Employee or Contractor? 12 common myths

Group of construction workers at building siteThe Tax Office says that it has encountered several myths adopted by both workers and employers when it comes to trying to decide the tax status of a job appointment.

  1. Having an Australian Business Number (ABN) - Myth: If a worker has an ABN they are a contractor
  2. Common industry practice - Myth:"Everybody in my industry takes on workers as contractors, so my business should too".
  3. Short-term workers - Myth: Employees cannot be used for short jobs or to get extra work done during busy periods.
  4. The 80% rule - Myth: A worker cannot work more than 80% of their time for one business if they want to be considered a contractor.
  5. Past use of contractors - Myth:"My business has always used contractors, so we do not need to check whether new workers are employees or contractors."
  6. Registered business Name - Myth: If a worker has a registered business name, they are a contractor.
  7. Contracting on different jobs - Myth: If a worker is a contractor for one job, they will be a contractor for all jobs.
  8. Pay super - Myth: "My business should only take on contractors so we do not have to worry about super."
  9. Specialist kills or qualifications - Myth: Workers used for their specialist skills or qualifications should be engaged as contractors.
  10. Workers wants to be a contractor - Myth:"My workers wants to be a contractor, so my business should take them on as a contractor."
  11. Using Invoices - Myth: "If a worker submits an invoice for their work, they are a contractor."
  12. Contracts - Myth: "If a worker's contract has a section that says they are a contractor, then legally they are a contractor."

ATO Employee / Contractor Decision Tool

Use the employee / contractor decision tool to find out whether your workers is an employee or contractor for tax and super!