Contractors + workers compensation

As part of our contractor blog series, we discuss the potential workers’ compensation obligations you have with independent contractors.

This blog covers key considerations but is not an exhaustive guide.

If you’re unsure, please seek professional advice.

 

who regulates workers’ compensation?

NSW

1. State Insurance Regulatory Authority [SIRA]: SIRA is the regulatory body responsible for overseeing the workers’ compensation system in NSW.
2. Insurance and Care NSW [icare]: icare is a statutory authority that manages the insurance and care schemes for workers’ compensation in NSW.

 

QLD

WorkCover Queensland, a government-owned but self-funded system established under the Workers’ Compensation and Rehabilitation Act 2003.

Information on the workers’ compensation system is available at worksafe.qld.gov.au.

Each State and Territory in Australia has its own payroll tax legislation. Even if you only have one worker operating out of a state, you may have payroll tax obligations.

 

determining if a contractor is independent or a deemed worker

As an employer, you must declare wages for all relevant workers using the legislative definition of ‘workers.’

Some contractors are ‘deemed’ workers for workers’ compensation insurance purposes.

If the person performing work is a ‘worker’ or ‘deemed worker,’ then, as the employer, you have to include their wages in your wages declaration that you provide to your workers’ compensation insurer for the calculation of premiums for workers’ compensation insurance purposes.

 

New South Wales

Per Section 155 of the Workers Compensation Act 1987, you’re required to obtain and maintain workers’ compensation insurance with a workers’ compensation insurer for your worker or deemed worker, as well as any other workers you employ.

In NSW, icare provides the below factors to assist in distinguishing a worker from a contractor. No single factor is decisive.

Like superannuation, an ABN alone is not a definite indicator of a person[s] status.

 

A contractor is more likely to:

• Be engaged to carry out a particular task using their own skill and judgment.
• Employ others, delegate, or sub-let work to another.
• Be paid on the basis of a quotation for the job.
• Supply their own tools and materials.
• Carry on an independent business in their own name or under a business or firm name.

 

A worker is more likely to:

• Be directed by the employer regarding work to be performed and the time and manner in which it is performed.
• Be required to actually carry out the work.
• Be paid on a time basis.
• Have tools and materials supplied by the employer.
• Work exclusively for a single employer.
• Be affected by PAYG tax arrangements.

 

A person may have been hired as a contractor and be a contractor for other purposes, such as tax, but still be a worker for the purpose of workers’ compensation insurance. The status of a person for tax purposes bears no direct relationship to that person’s status as a worker for workers’ compensation insurance purposes.

Sole traders/proprietors cannot take out workers’ compensation insurance to cover themselves for injuries.

 

QLD

In QLD, a worker is defined as ‘a person who works under a contract and, in relation to the work, is an employee for the purpose of assessment for PAYG withholding under the Taxation Administration Act 1953 [Cwlth], Schedule 1, Part 2-5’.

In QLD, at least, the worker must be an individual to be considered a ‘worker,’ so operating through a company or trust will exclude you from being a worker. That said, just because you have an ABN does not make you exempt.

 

Specific exclusions that are not ‘workers’ include:

• A contract to obtain services from a company, trust, or partnership.
• A director of a corporation [where the corporation is the employer].
• A trustee [where the trust is the employer].
• A partner working for their own partnership [where the partnership is the employer].
• A person who is engaged by the Commonwealth.
• A professional sportsperson.
• A member of the crew of a fishing ship who receives a share of gross earnings.
• A person supplying and using a motor vehicle for tuition.
• A person participating in an approved program or Work for the Dole program.
• A person who has a Personal Services Business Determination [PSBD] from the Australian Taxation Office [ATO].

 

example application of guidance to Ally’s Allied Health Services Pty Ltd

As an example, we have applied the iCare guidance for the NSW jurisdiction to a set of fictitious facts below.

Please note that this example is a NSW example, and the outcome may be slightly different in QLD or another state.

 

	Ally’s Allied Health Services Pty Ltd	Worker vs. Contractor Result
Be engaged to carry out a specific task using their own skill and judgment.	The contractor must perform tasks under your direction.	Worker
Employ others, delegate, or sublet work to another.	The contractor may subcontract, but only with your permission.	Worker
Be paid based on a quotation for the job.	The contractor cannot provide a quote for the job, as you set the payment rates. “The Contractor will receive 50% on the gross for all monies earned by performance of the Services [the “Payment”].”	Worker
Provide their own tools and materials.	Your business provides most of the equipment, tools, and other assets required to complete the work. “The Principal will supply all property and equipment required for the Contractor to undertake the Services, including but not limited to: a. internet b. stationery; and c. filing cabinet.” “The Contractor will supply their own laptop.”	Worker
Carry on an independent business under their own name or a business or firm name.	An independent review of your current contractors, their ABNs, and LinkedIn profiles shows no indications of them running independent businesses; many are also not registered for GST. If you have any evidence to the contrary, please supply it. Simply working for another employer does not mean they are running a business.	Worker

 

As the workers contracted by Ally’s Allied Health Services Pty Ltd do not pass the majority [if any] of the contractor indicators, they would be categorised as deemed workers for workers’ compensation.

Further, as all contractors are sole traders, they are ineligible for workers’ compensation and must be covered under Ally’s Allied Health Services Pty Ltd policy. Sickness and accident insurance, whilst beneficial for the contractor to have, does not preclude Ally’s Allied Health Services Pty Ltd from its obligations for workers’ compensation coverage.

 

Co-authored by MD, John Knight.

 

you can review the other parts of our contractor blog series here:

 

 

we’re here to help

If you have any questions, please reach out to your usual contact at businessDEPOT. You can also give us a buzz on 1300BDEPOT or email us and our team will be happy to help.

 

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