Employee vs contractor in Australia: what working holiday makers need to know

What are the key differences between employee and contractor?

The main practical differences:

• Employee: Paid wages by the hour or day, tax deducted by employer, super paid by employer on top, entitled to leave, uses a TFN, works under direction
• Contractor: Paid by invoice per task or project, no tax deducted, no super from clients (usually), no leave, needs an ABN, works independently

The label your employer uses ("contractor", "subbie", "self-employed") does not determine your status. What matters is how the work actually operates.

How can you tell which one you are?

The ATO and Fair Work Ombudsman look at multiple factors rather than any single test:

Indicators of employment:

• Paid hourly or daily
• Required to do the work personally
• Working exclusively for one business over an extended period
• Business provides your tools, equipment, and workspace
• Business directs when, where, and how you work
• You receive regular pay (weekly or fortnightly)

Indicators of contracting:

• Paid per task, project, or piece
• Free to subcontract or delegate the work
• Provide your own equipment
• Free to work for multiple clients at the same time
• Set your own hours and methods
• Issue invoices for completed work

No single factor is decisive. The overall picture is what matters.

Why does this matter for working holiday makers?

The classification affects:

• Tax: Employees have tax withheld; contractors must set aside their own
• Super: Employees get 12% super on top of wages; contractors usually do not
• Leave: Employees accrue paid annual and sick leave; contractors do not
• Workplace protections: Employees are covered by Fair Work; contractors have fewer protections
• Income at risk: Contractors without a valid ABN have 47% withheld from invoices

If you are being treated as a contractor when the arrangement looks like employment, the business may be avoiding their obligation to pay you super and leave entitlements. This is called sham contracting, and it is illegal. Get in touch with our team and we can help you raise this through the right channels.

Can you be both an employee and a contractor?

Yes. Many working holiday makers are employees at one job and contractors elsewhere. You use your TFN for employment income and your ABN for contracting income, and you declare both on the same tax return at the end of the financial year.