When engaging a new worker, you should check if they’re an employee or contractor before entering into any agreement or contract.
If you’ve previously engaged a worker without checking our information about whether the arrangement is employment or contracting, you should review your earlier decision now to make sure you got it right.
How to determine if workers are employees or contractors ?
To correctly determine whether a worker is an employee or contractor, you need to look at the whole working arrangement. A worker isn’t automatically a contractor just because they have an ABN or specialist skills or you only need them during busy periods.
ATO’s Employee/contractor decision tool makes it easy to get the right answer.
Records you need to keep:
Your business will need to keep records to support your decision on whether your worker is an employee or contractor and the factors you relied on.
Your obligations:
Your tax, super and other government obligations will vary depending on whether your worker is an employee or contractor.
If employees are incorrectly treated as contractors:
ATO checks how businesses engage their workers. You face penalties and charges if you incorrectly treat an employee as a contractor and don’t meet your obligations. You can report a business incorrectly treating employees as contractors to ATO.
Resource: http://www.ato.gov.au/Business/Employee-or-contractor/