When a worker wants to be a contractor

Sometimes a worker may approach your business and ask to be engaged as a contractor.

If you think the working relationship is one of employment, be very careful before agreeing to the arrangement.

Businesses that agree to incorrectly treat employees as contractors

If your business feels pressured into accepting an invalid contracting arrangement, you need to be aware you may face penalties and other charges for failing to comply with your obligations as an employer.

These penalties and other charges include:

  • pay as you go (PAYG) withholding penalty for not meeting your PAYG withholding obligations, which  
    • in the most serious cases can be as high as 100% of the amount that should have been withheld
    • may be reduced to a smaller percentage usually either 25% or 50% depending on the business's circumstances that led to the non-compliance
  • super guarantee charge for not meeting your super obligations, made up of  
    • super guarantee shortfall amounts (amount of super contributions which should have been paid into a complying fund)
    • interest
    • an administration fee.

Unlike super guarantee contributions, the super guarantee charge is not deductible.

    Last modified: 09 Jan 2015QC 26276