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Factors to determine self-employment 043-03030000

This document outlines the factors used to decide if a customer is self-employed or not.

On this page:

Business indicators of self-employment

Other factors indicating self-employment

Coding self-employment

Business indicators of self-employment

Table 1

Item	Factor/indicator
1	Does the activity have a significant commercial purpose or character? Is the activity carried out: for commercial reasons, and in a commercially viable manner
2	Is there more than just an intention to engage in business There needs to be a decision to start a business and to do something about it.
3	If there is a purpose of profit as well as a prospect of profit It is relevant if there is: a plan to make a profit, and a genuine belief that a profit will be made
4	Is there repetition and regularity in the activity Most businesses have similar sorts of activities repeated on a regular basis. Some businesses can have one-off activities.
5	Is the activity of the same kind and carried on in a similar manner to businesses in the industry It is relevant if how the business operates is similar to industry norms or businesses in the same field.
6	The activity is planned, organised and carried on in a business-like manner This may be indicated by: business records and books of accounts business premises licenses or qualifications, and a registered business name. Note: having a registered business name: is not compulsory for tax purposes and may not mean you are in business
7	The size, scale and permanency of the activity It is likely that the activity is a business if its: size and scale is similar to other businesses in the same field or with industry norms, and sufficient for a profit to be made, even if not in the short term
8	The activity is better described as a hobby, recreation or sporting activity An activity will not be a business if it is shown that it is more likely a: hobby recreation, or sporting activity A hobby may turn into a business.

Other factors indicating self-employment

Table 2

Item	Factor/indicator
1	Whether a contract exists to produce results or for labour A contract of service indicates an employee/employer relationship exists and there is self-employment. A customer might be self-employed if: they work for gain or reward, and are not under a contact of employment or apprenticeship. For example, not receiving wages or salary This is regardless of if they employ one or more employees.
2	Who has the power or right to make decisions? A customer may be: self-employed as an independent contractor if they can decide: what they do how, when and where they work, and what resources they use with little or no control by another person an employee if there is a high level of control by another person: over what they do how, when and where they work, and what resources they use
3	Is the work done for the business or as part of the business? A customer is likely to be self-employed when they have to make the following decisions regarding work: when where how, and who is going to do it
4	Does the risk of the profit or loss from the work rest with the person or the business? If the customer is bearing the risk of profit and loss, they are more likely to be self-employed. A customer is more likely to be self-employed if they are responsible for losses or damages caused by the business activity.
5	Who owns the business premises, tools and equipment? A customer is more likely to be self-employed if they own the: business premises tools and equipment For example, a person is likely to be self-employed if they: pay for stationery, sample products, materials etc operate from their own home or other property they own without reimbursement for costs such as: electricity postage transport
6	Receipt of a payment summary A person is generally an employee if they get a payment summary.

Coding self-employment

Table 3

Item	Description
1	Self-employment coding Code the details in either: Process Direct: Key START into the Super Key and select the Self-Employment workflow from the Task Selector The Decision Support Tool (DST) is included in the self-employment workflow and may assist staff to determine employment status, if officer is unsure. Any recommendation will automatically be recorded in a Note. The use of this tool is not mandatory Customer Record: Go to the Real Estate Business Summary (REBS) screen Any decision made in relation to whether the customer is considered self-employed or an employee and the reason for this decision, should be manually recorded on the customer’s record. If DST was used, a copy of the document should be scanned to the customer’s record For new businesses where a MOD F has been supplied, see Assessing and coding the Business details for sole traders and partnerships MOD F. Use the manual coding below when these are not available.
2	Customer is self-employed If the customer is self-employed, and the work is: commission or contract based on the Other Income Summary (OINS) screen, code the Type field as: 'ROC' for commission based 'OTH' for contract based business based, on the Business details (BUS) screen add the relevant code: 'NST' - Non Farming Sole Trader 'FST' - Farming Sole Trader 'NPT' - Non Farming Partnership 'FPT' - Farming Partnership Consider updating the family income estimate for partnered customers receiving: Family Tax Benefit (FTB), and/or Child Care Subsidy (CCS), and receiving a social security pension or benefit (but not an allowance)
3	Customer is an employee When a customer is an employee, code commission or contract income from employment: using the Earnings and Reporting workflow, or on the Employment Income Summary (EANS) screen code the Type field as: 'SAC' for commission based 'EAR' for contract based