Just because an agreement states that a worker is an independent contractor, this does not mean that they are a contractor for tax and superannuation purposes, new guidance from the ATO warns.

Where there is a written contract, the rights and obligations of the contract need to support that an independent contracting relationship exists. The fact that a contractor has an ABN does not necessarily mean that they have genuinely been engaged as a contractor. The ATO says that “at its core, the distinction between an employee and an independent contractor is that:

• an employee serves in the business of an employer, performing their work as a part of that business

• an independent contractor provides services to a principal’s business, but the contractor does so in furthering their own business enterprise; they carry out the work as principal of their own business, not part of another.”

Contracts over time

The ATO points out that a contracting agreement at the start of a relationship may not continue to be one over time. For example, if the project the contractor was engaged to complete has finished, but the worker continues working for the company then the classification needs to be revisited.

What happens if there is no contract?

If no contract exists, then it’s important to look at the form and substance of the relationship to come to a reasonable position about whether an employment or contractor relationship exists.