Hey there, allied health clinic owners! If your business operates under multiple entities, you’ve probably wondered how to manage team members who work across these different structures. The way you approach this isn’t just about convenience; it also has tax and legal implications. So, let’s break down your options.
Option 1: Invoice from One Entity to Another
How It Works
When an employee works for multiple entities, one entity can essentially “hire out” the employee’s services to another. Entity A sends an invoice to Entity B for the services provided by the shared employee.
- Simplifies payroll by centralizing it within one entity.
- Easy tracking of employee hours and performance under one umbrella.
- Potentially simpler tax implications for the employee.
- Inter-entity financial obligations could become complex.
- The employee is officially tied to one entity, which may create issues of loyalty or priority if the two entities are separate brands.
- If both entities are registered for GST, the invoicing entity must include GST on the invoice, and the receiving entity can claim this back as an input tax credit.
- Detailed invoices outlining the services provided, including the employee’s hours and rate.
- Legal documentation between entities to ensure compliance and agreement on the invoicing process.
- Legal responsibilities need to be handled. The invoicing entity assumes full employment liability. It must also adhere to the Fair Work Act and manage leave, benefits, overtime and other employment responsibilities.Things like the employment contract and insurance should also be reviewed to ensure they allow for this arrangement.
Option 2: Team Member on Payroll for Both Entities
How It Works
In this option, the employee is formally employed by both Entity A and Entity B. Each entity runs its separate payroll for the shared employee.
- Greater flexibility in distributing workload and responsibilities.
- Easier to allocate costs more precisely based on actual work done for each entity.
- More complicated payroll management along with employment agreements.
- Tax implications for the employee could become complicated, depending on income brackets.
- Separate tax file numbers (TFNs) declarations for each entity.
- Separate superannuation setups, unless an integrated solution is in place.
- Compliance with Fair Work regulations for both entities.
Other Options You Might Consider
- Use of a Holding Company: Here, a single holding company employs all team members and allocates them to the various entities. This can simplify payroll but requires the setup and management of a separate holding company which will come along with its own new set of challenges.
We hope you’re enjoying our blog, just a note though. The information provided here is intended for general informational and educational purposes only. While we aim for accuracy, we can’t guarantee that this content will apply to your specific situation—every business owner’s circumstances are unique.
This blog is not a substitute for personalized advice from a qualified accountant, tax advisor, or any other professional. If you have questions specific to your individual circumstances, we strongly recommend consulting a professional for tailored advice.