Employment tax traps for retailers: Employees, contractors, and influencers
Employment tax traps for retailers: Employees, contractors, and influencers
In today’s fast-paced retail and e-commerce sector, businesses rely on a diverse mix of talent, with influencers and models now central to brand strategy. As work models evolve, business processes need to keep up. Misclassifying workers or overlooking rules for influencers and models can expose retailers to significant penalties, ATO scrutiny and reputational damage.
Employee or contractor?
Classifying workers as employees or contractors is crucial for retailers as it drives obligations around PAYG withholding, superannuation and payroll tax.
The common law classification is determined by looking primarily at the contractual relationship between the business and worker. This involves having regard to factors such as control, ability to delegate, whether it’s a results contract, provision of tools, who bears the risk, and the nature of the parties involved. It is, in fact, the substance of a contractual arrangement that will dictate a worker’s classification, not whether the worker has an ABN.
Even if a worker isn’t classified as an employee under common law, tax obligations may still apply, including:
- PAYG withholding, which can specifically include payments to models and influencers
- Superannuation, which extends to contractors working under a contract primarily for their labour
- Payroll tax applies broadly, with everyone ‘in’ unless specifically excluded.
What about influencers, content creators and models?
Influencer marketing is booming, but the associated tax obligations are often overlooked. Under Australia’s performing artist rules, payments made to influencers, content creators and models may trigger a range of tax obligations, unless they are engaged via an agency. These can include:
- PAYG withholding
- Superannuation contributions
- Payroll tax compliance.
Importantly, these rules don’t only apply to cash payments and appearance fees, but also to non-cash benefits, like gifts or free products provided in exchange for promotion. The Australian Taxation Office (ATO) actively monitors influencer activity, including non-cash benefits.
Businesses engaging influencers, content creators or models as part of their marketing strategy need to ensure they are compliant with these rules. Engaging talent through an agency can simplify compliance, but this isn’t always practical. When influencers are engaged directly, retailers may need systems that capture and report both cash and non‑cash benefits so they can meet their employment tax obligations. This helps reduce the risk of unexpected liabilities and keeps the business on the right side of the ATO.
The risks of getting it wrong
Misclassifying workers and neglecting tax obligations can expose businesses to significant financial, regulatory and commercial risks, including:
- Financial penalties: Directors can be personally liable for unpaid PAYG and superannuation
- ATO scrutiny: Data-matching tools can detect undeclared income and incorrect classifications
- Business sales: Misclassification is a common issue during due diligence, reducing sale value
- Reputational damage with customers and partners.
Beyond managing risk, ensuring that worker classification and employment tax obligations are correct supports strong governance, audit readiness and long-term business sustainability. Staying on top of these obligations is essential to avoid costly mistakes and keep your business on the right track.
How BDO can help
Worker classification and employment tax obligations can be complex, especially as retail and e-commerce expands and work arrangements continue to evolve. Whether you need help assessing current arrangements, addressing historic risks or setting stronger processes in place, BDO’s retail specialists are here to support. Request assistance from our team or find out more about our retail services to explore how we can help your business thrive.
