Mastering Subcontractor Compliance for Tradies

Using subcontractors is a common way to handle overflow work or specialized tasks, but getting the classification wrong can lead to serious financial headaches with the ATO.

Defining the Difference

The main difference between an employee and a subcontractor lies in control and risk. If you provide the tools, dictate exactly when and how the job is done, and control the profit margins, they are almost certainly an employee.

• They have their own ABN and provide invoices.
• They use their own specialized tools and equipment.
• They take on the commercial risk of fixing faulty work.
• They have the freedom to work for other clients simultaneously.

1. Always verify their ABN using the ABN Lookup tool before engaging them.
2. Request a written agreement outlining the scope of work and payment terms.
3. Ensure you are not paying superannuation or leave entitlements if they are genuine contractors.
4. Regularly review your subbie arrangements to ensure the actual working relationship hasn't changed.