Making employment look like contracting
Sometimes workers (and businesses) go to some lengths to make an arrangement look like a contract.
If the underlying relationship is one of employment, none of these things has any bearing on the worker being a contractor:
- having a registered business name
- being able to quote an ABN
- being registered for GST
- providing tax invoices
- if the work is temporary or part-time
- if specific qualifications are required
- entering a written contract that purports to set up a contracting arrangement.
If a worker demands to be treated as a contractor
Do not agree to break the law. Use our Employee/contractor decision tool and show the worker the result. Give them a copy of this fact sheet.
Tell us about competitors who sidestep their obligations and incorrectly treat employees as contractors. We have a compliance program which aims to promote a level playing field for business.
Businesses who do not comply with their obligations to workers are often able to undercut their competitors, leading to unfair competition. When this becomes common practice in an industry, it is difficult for complying businesses and pressure mounts to join the non-compliance. We are happy to intervene to prevent this where we have good information about non-compliance. You can make a report to the Tax Evasion Reporting Centre confidentially by phone, online, fax or letter.
We also work with industry associations to help stamp out this practice. If you are a member, contact your industry association for further information.
Do not agree to incorrectly treat an employee as a contractor. If you do, you are breaking the law and penalties and charges can be applied to your business.
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Other things to be aware of
Paying super to contractors
If you pay contractors under a contract that is wholly or principally for their labour, you will have to pay super contributions for them.
Some contractors ask that their contract payments include an amount to compensate them for not receiving super guarantee contributions.
If you are required to pay super contributions for your contractors, your business has a legal obligation to make the contributions directly to a complying fund. Your business cannot contract away its legal obligations. Even if the contractor agrees to the request, your business is still liable to contribute an additional amount to a fund and can end up having to pay twice.
Giving contractors employment conditions
Sometimes workers who request to be engaged as contractors also request conditions that only apply to employment, such as the ability to salary sacrifice or to be paid tax free living away from home allowances.
Access to these conditions is a clear sign that the underlying arrangement is employment, not contracting. They rely on provisions in the fringe benefits tax law to be effective and fringe benefits tax only applies to benefits provided by an employer to their employee. Fringe benefits tax does not apply to benefits provided by a business to their contractor.
Employee or contractor
Find out more:
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Find out your responsibilities and the consequences if you incorrectly treat an employee as a contractor. Includes what to do if the worker demands to be treated as a contractor, even though they are an employee.