Latest ATO News: Clarity on Employee Status

Latest ATO News: Clarity on Employee Status

Understanding employee status, e.g. if someone is an employee or an independent contractor, just got a bit clearer, thanks to the Australian Taxation Office’s (ATO) fresh guidelines on Pay As You Go (PAYG) withholding.

To simplify, the ATO suggests looking at whether a worker is actively involved in the day-to-day activities of a business, based on what’s laid out in their contract. Importantly, having your own business or an Australian Business Number (ABN) doesn’t automatically make you an independent contractor.

The ATO’s advice is to not take the title of “independent contractor” in a contract at face value. Just because it’s written there doesn’t necessarily mean it holds true for tax and superannuation purposes. The real test lies in the rights and responsibilities laid out in the contract, showing whether it’s genuinely an independent contractor relationship.

According to the ATO, the key difference is this: an employee works as part of the employer’s business, while an independent contractor does the work to benefit their own business.

Contracts can change over time. If a contractor initially hired for a specific project sticks around after it’s done, the classification might need a rethink.

And what if there’s no contract at all? In that case, it’s about looking closely at how the working relationship functions to decide if it’s more of an employment or contractor setup.

So, the bottom line is, the ATO wants everyone to dig a bit deeper and not just rely on surface-level details. Knowing these guidelines is crucial for both employers and workers, making sure everyone gets the right classification and stays on the right side of tax and superannuation rules.


For more information, speak with your Simmons Livingstone advisor on 1800 618 800 or via email at

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