How to determine if workers are employees or contractors

Obligations you need to meet

You will need to meet different obligations depending on whether your worker is an employee or contractor.

Your obligations for employees

When your worker is an employee, there are certain things you need to do in relation to:

• PAYG withholding
• super
• FBT.

PAYG withholding

Your PAYG withholding obligations include:

• registering for PAYG withholding if you have not already
• withholding amounts from wages and other payments you make to your employees
• reporting and paying the amounts withheld to us through your activity statement
• preparing payment summaries and lodging your annual report
• keeping PAYG withholding records.

	New employees should complete a Tax file number declaration (NAT 3092). You must complete the payer section and send the original to us.
	For more information, visit Pay as you go (PAYG) withholding - home.

Super

Your super obligations include:

• working out if you have to pay super
• setting up super for eligible employees
• calculating how much to pay and making payments at least quarterly
• keeping super records.

	If you do not meet your super obligations, you will need to pay a super guarantee charge.
	For more information, visit Employers superannuation - home.

FBT

If you provide fringe benefits, your FBT obligations include:

• working out how much FBT you have to pay
• registering for FBT
• reporting fringe benefits on the employee's payment summary
• lodging an FBT return and paying FBT
• keeping FBT records.

For more information about FBT, visit Fringe benefits tax.

Your obligations for contractors

When your worker is a contractor there are certain things you may need to do in relation to:

• PAYG withholding
• super.

You will not have any FBT obligations.

PAYG withholding

Generally, contractors will look after their own tax obligations and you usually do not have to withhold amounts from payments you make to them.

However, you may be required to withhold from payments if:

• the contractor does not quote their ABN to you
• you enter into a voluntary agreement with the contractor to withhold tax from their payments.

If you withhold from a payment, you will need to:

• report and pay the amounts withheld to us through your activity statement
• prepare payment summaries and lodge your annual report
• keep PAYG withholding records.

	If a contractor does not quote a valid ABN, you should withhold 46.5% from payments you make to them. You can check if an ABN is valid by using the ABN Lookup tool.
	For more information, visit Pay as you go (PAYG) withholding - home.

Super

Your super obligations include:

• working out if you have to pay super for contractors
• setting up super for eligible contractors
• calculating how much to pay and making payments at least quarterly
• keeping super records.

	If you pay a contractor under a contract that is wholly or principally for their labour, you will have to pay super contributions for them. If you do not meet your super obligations, you will need to pay a super guarantee charge.
	For more information, visit Employers superannuation - home.

FBT

You will not have FBT obligations for your contractor.

FBT only applies to benefits provided by an employer to their employee. FBT does not apply to benefits provided by a business to their contractor.

Concessional FBT rules such as those relating to living-away-from-home allowance or salary sacrificing arrangements do not apply to a contractor arrangement. The value of any payment or benefit you provide to a contractor needs to be included as income in the contractor's tax return.

For more information, visit Fringe benefits tax.

Other government obligations

You may also have other federal, state and territory government obligations you need to meet. Visit www.business.gov.au to find out more about:

• occupational health and safety requirements
• payroll tax
• wages, conditions, awards and leave entitlements.