Determining whether someone is an employee or a contractor in Australia is a crucial decision with significant legal and financial implications. The distinction is important for tax, superannuation, and employment law purposes. The Australian Taxation Office (ATO) provides guidelines to help make this distinction. Here’s a guide on how to decide:

1. Control Over Work

• Employee: Generally, an employee works under the control of the employer in terms of how, when, and where the work is done.
• Contractor: Typically has more freedom and control over how they complete their work, and may have the ability to subcontract the work.

2. Basis of Payment

• Employee: Usually paid based on time worked (hourly, weekly, etc.), a commission, or a salary.
• Contractor: Often paid for a result achieved based on the quote they provided. This could be a fixed fee for a specific task or project.

3. Equipment, Tools, and Other Assets

• Employee: The employer generally provides all or most of the equipment, tools, and other assets required to complete the work.
• Contractor: Usually provides and maintains their own tools and equipment.

4. Commercial Risks

• Employee: Bears minimal commercial risks. The employer is responsible for the work done by the employee and rectifying any mistakes.
• Contractor: Bears the risk for making a profit or loss on each task, and is responsible for rectifying any mistakes at their own cost.

5. Independence

• Employee: Is part of the employer’s business and does not operate independently.
• Contractor: Operates their own business independently, has the ability to accept or refuse additional work, and can work for multiple clients.

6. Superannuation

• Employee: Entitled to superannuation contributions from their employer.
• Contractor: Generally responsible for their own superannuation arrangements, although in some cases (like in the building and construction industry), superannuation may still be payable to contractors.

7. Taxation

• Employee: Has income tax deducted by their employer.
• Contractor: Manages their own taxation and GST obligations.

8. Leave Entitlements

• Employee: Entitled to leave, including annual leave, sick leave, and other statutory entitlements.
• Contractor: Does not receive paid leave.

9. Method of Engagement

• Employee: Usually engaged with an employment contract.
• Contractor: Engaged under a contract for services.

It’s important to note that no single factor determines whether a person is an employee or a contractor. Instead, the whole working arrangement must be considered. Misclassifying an employee as a contractor can lead to legal and financial penalties. If in doubt, seek legal advice or use the ATO’s decision tool available on their website for guidance.