ATO - Tax & Superannuation

https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/employees-treated-as--independent-contractor/difference-between-employees-and-independent-contractors


https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/employees-treated-as--independent-contractor/employees-treated-as--independent-contractor

It's against the law for a business to incorrectly treat their employees as independent contractors. Businesses that do this are illegally lowering their labour costs by:

  • not meeting their tax and super obligations
  • denying workers their employee entitlements.


Super contributions for independent contractors

If you pay independent contractors mainly for their labour, they are employees for superannuation guarantee (SG) purposes. You may need to pay super to a fund for them.

It doesn't matter if the independent contractor has an Australian business number (ABN).

Make super contributions for independent contractors if you pay them:

  • under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour)
  • for their personal labour and skills (payment isn't dependent on achieving a specified result)
  • to perform the contract work (work cannot be delegated to someone else)


The minimum super you must pay is the super guarantee percentage of the worker's ordinary time earnings. This is the labour component of the contract. Do not include:

  • any contract payments that are for material and equipment
  • overtime for which the worker was paid overtime rates
  • GST.

If the values of the different parts of the contract aren't detailed in the contract, we'll (ATO will) accept their market values. 



Fairwork

https://www.fairwork.gov.au/find-help-for/independent-contractors

Whether someone is an independent contractor or an employee depends on a number of indicators. These include:

  • the amount of control over how work is performed
  • financial responsibility and risk
  • who supplies the tools and equipment
  • ability to delegate or subcontract work
  • hours of work
  • expectation of work continuing.



Icare workers compensation insurance

https://www.icare.nsw.gov.au/employers/who-needs-workers-insurance/classifying-your-workers#gref

Other than deemed workers, you are not required to provide workers compensation insurance for contractors.

Several factors separate a worker from a contractor. No single factor is decisive.


ContractorWorker
  • be engaged to carry out a particular task using their own skill and judgment
  • employ others, delegate or sub-let work to another
  • be paid on the basis of a quotation for the job
  •  supply their own tools and materials
  • carry on an independent business in their own name or under a business or firm name.

Please note: An ABN by itself is not a definite indicator of a person(s) status.


  • be directed by the employer regarding work to be performed and the time and manner in which it is performed
  • be required to actually carry out the work
  • be paid on a time basis
  • have tools and materials supplied by the employer
  • work exclusively for a single employer
  • be affected by PAYG tax arrangements.


Please note: A person may have been hired as a contractor and be a contractor for other purposes such as tax, but still be a worker for the purpose of workers compensation insurance. The status of a person for tax purposes bears no direct relationship to that person's status as a worker for workers compensation insurance purposes.



Other considerations

  • during covid - businesses that hired contractors only did not get access to ATO jobkeeper, ATO cash boost, or NSW jobsaver
  • Wage subsidies are for employees only. Not contractors
  • Permanent employees have leave entitlements and fairwork minimum wages.