Insights · Payroll ·
Contractor or employee?
Having an ABN doesn’t make someone a contractor. Getting this wrong can mean unpaid super, PAYG withholding, payroll tax and penalties.
What decides it
The ATO looks at the whole relationship, mainly the written contract’s rights and obligations: who controls how the work is done, whether the worker can delegate or subcontract, who supplies tools and equipment, whether they are paid for results or time, and who bears the commercial risk.
The super trap
Even a genuine contractor can count as an employee for super guarantee if they are paid mainly for their labour and skills under a contract that is wholly or principally for labour. That means 12% SG, paid on each payday since Payday Super.
Also check
- Payroll tax: some contractor payments are treated as wages under Queensland’s contractor provisions. See Queensland payroll tax.
- Workers’ compensation and the Fair Work definitions differ again.
- TPAR reporting for contractors.
Use the ATO’s employee/contractor decision tool and keep the result on file.
Quick answers
Does an ABN make someone a contractor?
No. The ATO looks at the whole working relationship.
Want this looked at for your business?
Book a free 15-minute Financial Health Check with Tereza, our practice manager. We look at income, tax, the business, mortgage, insurance and super in one go. Short on time? Grab a 5-minute quick chat.
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General information only. This doesn’t take your circumstances into account and isn’t tax, financial or legal advice. Talk to your accountant or registered tax agent before acting. PRM is not a registered tax agent; tax agent services are provided by Australian Tax & Super Pty Ltd (TPB 25291395).