Changing from employee to contractor (business) has the benefit of making some private expenses tax deductible. Expenses such as motor vehicle, home office, travel, etc., may become deductible. A contractor’s total expenses are normally maximised by utilising the PSI Entity strategy which may make private motor vehicle expenses and living away from home accommodation and meals deductible.
The employer will save payroll tax and superannuation costs when changing the status of the employee to a contractor operating through their PSI entity. These extra savings should ideally result in the employee being paid 10-15% higher gross income (at no extra cost to the employer).