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Does an ABN mean you are a Contractor?

Contractor or employee – work it out

There are a number of factors that determine whether you are working as a contractor or as an employee.

None of the following situations make you a contractor:

  • you must have an ABN to work
  • the work is only for a day or two
  • you want to be a contractor
  • everyone in the industry has an ABN.
If you are working as an apprentice, labourer or trainee you will always be an employee for tax and super purposes.
  • The table below shows you the differences between contractors and employees.

    Contractors and employees: the differences
    SituationIf you’re a contractorIf you’re an employee
    Ability to sub-contract or delegate

    – who does the work?

    You’re free to pay someone else to do the work instead of you.You can’t pay someone else to do the work.
    Basis of payment

    – how does the person who pays you work out how much to pay you?

    You’re paid all or the majority of the amount of your quote once you finish the work (to an agreed standard).

    You will generally supply an invoice to the other business before they pay you.

    You’re paid either:

    • for the amount of time (normally hours or shifts) you worked
    • a price for each item or for each activity you do
    • a commission.
    Equipment, tools and other assets

    – what you need to do your work?

    You bring to the job all or most of the things you need to do your work.

    You have to buy or hire your tools of trade or any equipment you need to do the work.

    The business you work for gives you all or most of the things you need to do your work.

    or

    You provide all or most of the things you need to do your work but the business you work for gives you an allowance or pays you back for the cost of the things you have bought.

    Commercial risks

    – if you make a mistake, who pays to have it fixed?

    You’re responsible for fixing your own mistakes at your own expense.The business you work for is responsible if you make a mistake. They pay for the cost of fixing it.
    Control over the work

    – who tells you how to do the work?

    You can do the work in any way you like as long as the work is completed to an agreed standard, or to the specific terms in your contract or agreement.You follow any reasonable work requests your supervisor or the business you work for makes.
    Independence

    – are you seen to be a part of the business or separate?

    You’re operating your own business independently. You complete the tasks or services as agreed to in your contract or agreement and are free to accept or refuse extra work.You’re seen to be part of the business and are not independent from it.

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