The table below outlines the main tax and super obligations a business has when you're working for them as an independent contractor compared to working as an employee.
Comparison of independent contractors and employees for you and the business
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As an independent contractor
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As an employee
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You:
- put money aside to cover the tax owed from your contracting work (or you have a voluntary agreement for the business to take tax out of payments they make to you)
- complete and lodge activity statements you get from the ATO
- report and pay GST on an activity statement if you are registered
- keep records of your income (including invoices you issue) and business expenses
- complete your tax return and the business and professional items schedule using your records
- look after your own super unless you are contracted mainly for your labour
- provide your own business insurances, including personal income protection for yourself and workers' compensation for anyone working for you
- put money aside to pay for any holidays or if you get sick
- work out if you are receiving personal services income.
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You:
- provide your tax file number (TFN) to your employer by filling out a TFN declaration and the employer withholds tax from your salary and wages
- keep records for any work-related expenses
- complete your tax return using the payment summary or income statement from your employer(s) and other information provided by the ATO's pre-filling service to assist you
- can choose which super fund your employer super contributions are paid into.
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The business:
- pays you for the work you do based on the working arrangement, generally after you have submitted an invoice.
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The business:
- pays you your wages or salary on a weekly, fortnightly, or monthly basis
- withholds tax from the money they pay you and sends it to us
- provides you with a payment summary after the end of the financial year
- makes super contributions as required into your super fund
- pays you any sick leave, annual leave and any other leave you may entitled to
- provides workers compensation and insurances
- provides pay and conditions as required by the Fair Work Ombudsman.
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