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All over the world, more and more people are enjoying the flexibility that comes with being an independent contractor. And with the growing availability of remote work, Australia is a great location to start life as your own boss.
In 2021, just over 1 million workers (around 8% of the population) were classified as independent contractors in Australia. But before you can become one of them, there are several legal factors to consider, such as:
Correctly registering your business
Avoiding misclassification as an employee
Managing your taxes
Invoicing and getting paid
In this article, we’ll explain how to do all these things and help you stay compliant. We’ll also discuss some of the other risks you should be aware of, and point you in the right direction for additional guidance and resources.
First, though, it’s important to clarify how Australia defines independent contractors.
Independent contractors are workers that provide contracted services to another party. However, under Australian law, they are classified differently from employees, and are not entitled to the same benefits.
See also: Why businesses hire international employees vs. contractors
The Australian government lists several indicators that help clarify whether a worker is a contractor or an employee, including:
The level of control over the work performed
The exposure to financial risk
Who provides the tools and equipment for the job
The ability to delegate or subcontract work
The number and pattern of hours worked
The expectation of ongoing work
Note that temporary workers can be engaged either as fixed-term employees, casual employees, or independent contractors. Unlike permanent employees with an open-ended contract, fixed-term employees typically work for a pre-agreed period, but are still entitled to the benefits and protections of permanent employees.
The classification of casual workers depends on the agreed working arrangement. They’re typically paid hourly and called in as needed with no commitment to an ongoing relationship, but can still be classified as employees if it suits both parties.
When setting up as an independent contractor, it’s important to be correctly classified to avoid penalties and fines.
To work as an independent contractor in Australia, you can operate as a sole trader, or you can incorporate a legal entity — whichever best suits your needs.
The sole trader model is ideal for individual, independent contractors who intend to be sole owners (although you can still legally employ staff if required). You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities.
Alternatively, you can set up one of the following business structures:
Partnership. A legal entity composed of two (or more) partners. Income and losses are distributed between you and your partners.
Company. A legal entity that is separate from you, the individual. It must include a minimum of one shareholder and one director. All income and losses are attributed to the company as opposed to you personally.
Trust. A specialist structure whereby a trustee manages the business and all of its activities on behalf of beneficiaries.
If you’re unsure which structure is right for you, Australia’s Business Registration Service (BRS) has a handy “Help Me Decide” tool that can provide guidance and advice.
That said, most independent contractors in Australia choose the sole trader classification as it’s the simplest form of business structure, and is fairly easy to set up and operate.
If you want to work as a sole trader in Australia, it’s advisable to get an Australian Business Number (ABN) (this is mandatory if your business has an annual turnover of $75,000 or more). You can register for an ABN online for free — all you need is proof of identity, some basic details about your business, and your business structure. You can also choose to register a business name with the BRS for a nominal fee, and set up a separate business bank account (although this isn’t required).
You can find more guidance on registering your business on the BRS portal.
As a contractor, receiving and accessing your payments is crucial. Employees get paid automatically through payroll, but independent contractors have to invoice their clients. This can be tedious and time-consuming, as you need to send invoices to each client (often at different times of the month), and then collect payment in the client’s preferred payment method.
Some of the common ways you can collect payments include:
Digital transfer services like PayPal and Wise
These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. Other methods may have unfavorable exchange rates if you’re collecting payments from clients in other countries.
Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Australian dollars — and with no hidden fees. Learn more about how we can help here.
As a sole trader in Australia, you are responsible for paying your own taxes and superannuation (pension) contributions. The tax year in Australia runs from July 1 to June 30, with returns due on October 31.
Like many countries, Australia has a progressive income tax rate which determines how much tax you need to pay. As a sole trader, you don’t need to submit a separate tax return. Simply record your business income and expenses in your individual tax return (in the section entitled “Business and professional items schedule”).
You can also claim deductions for business-related expenses, charitable contributions, and pension fund contributions.
Note that non-residents are subject to a different taxation structure, and must file a return on any income they make in Australia (even if it is below the minimum taxable threshold of $18,200).
You may also need to pay attention to Australia’s goods and services tax (GST). This is essentially a value-added tax (VAT) that applies to most goods and services. The standard GST rate is 10% in Australia, although some products and services — like food, exports, health, medical, and education supplies — are GST-free.
As an independent contractor, you’re required to register for GST within 21 days if you meet any of the following criteria:
Your GST turnover is $75,000 or higher ($150,000 or higher for non-profits)
You provide taxi or ridesharing services, regardless of your GST turnover
You want to claim fuel tax credits, regardless of your GST turnover
If you don’t meet any of these criteria — for example, if your GST turnover is less than $75,000 — registering for GST is optional. You can learn more about GST through the BRS.
In Australia, sole traders are personally liable for finance and tax debts. This means your private assets can be forcibly used to settle your business debts.
You’ll also be held responsible for any faults in your work. Many contractors take out business insurance to minimize this risk.
As an independent contractor, you are responsible for adhering to Australia’s accounting laws. Each business structure has different accounting requirements, but luckily, the requirements for sole traders are fairly straightforward. You must:
File your business income and expenses in your individual tax return (in the “Business and professional items schedule” section)
Keep financial and tax records for at least five years
Notify the government of any business changes within 28 days
It isn’t mandatory to open a separate business bank account, but it’s generally recommended as a way to simplify your business income and expense accounting.
Employees are classified differently from independent contractors in Australia. The protections and benefits that employees enjoy do not typically apply to contractors.
As a result, it’s important to ensure that you’re classified correctly. Sometimes, companies try to circumvent their legal obligations by deliberately misclassifying contractors as employees, meaning their workers don’t receive the benefits they’re entitled to. This is called sham contracting and, in Australia, it’s illegal. Sometimes, misclassification can happen accidentally too, but whether it’s intentional or unintentional, misclassifying employees as contractors can result in penalties and fines for both you and your client.
To ensure you’re classified correctly, discuss your role and responsibilities with your client and review the working arrangement regularly. If you’re not sure what you should be classified as, the Australian Fair Work Ombudsman clearly lays out the differences between employees and contractors. If your role with your client begins to resemble that of an employee, you can discuss the possibility of converting to employee status to avoid misclassification (see the next section).
If you still think you’re being misclassified, or you’re unwillingly part of a sham contracting arrangement, you can contact the Fair Work Ombudsman for guidance.
For further information, Remote has developed a comprehensive guide to employee and independent contractor classification.
It’s worth having a conversation with your client if you find yourself in one or more of the following situations:
Your current classification as a contractor is noncompliant with local labor laws
Your ongoing contract is outdated and causing issues
You feel like you need a greater share of responsibilities within the client’s organization
You need access to the benefits that employees are entitled to in Australia
Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.
You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Australian law.
To better advocate for flexibility at work, download our Choose Remote Toolkit today.
As you can see, life as an independent contractor comes with plenty of additional responsibilities. Remote’s platform can help alleviate many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:
Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.
Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Australian dollars hassle-free, without any hidden fees.
When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Australian laws, and insight into complex concerns such as local classification and intellectual property protections.
With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by disparate processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.
Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.
Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.
By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:
Avoid intermediary fees and delays with international client payments
Draft compliant contracts for foreign clients
Enhance your invoice management and avoid manual processes
Comply with local labor laws regarding work practices
Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.
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