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Carl Desacola, post: 200156 wrote:
Hi SamBAdelaide,

You will definitely need an Independent Contractors Agreement (or Sub-Contractors Agreement) at the very least.

The main purpose of such an Agreement, of course, is to make it clear to everyone that your worker is an independent contractor, rather than an employee.

But keep in mind that Independent Contractors Agreements are not all created the same. There are countless instances where such Agreements have been found to be inadequate, and so the workers were deemed to be employees, resulting in significant financial burdens for the unintended “employer” (principal). A penalty of over $50K can also be imposed for each sham contracting arrangement identified by Fair Work Australia or the courts.

Unfortunately, there are no hard and fast rules – or a single indicator – to determine whether someone is an independent contractor or an employee. This makes it risky for business owners. Therefore, if you want to make sure that someone is legally found to be an independent contractor, you will need to take extra measures to make this abundantly clear to all and sundry. Leave nothing to chance!

For example, I would suggest that you make sure your Agreement contains, amongst other things, terms that demonstrate that the worker:

> Has acknowledged that they are an independent contractor, and not an employee;
> Has an Australian Business Number (ABN);
> Issues you with an ATO-compliant tax invoice for all work completed;
> Is paid based on the work performed, rather than number of hours worked;
> Has a very high level of control over how and when they conduct the work;
> Can decide what hours to work to compete their assigned task;
> Can employ or sub-contract whoever they want in order to complete the task;
> Has no ongoing expectation of work – ie. they are engaged for a specific task;
> Is primarily responsible for supplying their tools and equipment;
> Is responsible for paying for their super, income taxes, workers’ compensation, and other staffing costs;
> Has no leave entitlements (eg annual leave, carer’s leave, long service leave, etc);
> Has an obligation to take out necessary insurances (eg. public liability); and
> Has an obligation to comply with all relevant workplace health and safety laws.

Of course, you will need to maintain proper records of your business relationship with your contractors, such as retaining a signed copy of the Agreements, ABN details, tax invoices, receipts and the like.

Merely having an Agreement in place will not be enough – you must be able to demonstrate, through your record-keeping, that the parties are actually complying with that Agreement.

I’ve only just finished setting up Independent Contractor Agreements for a couple of businesses (farming and commercial cleaning), so if you need further guidance, don’t hesitate to call out.

Hope this has been helpful!

Kind Regards,

Carl Desacola, Lawyer & Registered Migration Agent (MARN 1461661)
Winthrop Mason | Business Lawyers & Migration Agents

Excellent information, Carl! It’s a real grey area and it’s best to err on the side of caution. I guess as business owners, we want to minimise costs, ie without having to pay additonal workcover insurance, super, holiday pays etc. However, the ATO sees the complete opposite. We use contractors and we always make sure that they have what you’ve outlined above. It’s a great guideline for anyone looking to engage contractors. Thanks for the tips!