For many small businesses in Canberra, confusion between a contractor and employee is ticking away like a time bomb that will send them broke.
Nearly half of 1100 businesses the Australian Taxation Office targeted across the country have been found wrongly treating employees as contractors.
ACT insolvency specialist Eddie Senatore said pay-as-you-go and superannuation issues resulted from the audit, leaving significant tax bills which forced many businesses into administration.
''I'll give you an example. A small-time bricklayer who thought his staff were contractors, the ATO thought they were employees, and he ends up with a tax bill of $70,000.''
ACT Chamber of Commerce chief executive Chris Peters said employers confronted with their obligations fumed. ''Many businesses incorrectly assume that if someone has an Australian business number they are a contractor. That's not the case and never has been the case.''
Master Builders Association ACT executive director John Miller said the complex nature of engaging sub-contractors attracted scrutiny. ''That complexity and under-resourcing regulators to cut this off at the pass may indeed be contributing to some of the problems.''
Canberra accountant Mike Bannon said businesses which survived an adverse audit faced years of paying off fines and debts.
''Non-compliance with superannuation is a ticking time bomb and will be crystallised either when the ATO detects the employer, or when the employee reaches retirement age, realises he has no superannuation and advises the ATO of his circumstances,'' he said.
From the audits, the ATO has collected details of 51,000 payments made to around 41,000 contractors. ''Contractors who have not complied with their obligations are followed up individually,'' a spokesman said.