What's the difference between a contractor and an employee in Australia?

An employee works for one employer, is told how and when to do the job, uses the employer's tools, and is paid wages with PAYG tax + superannuation withheld. A contractor runs their own business, decides how to do the work, uses their own equipment, can subcontract, takes commercial risk, and invoices for outcomes. The Closing Loopholes No.2 Act 2024 restored a 'true substance over form' test from 26 August 2024, meaning the courts now look at how the relationship actually operates, not what the contract title says. The Fair Work Act 2009 s15AA codifies this multi-factor approach.

How do I know if I've been misclassified as a contractor?

If you're paid as a contractor (with an ABN, no super or leave) but the principal controls how, when, and where you work, requires you personally to do the work, provides your equipment, sets your hours, and pays you regularly like a wage — you are likely a misclassified employee. The High Court in CFMMEU v Personnel Contracting (2022) and ZG Operations v Jamsek (2022) confirmed the multi-factor test that courts apply.

What can I claim if I've been misclassified?

You may be entitled to backdated superannuation (12% from 1 July 2025), paid annual leave (4 weeks per year), paid personal/carer's leave (10 days per year), public holiday pay, redundancy pay if applicable, and casual loading or notice depending on what type of employee you should have been. Underpayments can be recovered going back six years under s544 of the Fair Work Act. The ATO can also pursue unpaid Super Guarantee Charge with interest and penalties.

Is the contract enough to make me a contractor?

No. Since the Closing Loopholes No.2 Act 2024 reforms, the contract is one factor among many. The court looks at the totality of the relationship — the day-to-day reality of how the work is performed. A contract that calls you a contractor but operates like an employment relationship will be treated as employment.

Can I claim unfair dismissal if I'm a contractor who's been misclassified?

Yes. If the Fair Work Commission finds you were actually an employee (not a contractor), you can pursue an unfair dismissal claim — including for the period you were treated as a contractor. The 21-day deadline still applies, so don't delay. Use FWM's unfair dismissal eligibility checker to see if you meet the other criteria.

Contractor or Employee?

Are you really a contractor — or an employee being misclassified? The eight-question test below comes straight from the High Court's multi-factor approach (Personnel Contracting and Jamsek, 2022) plus the 2024 Closing Loopholes substance-over-form reforms. Takes a minute. Tells you the answer.

Last verified: 1 July 2025

Question 1 of 8

Who decides HOW the work gets done?

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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.

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