ato logo
Search Suggestion:

Employees treated as contractors

Penalties and charges if you incorrectly treat an employee as a contractor plus how to make a tip-off about a business.

Last updated 30 June 2019

It's against the law for a business to incorrectly treat their employees as contractors. Businesses that do this are illegally lowering their labour costs by:

  • not meeting their tax and super obligations
  • denying workers their employee entitlements.

Businesses that behave this way can often undercut their competitors and obtain an unfair competitive advantage.

Find out about:

Penalties and charges

Businesses risk receiving penalties and charges, including:

  • PAYG withholding penalty – for failing to deduct tax from worker payments and send it to us
  • super guarantee charge, made up of  
    • super guarantee shortfall amounts – the amount of super contributions that should have been paid into a complying fund
    • interest charges
    • an administration fee
  • additional super guarantee charge of up to 200%.

In addition to the super guarantee charge – which imposes nominal interest and an administrative charge in all cases on top of the super guarantee shortfall – we can impose additional penalties of up to 200% of the super guarantee charge.

How to report a business

If you know or suspect a business is incorrectly treating an employee as a contractor it is important you let us know.

You can provide a tip-off about a business that is incorrectly treating an employee as a contractor by:

  • completing the tip-off form. This form is also available in the Contact us section of the ATO app
  • phoning 1800 060 062.

Your information is treated confidentially and tip-offs can be made without giving your name if you don't want to.

However, providing us with your contact information means we can talk to you if we need to better understand the information you provided. We will only contact you if you tell us it is ok to do so.

Find out what to do if a worker demands to be treated as a contractor, even though they are an employee.