Congratulations on expanding your business! If you are hiring a contractor, you need to consider whether they are actually an employee and whether you are liable to pay superannuation and other employee-related payments.

If you pay them as a contractor but they are actually classified as an employee, then you can be required to pay the worker superannuation on top of the contractor’s payment. Fair Work requirements including Awards may also apply, as well as state-based employment laws.

This article will walk you through whether your new worker is an employee or a contractor.

Employee or contractor test

It is important to understand if your new worker is an employee or a contractor. The following Fair Work information sets out the typical differences between an employee and a contractor:

Please note that:

(i) tax, super and other obligations vary depending on whether the worker is an employee or contractor;

(ii) the business needs to keep records to support the decision on whether the worker is an employee or contractor and whether superannuation is payable; and

(iii) the business faces penalties and charges if it incorrectly treats an employee as a contractor and/or does not pay superannuation if required.

Australian Government independent contractor test:

The Australian Government independent contractor test is available here:

Please note that this test is based on the common law tests that determine whether a worker is a contractor. It does not have legal force or effect, but it is an important risk management step to ensure that you do not inadvertently create a sham contractor relationship.

Employee or contractor for tax purposes?

Is the worker an employee or contractor for tax purposes? Please use the ATO online tool available here:

Please keep a copy of each of the test results for your records.

If your worker is an employee, you need to identify what type of employee they are, i.e. if they fall under any relevant Award and their superannuation eligibility.

If your worker is a contractor, you will need to assess whether they are eligible for superannuation contributions. I discuss this in a separate article available here.


Would you like help with these tests? Are you getting conflicting results? LegalVision’s employment lawyers can help you. Please call our office on 1300 544 755 and our Client Care team will happily provide you with an obligation-free consultation and a fixed-fee quote to help you decide if a new worker is an employee or contractor for employment law and tax purposes.

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