Insurance


Generally, as a contractor, if you’re unable to work due to illness or injury, you’re not entitled to paid sick leave. In addition, you may not be entitled to workers' compensation payments if you are involved in a work-related accident.

This means you’re generally responsible for organising your own income protection insurance. This will help you manage your expenses if you’re unable to work and earn income. Most large insurance companies offer income protection insurance.

If you work in the sharing economy, some companies offer access to free or discount income protection insurance to contractors who use their platform.

Other insurance you may wish to consider includes:

  • liability insurance – this covers you for damage or injuries you may cause to other people or property while working
  • asset and revenue insurance – this covers you for the loss, damage or theft of your work-related assets (such as your bicycle or car) or revenue

Licensing


If you’re a contractor, you may require a licence or other qualifications to perform certain work. For example, if you want to do electrical work in Australia you must hold the correct licence.

Superannuation


Employers in Australia generally have to pay a proportion of their workers' wages into a superannuation (super) fund to help them save for retirement. If you’re a contractor you may still be entitled to super from your employer. If you’re a contractor paid wholly or principally for your labour, you’re considered an employee for super purposes. You’ll be entitled to super from your employer under the same rules as employees.

Not entitled to super?

If you’re a contractor and not entitled to compulsory super payments, consider making voluntary personal contributions to your chosen super fund.

To find out about making voluntary personal contributions, visit the Australian Taxation Office (ATO) website or phone them on 13 10 20.

Tax


Tax file number (TFN)

A TFN is a unique number issued by the ATO and used to administer tax. If you are operating as a sole trader you must use your individual TFN. If you are part of a partnership or a registered company you will need to apply for a separate TFN.

Australian business number (ABN)

As a contractor, if you do not have an ABN before doing work, your hirer may legally withhold the top rate of tax, plus the Medicare levy, from your payment. Labour hire workers aren’t entitled to an ABN, so you need to check if you’re entitled before applying.

You must register for an ABN for certain activities, such as taxi driving or providing ride-sourcing services through the sharing economy. The sharing economy is economic activity through a digital platform (such as a website or an app) where people share assets or services for a fee.

If you provide services or assets through a platform for a fee, you need to consider how income tax and goods and services tax (GST) applies to your earnings. You can find out more about which tax obligations apply to different sharing economy activities at the ATO page on the sharing economy.

Goods and services tax (GST)

If you’re registered for GST, the services you provide will be subject to GST.  You are required to register for GST if:

  • your business has a GST turnover of $75,000 or more
  • your non-profit organisation has a GST turnover of $150,000 or more 
  • you provide taxi travel (including ride-sourcing services like Uber, GoCatch or Ola) regardless of your GST turnover
  • you want to claim fuel tax credits for your business

Personal services income (PSI)

PSI is income produced mainly from your personal skills or efforts as an individual. When working out if your income is PSI, you need to look at the income received from each separate contract or invoice.

If your business receives PSI, you’ll need to work out if special tax rules (the PSI rules) apply to that income. If the PSI rules apply, they’ll affect who reports the PSI to us and deductions you can claim.

Voluntary withholding tax arrangements with your hirer


You may be eligible to enter into a voluntary agreement with the hirer that will enable them to withhold tax for you. This may simplify the administration of your tax.

Payroll tax


Payroll tax is a state tax on the wages paid by employers. Many state and territory payroll tax laws define wages as including payments to contractors. Hirers should check with their state or territory revenue office to determine whether payments are subject to payroll tax.

Pay as you go (PAYG) instalments

PAYG instalments help you or your business to meet your income tax obligations. PAYG instalments are regular payments you make (usually each quarter) towards your expected income tax obligation.

PAYG instalments are generally paid by contractors who earn a certain amount of income. The ATO will write to tell you if you must pay PAYG instalments.