Contractor or Employee?

HomeInsights

Contractor or Employee?


Just because an agreement states that a worker is an independent contractor, this does not mean that they are a contractor for tax and superannuation purposes, new guidance from the ATO warns.


Where there is a written contract, the rights and obligations of the contract need to support that an independent contracting relationship exists. The fact that a contractor has an ABN does not necessarily mean that they have genuinely been engaged as a contractor. The ATO says that “at its core, the distinction between an employee and an independent contractor is that:

  • an employee serves in the business of an employer, performing their work as a part of that business
  • an independent contractor provides services to a principal's business, but the contractor does so in furthering their own business enterprise; they carry out the work as principal of their own business, not part of another.”


Contracts over time

The ATO points out that a contracting agreement at the start of a relationship may not continue to be one over time. For example, if the project the contractor was engaged to complete has finished, but the worker continues working for the company then the classification needs to be revisited.


What happens if there is no contract?

If no contract exists, then it’s important to look at the form and substance of the relationship to come to a reasonable position about whether an employment or contractor relationship exists.

Let's work together.

Unsure on your obligations as an employer? Get in touch with our business advisor's to assist in your business' success. 


CONTACT US  CONTACT US 



Navigating the Changing Legal Landscape: Key Updates for Employers

WEBINAR 11 SEPT // 12PM

The final session focuses on the changing legal environment, highlighting recent amendments to the Fair Work Act, capturing independent contractors under workers' compensation schemes, payroll tax considerations, superannuation compliance, and practical steps to mitigate risks.


Super Guarantee and Employee Terminations: Compliance Essentials for Employers

WEBINAR 4 SEPT // 12PM

In the third session, we'll delve into superannuation guarantee changes, including proposed changes to payday superannuation, new rates and bases, and the impact on SG liability. Gain insights into employer deductions, termination of employment considerations and more.


Allowances, FBT, and Compliance for Employers

WEBINAR 28 AUG // 12PM

Master allowances and reimbursements, understand their PAYG and super guarantee implications, and learn to navigate travel vs. living-away-from-home allowances. Gain insights into FBT considerations, new ATO record-keeping requirements, and effective salary packaging arrangements.

Related News

16 Jul

Small Business Productivity: Industry & Regional Trends

Building on the findings from Xero Small Business Insights (XSBI) report, Small business productivity: Trends, implications and strategies, this special report presents industry and regional labour productivity data for small businesses.


READ MORE READ MORE
10 Jul

Is your family home really tax free?

The main residence exemption exempts your family home from capital gains tax (CGT) when you dispose of it.


READ MORE READ MORE
8 Jul

Earned an income from the sharing economy?

It’s essential that any income earned from sharing economy platforms such as Airbnb, Stayz, Uber, etc., is declared in your tax return.


READ MORE READ MORE