• Employee or contractor - tax and super obligations compared

    The table below outlines the main tax and super obligations a business has when you're working for them as a contractor compared to working as an employee.

    As a contractor

    As an employee

    You:

    • put money aside to cover the tax owed from your contracting work (or you have a voluntary agreement for the business to take tax out of payments they make to you)
    • complete and lodge activity statements you get from the ATO
    • report and pay GST on an activity statement if you are registered
    • keep records of your income (including invoices you issue) and business expenses
    • complete your tax return and the business and professional items schedule using your records
    • look after your own super unless you are contracted mainly for your labour
    • provide your own business insurances, including personal income protection for yourself and workers' compensation for anyone working for you
    • put money aside to pay for any holidays or if you get sick
    • work out if you are receiving personal services income. 
     

    You:

    • provide your tax file number (TFN) to your employer by filling out a TFN declaration and the employer withholds tax from your salary and wages
    • keep records for any work related expenses
    • complete your tax return using the payment summary from your employer(s) and other information provided by the ATO's prefilling service to assist you
    • can choose which super fund your employer super contributions are paid into.

     

    The business:

    • pays you for the work you do based on the working arrangement, generally after you have submitted an invoice

     

    The business:

    • pays you your wages or salary on a weekly, fortnightly, or monthly basis
    • withholds tax from the money they pay you and sends it to us
    • provides you with a payment summary after the end of the financial year
    • makes super contributions as required into your super fund
    • pays you any sick leave, annual leave and any other leave you may entitled to
    • provides workers compensation and insurances
    • provides pay and conditions as required by the Fair Work Ombudsman. 
     

     

    Last modified: 09 Jun 2015QC 43440