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What's the difference between employees and independent contractors?

Deciding if you can hire someone as an employee or independent contractor is a big decision. It impacts taxes, what you need to do for payroll, and more. The government has a lot of rules around this, but here is a basic overview and some links that may help you.

Is my worker an employee or independent contractor?

Generally, employers have more control over an employee. This is because independent contractors, freelancers, and self-employed workers are in business for themselves.

Note: If you need help determining if your worker is a contractor or employee, please contact an accounting or legal professional.

If your worker is an employee, an employer must:

  • Withhold payroll taxes (PAYG withholding).
  • Pay super (for eligible employees).
  • Withhold Medicare levy.
  • Report and pay fringe benefits tax (FBT) (for eligible employees).

Get help deciding if your worker is a contractor

How you should classify a worker is determined by the Australian Taxation Office (ATO). Use ATO's guidelines to determine your worker classification: Employee or contractor?

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