3.1.4.2 Contractors, capital & materials
PIAWE for contractors is affected by their income, capital expenses and cost of materials.
A contractor is defined as:
- timber contractor
- passenger vehicle driver or
- a person deemed to be a worker under a contract of service or
- a person deemed to be a worker for independent contractors.
See: Contractors & independent contractors
Capital or materials
The amount for the supply of capital or materials is a prescribed percentage of the total amount paid.
The percentage depends on the class of contract.
See: Prescribed percentages for contractors' capital & materials
For example 
The prescribed percentage of the total amount paid to:
- an architect is 5%
- a carpenter is 25%
- a timber contractor is 25%.
Contractor's PIAWE
If the contractor provides materials or equipment, the total amount paid to the contractor may include an amount for those materials or equipment.
The worker’s PIAWE is based on the amounts deemed as remuneration, less amounts spent on capital or materials. That is, the labour component only.
If a percentage is prescribed for a contractor, that percentage is deemed to reflect the amount of the total contract price for materials and/or equipment.
Calculate the PIAWE by taking the total amount paid less the prescribed percentage.
See: Prescribed percentages for contractors' capital & materials
Expenses for other contractors
For contractors not listed in the prescribed percentages list, Agents must determine if a deduction for capital or materials can be made.
- the hire, lease or hire-purchase payments made for equipment
- other costs including maintenance and running costs associated with the equipment.
See: Capital & material deductions for other contractors | Identify remuneration
Capital
Capital can include:
Materials
Materials are items forming part of the work.
Prescribed percentages for contractors' capital & materials
About regulation 13
Regulation 13 of the Accident Compensation Regulations 2001 prescribes the relevant deductions for particular classes of contracts. The deductions are to be made if the amount paid to the contractor by the principal includes costs of materials and equipment provided by the contractor at their own expense.
Purpose of prescribed percentage deduction
A prescribed deduction is intended to represent the percentage of a contract price that is generally paid for materials and equipment for that class of contract.
This saves the need for the employer to calculate and substantiate these amounts on a case by case basis.
Use the prescribed deduction to identify remuneration
In some contracts the true costs for materials or equipment may be more or less than the amount prescribed, however, if a deduction has been prescribed only that amount can be deducted from the total contract price – no more and no less.
By deducting the prescribed amount from the total contract price, the remuneration to be declared is identified.
Classes of contracts and deductions from remuneration
The classes of contract prescribed in Regulation 13 schedule 3 and the extent to which amounts paid are not remuneration are as follows:
| Contract for | Prescribed percentage for capital & materials |
|---|---|
| Architects | 5% of amount paid |
| Draftspersons | 5% of amount paid |
| Engineers | 5% of amount paid |
| Bricklayers | 30% of amount paid |
| Building supervisors who provide their own vehicles and are required to supervise and inspect more than six different building sites each seven day period | 25% of amount paid |
| Cabinet makers | 25% of amount paid |
| Carpenters | 25% of amount paid |
| Carpet layers | 25% of amount paid |
| Computer programmers | 5% of amount paid |
| Driving instructors who provide their own vehicle | 30% of amount paid |
| Electricians | 25% of amount paid |
| Fencing contractors | 25% of amount paid |
| Painters | 15% of amount paid |
| Resilient floor layers (vinyl, sheet/tiles, cork) | 37% of amount paid |
| Roof tilers or slaters | 25% of amount paid |
| Tree fellers | 25% of amount paid |
| Plasterers | 20% of amount paid |
| Plumbers | 25% of amount paid |
Capital & material deductions for other contractors
For contractors not in a class listed in Prescribed percentages for contractors' capital & materials Agents must determine if a deduction for capital or materials can be made.
Capital or materials for contract period
Consider detailed financial records of the cost of capital or materials over the previous 12 months or the period of the contract if it is less than 12 months.
If the capital or material costs are an annual expense but the period of the contract is less than 12 months, take the pro rata amount for the period of the contract.
Incurred costs allowed
Only capital or material costs incurred by the worker in that period should be included. An incurred cost is a cost that the contractor has an obligation to pay.
Calculate PIAWE
Calculate the PIAWE by the total amount received less the deductions for capital and material costs and averaged over the relevant number of weeks (52 or less if the period of the contract is less than 52 weeks).
For details about the labour and non-labour components of the amounts paid to a contractor – see below.
Identify remuneration
Labour & non-labour components
The principal must calculate the contractor’s remuneration if the person is deemed to be working under a contract of service or a worker of the principal.
See: Workers & Injuries
Remuneration is defined in different sections of the legislation:
- deems the amount payable by the principal to the contractor for the performance of work under the contract to be remuneration
- deems amounts paid or payable by an employer for work under a relevant contract or the re-supply of goods by a worker under a relevant contract, to be remuneration paid or payable during that financial year.
The term 'resupply of goods' as used to include where the principal supplies goods to the worker and the worker either, resupplies the goods to the Principal in an altered form or condition or supplies goods to the principal in which the originally provided goods have been incorporated.
If the amount paid for work is part of a larger amount, it is the part paid for work that is deemed to be remuneration and which needs to be identified.
Deduct the part that is not deemed remuneration
If the deemed remuneration specified is only part of the larger amount that was paid or is payable by the principal, the part which is not for the performance of work and in the case of (the resupply of goods by a worker under the relevant contract) may be deducted from the larger amount paid.
Employer is responsible for proof of remuneration
As WorkCover is a self-assessing system in respect to remuneration, the burden of proving that the total contract price includes exempt amounts lies with the employer.
If it is not clear from the contract document itself, the employer must be able to demonstrate the amounts are exempt by providing supporting documentation for each contract. It is inappropriate for an employer to state general percentages for a complete financial year.
If principals/employers fail to keep enough records to enable them to substantiate that the contract payment includes amounts that are not attributable to the performance of work, the whole contract amount is deemed remuneration (refer to the prescribed percentage deductions set out in Prescribed percentages for contractors' capital & materials).
If there is no deduction for a class of contract, the remuneration is the total contract price less amounts, if any, paid under or for the contract which do not relate to the performance of work (and in the case of the re-supply of goods by a worker under the contract).
Written evidence
Written evidence can be:
- contract costing that show the allowances for materials and/or equipment
- copies of invoices that clearly show the breakdown of the contract costs
- copies of the contractor's tax returns that show deductions for materials and/or equipment
- a copy of the contract (if the contract was evidenced in writing).
Written evidence provided must clearly identify the:
- names of the parties involved
- expense amounts
- exact nature of the expenses
- date the expense was incurred or the contract arrived at.
Keep evidence for five years
If the principal/employer believes that part of a contract amount is rateable and certifies remuneration, the supporting documentation must be kept for five years.
Prescribed deductions
For details about the prescribed percentages and amounts to be deducted for capital and material expenses, see:
Prescribed percentages for contractors' capital & materials | Capital & material deductions for other contractors