Engaging a Full-Time or Part-Time Nanny may prove to be a more sensible and convenient Child Care option for your Family, however, there are some Employer Obligations which need to be addressed.
Nannies are engaged as either an ‘independent contractor‘ who run their own service and negotiate their own fees, or as an ‘employee’ of the family. It depends on which arrangement works best for you.
When engaging a Nanny into your family, you need to comply with the Australian Taxation Office and Fair Work and SafeWork. This is a standard and straight forward process, and in practice is not as difficult as it may seem.
You can use the ATO Employee/Contractor Decision Tool to work out if the arrangement with your Nanny is an employee or independent contractor for tax and super purposes. Fair Work have compared the difference between contractors and employees and who are independent contractors and employees.
Engaging a Nanny as an Independent Contractor
A Nanny can commit to specific days of work with a Client on a short-term or ongoing basis in the capacity of an Independent Contractor.
Independent Contractors have an Australian Business Number and are responsible for their own tax payments and statutory obligations, under the same rules as Employees. The Client is not liable for the payment of leave.
At the conclusion of each booking or each period of service to a maximum of seven (7) days, the Nanny will provide the Client with a Tax Invoice, which will include an amount to cover the Nanny’s charges and reimbursement for associated costs. The amount set out in the Tax Invoice is payable immediately and directly to the Nanny.
Contractors paid mainly for their labour are ‘employees’ for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number. To determine if your Contractor is eligible use the ATO Superannuation Decision Tool, currently the Superannuation Guarantee is 9.5% of their regular earnings.
WorkCover – Domestic Insurance
Independent Contractors come under “labour hire” service arrangement and are deemed to be “workers” for Workers Compensation purposes.
Insurance is indispensable and required by law if you engage people to be employed in your home. At an estimated cost of $40 per year from most insurance companies, it covers you in the unfortunate case of the employee injuring themselves while in your home. Contact Safe Work NSW on 13 10 50.
Engaging a Nanny as an Employee
For Employees, you may need to withhold PAYG Withholding Tax from payments to your Nanny, for services provided and you may need to pay Superannuation Contributions. The ATO encourages you to be ready and have a Checklist Available for first time Employers.
The Australian Taxation Office classifies Nannies as Household Employees. You can register for the Pay As You Go (PAYG) withholding, as you may be required to withhold amounts from payments which you make to your Nanny. Visit for more ATO Information on Household Employees and visit FairWork for great information on Paying Wages to Employees.
The Steps involve.
- Complete the Application to Register for PAYG Withholding (or apply over the phone 132866 and have your Nanny complete a Tax File Number Declaration form.
- Calculate the amount of tax to be withheld using the Withholding Tax Table
- Complete the Activity Statement quarterly and send the amount withheld to the ATO
- Provide your employee with a PAYG Payment Summary, by July 14 each year according to the Australian Taxation Office
Call the ATO business line for more information on PH: 132866 or go to www.ato.gov.au
Pay as you go (PAYG) withholding
As an Employer, you have a responsibility to assist your Payees with meeting their end-of-year tax liabilities.
Nannies can be covered by the Miscellaneous Award 2010 MA000104 when they are in an employment relationship in a private home, performing tasks such as;. caring for children, preparing meals for children, planning educational and play based activities and doing light house work.
Refer to the Australian Taxation Office’s (ATO) Household Employees page, to assist you with this process.
Employers are required to provide the nanny with a Tax Declaration form, payroll advice records and collect pay as you go (PAYG) withholding amounts from payments you make. Registration for PAYG Withholding can be completed online through the Australian Business Register or download their Application to Register for a PAYG Withholding Account.
At the end of each financial year, PAYG withholding annual report is lodged to the ATO. This includes all payments and the amounts withheld for your employee.
Refer to ATO website to ensure your obligations are being met or call 13 28 65.
If the family car is provided for the use of the Nanny, it is the Family/Employer’s responsibility to provide full Insurance coverage. If the Nanny is to use her own vehicle as a condition of employment, an allowance of approximately $0.78 per kilometre for petrol and running costs applies over and above the agreed wage. Please note that the type of vehicle the Nanny drives determines the exact kilometre rate from the Australian Taxation Office.
Nannies must work for more than 30 hours per week to qualify for Superannuation Contributions. Currently the Superannuation Guarantee is 9.5% of their regular earnings.
Refer to the Australian Taxation Office’s (ATO) Super for Employees page to assist you with this process and review their page, Working out if you have to pay Superannuation. To determine if your Employee is eligible, use the ATO Superannuation Decision Tool where you will be asked questions about the nature of the work arrangement.
Holiday Leave and Sick Leave
There are minimum leave entitlements for full-time and part-time employees. All full-time employees are entitled to a minimum of 20 days annual leave or pro-rata for the hours/days worked. Part time employees receive the same entitlement on a pro-rata basis. Sick and carer’s leave comes under the same leave entitlement of 10 days sick leave in the first year or pro-rata for the hours/days worked. Refer to Fair Works’s the Pay and Conditions Tool Calculator to find out how much annual or sick / carer’s leave has accumulated.
An agreement is highly recommended which highlights both your obligations as an Employer and the Employee’s expectations, including responsibilities related to: –
- Weekly or hourly pay rate
- Tax, Superannuation and work cover insurance
- Day and hours of work as well as start and finish times
- Car allowance if applicable – car usage, insurance, petrol etc
- Performance Review dates
- Specific duties and any additional duties
- Overtime rates for working outside set times
- Annual recreation leave, sick leave, special leave, pay on public holidays etc
- Conditions of salary review
- Conditions of termination
- Social Media Policy
WorkCover – Domestic Insurance
Domestic Workers Insurance is indispensable and required by law if you engage people to be employed in your home. At an estimated cost of $40 per year from most insurance companies, it covers you in the unfortunate case of the employee injuring themselves while in your home. Contact Safe Work NSW on 13 10 50.This is not always covered by your Home and Contents Insurance so you will need to check with your Insurance Company.
Public Liability Insurance to cover accidents in your home. You should check your Home and Contents insurance policy to ensure your Nanny is covered. Alternatively, you may arrange public liability insurance with an insurer such as NannySure.
Motor Vehicle Insurance if your Nanny is going to be using your car.