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Is a support worker an employee or contractor?

by | Direct Employ Workers, Self/Plan Manage Funds

According to the Australian Tax Office, there is a big difference between a contractor and an employee. Just because a support worker has an ABN and sends you an invoice does NOT always mean they are a contractor.
IMPORTANT DISCLAIMER: We are not accountants, lawyers or any other type of professional. Any information on this page is detailing our experience of directly employing workers in Victoria and may not apply to your situation. Always check with appropriate professionals such as Accountants/Bookkeepers and the relevant authorities such as Fair Work Australia and the Australian Taxation Office (ATO).
Australian Tax Office has a tool to help decide

If the support worker has an ABN and is actually a “true” contractor, it makes it very easy to employ their services.

My suggestion is always to get them to:

  • sign a service agreement so that both parties know exactly what is expected
  • show their insurances (for example: WorkCover, professional indemnity and if required, vehicle)
  • show relevant certificates (for example: Level 2 First Aid, Driving License, Police/Working with Children/Vulnerable People checks)
  • give recent references.

Paying contract support workers is relatively easy. They will give you an invoice with terms (usually 7-14 days) and you pay from the portal if you self-manage.

If you use plan management, using the defined procedure (different for each plan manager) – your plan manager will pay the invoice.

“If you use funds from the National Disability Insurance Scheme (NDIS) to engage a carer or other domestic help, you may have to pay SG for these workers. ”

The above is a quote from the ATO website and SG = Superannuation Guarantee.

This is another quote from the ATO on their Contractor webpage : “Contractors paid mainly for their labour are employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).”

And note – if you do have to pay SG for your contractors, it is your responsibility to pay the money into their nominated super fund.

This area is an absolute minefield for self or plan managed NDIS participants. You must ensure that you are complying with the law.

There are a couple of good ways of getting advice:

  1. Contact the ATO yourself
  2. Ask your Accountant or Bookkeeper

By the way, a REALLY, REALLY, REALLY BAD way of getting advice:
….. ask a Facebook group

I know this isn’t something anyone reading this blog would want to do, but just a warning anyway.

There are huge penalties for people who engage in what is determined as “sham contracting”.

Sham contracting is “when an employer attempts to disguise an employment relationship as an independent contracting arrangement. This is usually done to avoid responsibility for employee entitlements.”

You can find out more information from the Fair Work Australia website.

It also has some detailed information about the tricky employee vs contractor determination.

The bottom line is that this is complex.

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