The Pros & Cons: Company vs PAYG as a contractor

Posted on January 2021 By Speller International
Payg V Pty Ltd Company

Are you starting out as a contractor and unsure whether to PAYG or create a PTY LTD company?

There are a number of ways to manage your pay so that you can work legally and get paid for the work you do.

Here at Speller we have two options. Payroll contractors PAYG or pay direct to a PTY LTD company. So, what are the differences? In this blog we discuss some of the positives and negatives, so you can make an educated decision about how you’d like to get paid.


PTY LTD Company

Before you go onsite as a contractor you are required by law to be covered for Professional Indemnity Insurance (PI) and Public Liability Insurance (PL). Should you decide to set up your own PTY LTD company then you will need to take out these insurances. These require a large initial upfront cost.

PAYG Option

The PAYG option, on the other hand, generally requires less administration and no upfront cost. It will generally incur a small oncost from the payroll company to cover the cost of insurances.

Set Up Costs

PTY LTD Company

Setting up a PTY LTD company has a number of costs associated with it, such as insurances (as previously mentioned), labour hire, licenses and registering a company name. Unless you are tax savvy, you’ll need to hire an accountant to look after your taxes as it tends to be a lot more complicated than a general tax return.

Once you are set up as a PTY LTD company, the benefits of this method in the long run by far outweigh the initial setup costs. We do, however, advise you to seek independent advice from a registered accountant to work out if this is the best method for you.

PAYG Option

PAYG is easier and requires very little work to set up. All you need to do is simply supply your basic details to the payroll company. They will look after your tax, superannuation, insurances and deposit your pay into your nominated bank account.

There is usually a small cost associated to this method to cover administration, Workcover and Insurances. Note: The payroll company should hold a valid labour hire license to operate in Queensland and Victoria.

If you are starting out as a contractor and unsure of which route you should take when it comes to your finances, get in touch with your accountant to ensure you are selecting the right option to suit you and your circumstances.

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