Contractor or employee?
Liz Gibbs • June 19, 2023

Contractor or employee?

Following two landmark decisions handed down by the High Court, the ATO has issued a new draft ruling on determining whether you are an employee or independent contractor.

 

Ensuring that you are correctly classified as either an employee or contractor is important and can have significant ramifications for you. For example, employees (and some contractors deemed to be employees) are eligible for superannuation guarantee on their salary and wages. On the other hand, if you are an independent contractor, you may need to obtain an ABN to avoid the top rate of tax being withheld from the payments you receive. 


In the new ruling, the ATO still looks at the totality of the relationship between the parties to determine the classification. What has changed in the new guidance as a result of the High Court decision is that the ATO has confirmed that where the parties have entered into a written contract, the analysis of whether it is a contractor or employee relationship should focus on the terms of that contract to establish the nature of that relationship (rather than just the conduct of the parties).

 

Merely being labelled an independent contractor doesn’t necessarily make it so if this is inconsistent with the rights and obligations under the contract. A genuine independent contractor will typically be:

 

·        Autonomous rather than subservient in their decision-making;

·        Financially self-reliant rather than economically dependent upon the business of another; and,

·        Chasing profit (that is a return on risk) rather than simply a payment for the time, skill and effort provided.



Need Help?

Talk to us if you want assistance determining whether you are an employee or independent contractor.


Please note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please email us at RGA Business and Tax Accountants at reception@rgaaccounting.com.au . All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation

Key tax policies
By Liz Gibbs May 2, 2025
With the 2025 Federal Election approaching, tax policy is a central topic of debate. Here’s a concise comparison of some the major parties’ key tax proposals to help you stay informed when Australia goes to the polls on 3 May 2025:
By Liz Gibbs May 1, 2025
Let’s Make Meetings Work for You: 8 Simple Strategies for Better Results
By Liz Gibbs May 1, 2025
The ATO’s updated small business benchmarking tool
subdivision
By Liz Gibbs May 1, 2025
As the urban sprawl continues in most major Australian cities, we are often asked to advise on the tax treatment of subdivision projects. Before jumping in and committing to anything, it is important to understand the tax liabilities that might arise from these projects.
IAWO
By Liz Gibbs May 1, 2025
It has been a long time coming, but the Government finally passed legislation increasing the instant asset write-off threshold for the year ending 30 June 2025 to $20,000. This was announced back in the 2024-25 Federal Budget but the Government faced a number of hurdles in terms of passing the legislation.
Tax Planning
By Liz Gibbs May 1, 2025
With the end of the financial year fast approaching this is the first blog in our series where we outline some opportunities to maximise your deductions and give you the low down on areas at risk of increased ATO scrutiny.
Superannuation Guarantee
By Liz Gibbs April 17, 2025
The superannuation guarantee rules are broad and, in some circumstances, extend beyond the definition of common law employees to some directors, contractors, entertainers, sports persons and other workers.
time management
By Liz Gibbs April 15, 2025
If your to-do list is starting to look more like a novel than a plan for the day, you’re not alone. It’s all too easy to get bogged down by endless tasks, unsure where to start or what really deserves your attention. That’s where the “Must, Should, Could” method comes in—a brilliantly simple way to cut through the clutter and focus on what truly matters.
Solid Business Foundations
By Liz Gibbs April 11, 2025
When it comes to improving your business, think of it like building a house. You wouldn’t add a second floor without ensuring the foundation is rock-solid, right? The same goes for your business.
Personal tax cut
By Liz Gibbs April 10, 2025
On the last sitting day of Parliament, the personal income tax rate reduction announced in the 2025-26 Federal Budget was confirmed.
More Posts