What is an independent contractor?
An independent contractor is someone who is self-employed and provides services to clients. It's also known as contracting or sub-contracting.
Usually, independent contractors set up as a sole trader and run their business with their own Australian Business Number (ABN). But you can also be a contractor who works in your own company, partnership or trust.
What kind of jobs do contractors do?
Independent contractors are usually hired for a specific task and invoice the client when it's done. They're paid for the results they achieve and are personally responsible for whether their business makes a profit.
Contractors are common in industries with flexible and time-limited projects such as:
- construction
- IT
- creative industries such as music and film
- owner drivers and forestry contractors
- ridesharing and food delivery services in the gig economy
How to become an independent contractor
Once you make the decision to become an independent contractor, you'll need to:
- understand your tax obligations
- visit business.gov.au for information about super, insurance and workers compensation
- register a business name (this is optional if you're trading under your personal name)
- check that your proposed business name doesn't infringe on existing trade marks
- apply for the relevant licences and registrations
- protect your intellectual property
- find the right insurance to protect yourself against disruptions to your business such as legal claims or work injuries
What you need to know before you register
There are a few things to be aware of before you become an independent contractor.
Tax obligations and superannuation entitlements
Independent contractors work under their own ABN and pay their own:
- taxes
- goods and services tax (GST), if applicable
- superannuation
You might be entitled to paid super if your employer provides most of the materials and equipment that you need to complete your work.
Minimum wages and conditions
As an independent contractor, you're not entitled to all the conditions in the National Employment Standards or an award. This includes:
- minimum wages
- annual leave and sick leave
- notice of termination
Instead, you negotiate your own rates, allowances, payment terms and extra conditions with each contract.
Legal liability and insurance
Being a contractor, you're legally responsible for your own work. This means you'll bear commercial risks that you wouldn't as a regular employee.
You also might not be entitled to workers compensation, so it's a good idea to arrange your own accident protection insurance.
Deemed employees
Some workers in certain industries are seen as employees even if they were hired as independent contractors. These workers are called 'deemed employees'. Deemed employees get the same insurance, treatment and rights as regular employees.
Sham contracting arrangements
Sham contracting is when an employer disguises an employment relationship as an independent contracting arrangement. This is usually done to avoid paying employee entitlements.
If you think you're in a sham contracting arrangement, the Fair Work Ombudsman can investigate.
Dealing with unfair or harsh contracts
The Independent Contractors Act 2006 allows independent contractors to ask a court to set aside or change a contract if it's harsh or unfair.
For more information about unfair contracts and the Act, please call business.gov.au on 13 28 46.
Business.gov.au also has resources on tax and super, negotiating good contracts and managing disputes.
Rights to workplace and industrial activities
Independent contractors and principals (their hirers) have:
- limited workplace rights
- the right to engage in certain industrial activities
You can't be punished for choosing to exercise these rights.
Owner drivers and forestry contractors
Owner drivers and forestry contractors in the transport and forestry industries have special protections to help them run their businesses. For example, before they're contracted, the hirer must give them an information booklet with rates and costs.