Employee v Contractor Why does it matter?
The reason this definition is important, has to do with the potential liability for Superannuation, Workers Compensation, Annual Leave and even sick leave. The fact that you engage someone and insist they have their own ABN, does not mean they are a contractor. The tests to see if a person is a contractor are really around the terms and conditions of work, not desire, and we explore these in this article.
The Australian Tax Office gives guidance on employee v contractor in this article on their website. It examines the following questions related to the real relationship that determines employee v contractor:
ATO Decison Making Tool
The Australian Tax Office also provides a handy employee v contractor decison tool to help you work out if you are an employee or contractor in relation to tax and Superannuation purposes.
The ATO also outlines some common myths that are worth highlighting. :
- A requirement for an ABN does not mean you’re a contractor
- Length of job is not a factor in deciding if you are a contractor
- The business labelling you as a contractor is not relevant
- Your desire to be a contractor is not relevant
- Having a contract specifying you as a contractor makes no difference