Is your subcontractor really a contractor?
The ATO weighs the whole working relationship, not the label on the invoice. Answer 10 questions the way they assess it, add your annual contractor spend, and see your indicative risk level and back-payment exposure.
~3 minutes · 10 factors · No login to start
10-factor ATO test
Exposure from your own spend
Where the risk sits
Educational assessment based on ATO guidance — not legal or tax advice. For a definitive classification, speak with your accountant or an employment-law adviser.
About this tool
Subcontractor vs Employee Risk Calculator
In Australian building and trades, it's common to pay a "subbie" who invoices you and holds an ABN — and to assume that settles the matter. It doesn't. The ATO and Fair Work look at the whole working relationship, not the label on the contract or invoice. If a person you treat as a contractor is genuinely operating as an employee in substance, you can be liable for years of unpaid superannuation, PAYG withholding that was never remitted, leave entitlements, workers compensation gaps, and sham-contracting penalties. This tool is a plain-English self-assessment that helps a business owner see where a given arrangement sits on the contractor-versus-employee spectrum, and roughly what a misclassification could cost — before the ATO or an aggrieved worker raises it.
How it works
The tool walks you through ten working-relationship factors drawn from ATO guidance — who supplies tools and equipment, who controls the hours and the method of work, whether the person can delegate or subcontract, whether they run their own registered business, whether they work for multiple clients, how they're paid, who carries the risk for defects and rework, whether they market their services publicly, and whether they can genuinely make a profit or loss on a job. Each answer leans either "contractor" or "employee", and the tool tallies them into an indicative score and a risk band (lower risk, borderline, or higher risk), with a factor-by-factor breakdown so you can see exactly which indicators are pulling which way. You then enter your own annual spend with that person, and the tool applies the current superannuation guarantee rate and an indicative look-back period to sketch the order-of-magnitude back-payment exposure — unpaid super plus the superannuation guarantee charge, indicative PAYG withholding, and accrued leave. Because compliance figures change, the tool works from your own inputs and the prevailing official rates rather than baking in fixed numbers, and it points you to the underlying sources (ATO, the Superannuation Guarantee legislation, the Fair Work Act sham-contracting provisions, the relevant modern award, and WHS duties) rather than substituting for advice.
Who it’s for
Owners and managers of Australian trades, construction and other SMEs who engage subcontractors and want a quick, honest read on classification risk before it becomes an ATO or Fair Work problem.
- Classification turns on the substance of the working relationship — control, delegation, tools, financial risk and whether the person runs their own business — not on holding an ABN or issuing invoices, so a 'subbie' can still be an employee in the eyes of the ATO and Fair Work.
- A misclassified worker can expose you to years of back-payments: unpaid superannuation plus the superannuation guarantee charge, PAYG that was never withheld, accrued leave, workers compensation gaps, and indexed sham-contracting penalties under the Fair Work Act.
- The tool estimates exposure from your own annual spend and current official rates rather than a made-up wage, giving an order-of-magnitude figure to show whether an arrangement is worth a professional review.
Frequently asked questions
My subbie has an ABN and sends me invoices — doesn't that make them a contractor?
Not on its own. An ABN and invoicing are consistent with contracting, but the ATO and Fair Work weigh the entire relationship. If you control their hours and how the work is done, they use your tools, they can't delegate the job, they work only for you, and they carry no genuine profit-or-loss risk, the arrangement can still be employment in substance regardless of the paperwork. This tool exists precisely because the label on the invoice is not the deciding factor.
What could a misclassification actually cost me?
The main heads of exposure are unpaid superannuation (which triggers the superannuation guarantee charge — the shortfall plus an interest and administration component, and the charge is generally not tax-deductible), PAYG amounts you should have withheld, and leave and entitlements the person would have accrued as an employee. On top of that sit indexed civil penalties for sham contracting under the Fair Work Act, potential award underpayment claims, and workers compensation gaps if someone is injured. The tool uses your stated annual spend and a look-back period to give an indicative order of magnitude — it deliberately doesn't present itself as a precise liability calculation.
The result came back borderline — what should I do?
Borderline is the grey zone the ATO scrutinises most, so treat it as a prompt to get a definitive view rather than to keep guessing. Get a written opinion from your accountant or an employment-law adviser, review the actual contract against how the work happens day to day, confirm your workers compensation and public liability cover really respond for the people working for you, and keep good records — contracts, invoices, ABNs, insurances and evidence of how work is directed — so you can show the basis for your classification if it's ever questioned.