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Suppose I have some work around the house, e.g. painting, gardening, etc. And I offer to pay a friend some cash and non-cash (e.g. beer) to help out. The house is an investment, and not my primary residence.

Are there any particular pitfalls or legal consequences to remunerating someone in this way? There is no written or explicit employment agreement in this scenario, just

"Hey, can I pay you X bucks an hour to help with this?" "Sure"

This hypothetical agreement was made in Australia.

Am I in breach of any laws by making such an agreement? Is this any different to asking a friend to help out and not paying them?

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    I would expect this to be legal, but your friend will likely have to pay taxes on the cash, and possibly on the fair market value of the beer.
    – Someone
    Nov 28, 2023 at 3:28
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    In some places (from traffic on the DIY stack, I believe the US is one), certain work on rental properties can only be carried out by suitably qualified persons.
    – TripeHound
    Nov 28, 2023 at 7:54
  • @Someone so there's no issue with failing to pay super, payroll tax, etc? Also, if they are expected to declare the income, does that mean I am entitled to claim it as an expense?
    – quant
    Nov 28, 2023 at 10:10

1 Answer 1

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It's not illegal to hire people in Australia

However, since this is a revenue-generating property, you are a "person conducting a business or undertaking" under your state's Work Health and Safety laws. That means you are responsible for their health and safety. If they injure or kill themselves doing the work, you can be fined or jailed if you failed to take reasonable care. This is in addition to any liability you might have to them or their family for their loss. If the work they are doing is construction work under the Act (or high-risk construction work), which both painting and gardening might be, then there are additional obligations. Note: this obligation exists whether they are being paid or not.

If you are hiring your friend in a way that corresponds with an actual business they run (e.g. they operate a painting, gardening, or handyman business), then it would be no different than hiring a business not run by a friend.

If not, this relationship is unlikely to be considered an employer-employee relationship since no ongoing contractual relationship is intended. As such, your friend is likely to be treated as an independent contractor. However, the decision is ultimately a matter for the court and will depend primarily on the contract you entered. So, a verbal contract would be ... unwise.

If they are an employee, then all the normal baggage is triggered: workers' compensation insurance, withholding tax, superannuation, redundancy, minimum wage laws, having to pay in cash rather than beer, etc.

If you have an Australian Business Number (ABN), which you would be required to have if your revenue from the rental business exceeds $75,000 pa, and they don't, you are required to withhold 48.5% tax from their remuneration (cash plus beer value) and remit that to the Australian Tax Office (ATO). Either way, they need to declare their remuneration as income on their tax return, and you can claim it as either a capital improvement or revenue expense on yours, depending on what the "work" actually is.

You should check that your landlord's insurance covers any acts or omissions they might make while working for you and any injuries they might suffer.

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