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

Note: This document forms part of our publication Tax basics for non-profit organisations. To view the full publication, click here.

Introduction

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:

are paid for time worked
receive paid leave (for example, sick, annual or recreation, or long service leave)
are not responsible for providing the materials or equipment required 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, and
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:

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, and
is in a position to make a profit or loss.

For more information refer to PAYG withholding guide no 2 – How to determine if workers are employees or independent contractors (NAT 2780).

To obtain this publication, see More information.

Meaning of volunteer

There is no legal definition of ‘volunteer’ for tax purposes. The dictionary explanation 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 on the tax treatment of:

independent contractors – see Independent contractors and tax.

volunteers – see Volunteers and tax.

Last Modified: Monday, 15 October 2007

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