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Insurance

As a contractor, you’re generally not entitled to paid sick leave if you can’t work due to illness or injury. You may also not be entitled to workers' compensation payments if you have a work-related accident.

This means you’re generally responsible for organising your own income protection insurance. This will help you manage your expenses if you’re unable to work and earn income. Most large insurance companies offer income protection insurance.

If you work in the sharing economy, some companies offer access to free or discount income protection insurance to contractors who use their platform.

Other insurance you may wish to consider includes:

  • liability insurance to cover you for damage or injuries you may cause to other people or property while working
  • asset and revenue insurance to cover you for the loss, damage or theft of your work-related assets (such as your bicycle or car) or revenue.

Licensing

Contractors are generally responsible for any licence or other qualifications needed to perform certain work. For example, if you want to do electrical work in Australia you must hold the correct licence.

Super

Superannuation (super) is a proportion of wages paid into a superfund to save for retirement. Employers are generally required to pay super to their employees.

If you’re a contractor paid wholly or principally for your labour, you’re considered an employee for super purposes. This means your employer will need to pay you super under the same rules as employees.

Not entitled to super?

If you’re a contractor and not entitled to compulsory super payments, consider making voluntary personal contributions to your chosen super fund.

To find out about making voluntary personal contributions, visit the Australian Taxation Office (ATO) website or phone them on 13 10 20.

Tax

Tax file number (TFN)

A TFN is a unique number issued by the ATO and used to administer tax. If you're operating as a sole trader you must use your individual TFN. If you're part of a partnership or a registered company you need to apply for a separate TFN.

Australian business number (ABN)

As a contractor, if you don't have an ABN before doing work, your hirer may legally withhold the top rate of tax, plus the Medicare levy, from your payment. Labour hire workers aren’t entitled to an ABN, so you need to check if you’re entitled before applying.

You must register for an ABN for certain activities, such as:

  • taxi driving
  • providing ridesharing services through the sharing economy (such as Uber, Didi, Ola).

Goods and services tax (GST)

If you’re registered for GST, the services you provide are subject to GST. You need to register for GST if:

  • your business has a GST turnover of $75,000 or more
  • your non-profit organisation has a GST turnover of $150,000 or more
  • you provide taxi travel (including ridesharing services) regardless of your GST turnover
  • you want to claim fuel tax credits for your business.

Sharing economy

The sharing economy is where customers connect to workers through a digital platform (such as a website or an app). Customers request services on the digital platform and workers can choose to provide the service for a fee. Examples of sharing economy businesses include Uber, Airtasker and Deliveroo.

If you work in the sharing economy as a contractor, you need to consider how income tax and goods and services tax (GST) applies to your earnings.

Personal services income (PSI)

PSI is income produced mainly from your personal skills or efforts as an individual. 

If your business receives PSI, you need to work out if special tax rules (the PSI rules) apply to that income. If the PSI rules apply, they affect who reports the PSI to us and deductions you can claim.

Voluntary withholding tax arrangements with your hirer

You may be eligible to enter into a voluntary agreement with the hirer so they can withhold tax for you. This may simplify the administration of your tax.

Payroll tax

Payroll tax is a state tax on the wages paid by employers. Many state and territory payroll tax laws include payments to contractors as wages. Hirers should check with their state or territory revenue office to determine whether payments are subject to payroll tax.

Pay as you go (PAYG) instalments

PAYG instalments help you or your business to meet your income tax obligations. They are regular payments you make (usually each quarter) towards your expected income tax obligation.

Contractors earning over a certain amount of income need to pay PAYG instalments. The ATO will write to tell you if you need to pay.

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