Congrats! You’ve found a house hold staff or a nanny you’d like to hire. Now what? Know that as soon as your new household professional accepts your job offer, your responsibilities as an employer begin. That means putting the terms of your working relationship into a contract, deciding on benefits and setting up payroll. It also means complying to state
and federal regulations, including what many people call “nanny taxes.”
Nanny taxes refer to the federal and state payroll and tax responsibilities families have to manage when
they hire a nanny to work in their home.
Your Obligations When Hiring A Nanny
Congrats! You’ve found a nanny you’d like to hire. Now what? Know that as soon as your nanny accepts
your job offer, your responsibilities as an employer begin. That means putting the terms of your working
relationship into a contract, deciding on benefits and setting up payroll. It also means complying to state
and federal regulations, including what many people call “nanny taxes.”
Nanny taxes refer to the federal and state payroll and tax responsibilities families have to manage when
they hire a nanny to work in their home.
While complying to these state and federal laws means you won’t be at risk of being slapped tax evasion
fines, there are benefits for the caregivers, too. Nannies become eligible for state unemployment
benefits, and a traceable payment history enables them do things like apply for credit cards, rent an
apartment or lease a car.
Follow this simple compliance checklist, and you can meet the requirements laid out by the Tax
department and your state.
1. Know that your nanny should be classified as a household employee.
With very few exceptions, nannies are employees of the families for whom they work — not
independent contractors. This is regardless of the amount of hours worked, wages paid or what’s
written in an employment contract. A nanny can operate as a contractor, which means less
requirements for the parent, but even if they claim to operate as a contractor they still may meet the
definition of an employee. It’s important to know the difference because it will affect your tax and super
obligations. The ATO has a decision tool that you can use that makes it easy to work out if you are
engaging a carer as an employee or a contractor.
2. Agreed Contract
You must ensure the contract you make with your nanny is comprehensive. This is to ensure there are
clear grounds to end an agreement if it doesn’t work out. Take the time to outline all the roles and
responsibilities with your nanny, and ensure that expectations are clearly outlined and agreed to on
both sides before beginning any arrangement.
3. Superannuation and Withholding Payments
If your nanny is an employee, you are required to pay super on top of their wages if they work 30 hours
or more per week and receive $450 or more before tax in a calendar month. According to the ATO, you
must also register for PAYG withholding for tax purposes.
4. Fringe Benefits
If benefits are included in the remuneration arrangement, such as free rent for a live-in au pair, you may
need to register for Fringe Benefits Tax.
5. Minimum Wage and Entitlements
As mentioned above, it is more than likely that a nanny will be considered as an employee. This means
they are covered under the Miscellaneous Wage. The Fair Work Ombudsman has an easy-to-use Pay and
Conditions Tool (PACT) that works out the required pay and leave arrangements that are specific to your
circumstances.
There is an exception to this for parents in Western Australia, as a nanny may be considered as a worker
in domestic services in a private home – you should contact Wageline for further information on this
matter.
There is a range of minimum workplace entitlements that must be considered when hiring a nanny,
which are available on the Fair Work Ombudsman website.
While having a nanny join your beautiful family can make things a lot easier, the legal and financial
requirements can be a little heavy. We recommend engaging a domestic payroll provider to ensure you
meet all your requirements and spend more time with the ones you love most.
6. Insurance
When you employ a nanny, your home becomes a workplace, which means you have the same
responsibility as employers in a traditional workplace. It is your duty to provide a safe workplace for
carers in your home.
You must get Workers Compensation Insurance to cover your nanny in the event of an accident.
insurance is different in Australia for every state and territory:
For the full list of coverage across Australia, visit the Fair Work Ombudsman website
If the nanny uses your car, you need to ensure that your CTP policy covers them, and check and allow for
additional provisions if they are less than 25 years of age.
Your nanny may also have their own insurance cover from Nanny sure, particularly if they’re a contractor.
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