Contractors and ABN Misuse

The distinction between an employee and an independent contractor is determined by the totality of the working relationship, not just the label on the contract. The High Court's 2022 decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting and ZG Operations Australia v Jamsek focused on the terms of the written contract. The position has since moved on: from 26 August 2024, a new “whole-of-relationship” test in section 15AA of the Fair Work Act requires the real substance, practical reality, and true nature of the relationship to be considered, not just the words of the contract. This displaces the contract-only approach for most workers. Key indicators of employment include: the worker performs work for the benefit of the business; the business controls how, when, and where the work is done; the worker cannot subcontract or delegate the work; the worker is integrated into the business (has a desk, uses the firm's equipment, has a firm email address); and the worker bears no commercial risk.

Sham contracting occurs when an employer disguises an employment relationship as an independent contracting arrangement to avoid paying entitlements such as superannuation, leave, and overtime. Common signs in architecture include: being asked to get an ABN and invoice for work that looks identical to an employee’s role; working fixed hours set by the firm; using the firm’s software licences, computers, and other equipment; being managed and directed in the same way as employees; having no ability to negotiate the rate of pay; and not being able to work for other clients during the engagement. If the working arrangement walks like employment and talks like employment, it is employment, and we are entitled to all the protections and benefits that come with it.

Sham contracting is prohibited under sections 357 to 359 of the Fair Work Act 2009. An employer must not misrepresent employment as an independent contracting arrangement. From 27 February 2024, the defence to a sham-contracting claim changed: an employer must now show it reasonably believed the arrangement was contracting, judged objectively, not merely that it did not know the representation was false. The Fair Work Act sets significant maximum penalties per contravention, with far higher maxima for serious contraventions, and since 1 January 2025 intentional underpayment can be a criminal offence; penalty amounts are indexed, so UAW will confirm the current maximum. A contractor “high-income threshold” affects some of these provisions, and eligible independent contractors can now challenge unfair contract terms in a new Fair Work Commission jurisdiction. Workers found to have been misclassified can recover unpaid entitlements, including superannuation, leave, and overtime, for up to six years.

If the working arrangement looks more like employment than genuine contracting, start by documenting the arrangement: hours worked, who directs the work, what equipment is provided, whether there is any ability to work for other clients, and how invoicing and payment works. Check whether the ABN was our idea or the employer’s. Assess whether we bear any genuine commercial risk, or whether the firm controls everything. Contact us for a confidential discussion. We can help assess the situation and, if appropriate, connect workers with industrial officers who can assist with a sham contracting claim. We can also provide guidance on transitioning to employee status while protecting the working relationship. Nobody should be denied their entitlements because of a label on a contract.