The Australian Government has introduced legislation to protect the status of independent contractors in the workplace.
The Independent Contractors Act 2006 (IC Act) and the Workplace Relations Legislation Amendment (Independent Contractors) Act 2006 (Amendments Act) recognise the role independent contractors play in Australian workplaces.
The laws ensure that genuine independent contractors are not treated as employees. The laws also protect genuine employees from being treated as independent contractors.
Most independent contractors run their own business, control their own working times and decide how and where they undertake work. Many independent contractors also advertise their business, provide their own tools and equipment and may pay others to carry out work on their behalf.
In contrast, employees are typically subject to controls on how, where and when their work is performed. They are paid regularly and cannot pay someone else to do their work for them.
How do I know if I am an independent contractor?
The courts have adopted a multi-factor test to determine whether a person is an employee or independent contractor. No single issue will be determinative. However, courts will place greater weight on some matters, in particular, on the right to control the manner in which the work is performed.
In applying the test, a court will look at the whole relationship, and make a decision on balance. Any written agreement stating the nature of a relationship as either employment or contractual is relevant, but not conclusive.
Building industry participants should use the common law test to assist in a self-assessment of their status. A table summarising the common law test is provided on this fact sheet. If in doubt, it is strongly recommended you seek independent legal advice.
In the instance of a dispute, it is the court that will ultimately decide whether the relationship is that of an independent contractor or an employee.
What if I am an independent contractor under taxation or superannuation laws?
An individual may be a called a ‘contractor’ according to other federal and State laws. This does not automatically make them an independent contractor under the IC Act.
For example, an individual is a contractor for taxation purposes and has an ABN or ACN. However, under the common law test the individual may be assessed as an employee.
Some State laws also treat contractors as employees, in particular workers’ compensation laws.
Further information
Department of Education, Employment and Workplace Relations
The Office of the Australian Building and Construction Commissioner
Website:
http://www.abcc.gov.au/
Summary of Common Law Test |
Factor |
Indicative of Employment |
Indicative of Independent Contracting |
| Do I have control over the way I perform a task? |
No |
Yes |
| Do I supply/maintain my tools or equipment? |
No |
Yes |
| Do I work standard hours? |
Yes |
No |
| Am I paid according to task completion, rather than receiving wages based on time worked? |
No |
Yes |
| Do I incur any loss or receive any profit from the job? |
No |
Yes |
| Do I accept responsibility for any defective or remedial work which was my doing? |
No |
Yes |
| Am I free to work for others at the same time? |
No |
Yes |
| Do I accept that work lasts for the term of each particular task or contract? |
No |
Yes |
| Do I have the right to employ or subcontract any aspect of my work to another person? |
No |
Yes |
| Do I have the right to employ an apprentice or trainee in the execution of contracts? |
No |
Yes |
| Do I understand the arrangement between us as a contract for services? |
No |
Yes |
| Is tax deducted by the hirer from my pay? |
Yes |
No |
| Do I provide my own public liability and sickness and accident insurance cover? |
No |
Yes |
| Do I receive paid holidays or sick leave? |
Yes |
No |
| Do I render tax invoices for payment? |
No |
Yes |
| Do I file GST returns? |
No |
Yes |
|
|
|
|
Note: the outcome of this test is not determined by adding the number of factors and no one factor will be conclusive. If in doubt, it is strongly recommended that you seek independent legal advice.
Print friendly version:
Am I an independent contractor? Fact sheet (PDF 101KB)
The information contained in this fact sheet is correct as at 26 February 2008.
This material is for general information only. You should seek legal advice in relation to your particular circumstances. The Australian Government, its employees and agents do not accept any liability for action taken in reliance on this document and disclaim all liability arising from any error or omission. ABN 68 003 725 098
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