Employees, independent contractors and volunteers - Tax basics for non-profit organisations

Note: This information is part of our guide Tax basics for non-profit organisations .

It is important to determine whether an individual is an employee, independent contractor or volunteer of an organisation, as this status may affect the tax treatment of transactions between the individual and the organisation.

Meaning of employee

Generally, an individual is considered to be an employee if they meet the following requirements:

are paid for time worked
receive paid leave - for example, sick, annual, recreation or long service leave
are not responsible for providing the materials or equipment needed to do their job
must perform the duties of their position
agree to provide their personal services
work hours set by an agreement or award
are recognised as part and parcel of the payer's business
do not take commercial risks and cannot make a profit or loss from the work performed.

Meaning of independent contractor

An independent contractor is an entity (such as an individual, partnership, trust or company) that agrees to produce a designated result for an agreed price. In most cases an independent contractor meets the following requirements:

is paid for results achieved
provides all or most of the necessary materials and equipment to complete the work
is free to delegate work to other entities
has freedom in the way the work is done
provides services to the general public and other businesses
is free to accept or refuse work
is in a position to make a profit or loss.

For more information about determining if workers are employees or contractors, refer to How to determine if workers are employees or independent contractors (NAT 2780).

Meaning of volunteer

There is no legal definition of 'volunteer' for tax purposes. A dictionary definition of a volunteer is someone who enters into any service of their own free will, or who offers to perform a service or undertaking.

For more information about the tax treatment of:

independent contractors - see Independent contractors and tax
volunteers - see Volunteers and tax.

Last Modified: Thursday, 30 June 2011

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