle-free.
So, as we move towards the end of the financial year, a time when many new contracts open up for the new financial year, it’s time to look at if contracting could be your next rewarding career move.
Christine Marr is the CEO of Bookssorted Payroll Services with a passion for helping IT contractors maximise their pay. Find out more at Bookssorted.com.au