The first step I took in becoming a nanny was obtaining an ABN. It never crossed my mind to be employed nor seek work through an agency. Nothing against either of those options, I know plenty of nannies who run under an ABN with agencies. I just knew from day one I wanted to be my own boss and run my service through a small business model. Nannies who run their services this way are the minority but for the small few of us who do, it works. Employee or contractor, what’s important is that you educate yourself on your obligations based on your circumstance and today I want to run through why running as a sole-trader works for me and why it’s 100% legal.
What does a sole trader nanny look like?
Nannies who qualify for working under a sole-trader model typically have 3+ families at a time (1 – 2 days per family). The roster built from this would be full-time however to each family, the nanny would be part time/ casual. This means a sole-trader typically pays for their own super, leave, insurance and tax – this makes their rate higher than the average nanny. Families fortunate enough to have a sole trader nanny have the hassle free arrangement of receiving an invoice each week for bank transfer payment. Consider it the same as a trades person, you simply come in, offer your service and send the invoice.
Let’s stop for a moment and look at the situation if I was to be employed by each of these families. I could only claim the tax-free threshold on one of my families which would result in high tax rates for me on all my other clients. Families would also have to pay the $250+ fee for workers comp and organise a payroll each week to pay taxes and super.
Are you a sole trader?
I can assure you, the ATO has confirmed time and time again that I am eligible to run my service as a sole-trader. The main test I offer to nannies who are unsure is the 80-20 rule. This means that if your services derive more than 80% of your earnings in one tax year from one client, you’re an employee. If you’re unsure as to whether contractor or an employee you can take this survey on the ATO website. Further more, you can call the ATO, explain your situation and they will tell you the right thing to do.
Not everyone is a fan of the sole-trader nanny model and not all working arrangements qualify a nanny to work as a sole trader. In an industry that still remains largely unregulated it can be easy to get mixed messages about employment standards and what you should and shouldn’t do. I’m tired of hearing people publicly declare that under no circumstances can a nanny be a sole-trader because that information simply isn’t true. Seek out the right information for your situation.
Do you qualify as a sole-trader and not too sure how to get started? Lollaby offers tailored consultations to help you run you nanny service as a small business.
Click here to subscribe to LOLLABY NANNYBOSS