Contractor or Employee? How to Classify a Worker in NSW
Engaging an independent contractor who is, in law, an employee is one of the most common and most expensive structural mistakes a growing business makes. The arrangement appears to save money: no payroll tax, no superannuation, no leave accrual, no notice obligations. The saving is illusory. When a tax audit, an insurance claim, or a Fair Work complaint reclassifies the relationship, the business becomes liable for everything that was never paid, often with interest and penalties on top.
This article explains how contractor classification works following the Closing Loopholes reforms, the full economic cost of getting it wrong, the factors that determine the answer, and how to structure genuine contracting arrangements that withstand scrutiny.
