Understanding Contractor vs Employee Rules for Trade Businesses
13 September 2026 · 5 min read · By Heaney Accounting
Why Getting the Status Right Matters
Many trade businesses prefer hiring subcontractors to keep overheads low, but the ATO looks closely at the reality of the working relationship. Misclassifying an employee as a contractor can lead to massive back-payments for superannuation, workers' compensation, and payroll tax.
Warning: Even if your worker has an ABN and sends you an invoice, they might still be legally classified as an employee if the nature of the work implies a standard employment relationship.
Key Indicators of Employment
- They have no power to delegate the work to someone else.
- You provide the primary tools and equipment for the job.
- The worker is paid a fixed hourly rate rather than a flat fee per project.
- The worker is not exposed to financial risk if the job goes over budget.
- Review the specific nature of the work tasks.
- Check the contract terms against ATO guidelines.
- Document why you classified them as a contractor.
- Update your payroll systems immediately if their status changes.
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