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Contractors & Sham Contracting

sham_contracting

If you hire contractors, you need to be confident your arrangements are genuinely compliant. The ATO and Fair Work Ombudsman are actively cracking down on sham contracting, and the penalties for getting it wrong are significant.

Sham contracting happens when a business treats a worker as a contractor when the working relationship is actually one of employment. It does not matter what the contract says. What matters is how the work is actually performed. If you control when, how and where someone works, they may be an employee in the eyes of the law.

We have created a packaged service to help you assess, restructure and protect your contractor arrangements. Fixed prices. Plain English. No surprises.

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Book a Free 15-Minute Consultation

Not sure if your contractor arrangements are compliant? Schedule a quick 15-minute call with us. We will walk you through the key risk areas, answer your questions and help you take the first step toward getting your contractor setup right.
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HOW WE CAN HELP

We can help you with the following bespoke services or you can check out some of our simple to use legal templates below

Contractor Risk Assessment

Not sure if your contractors are genuinely contractors? Our risk assessment reviews each arrangement against the ATO multi-factor test and flags any red zones before the regulators do.

Contractor Agreement Review & Drafting

We review your existing contractor agreements to identify gaps, non-compliant clauses and missing protections. Or we draft compliant agreements from scratch, tailored to your business and industry.

Compliance Restructuring

If your contractor arrangements are non-compliant, we help you restructure them properly. This includes transitioning workers to employment where needed, updating agreements and setting up compliant processes going forward.

Ongoing Contractor Compliance Support

As your business grows and you engage more contractors, we provide ongoing support to ensure every new arrangement is set up correctly from day one. Peace of mind, on retainer.

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FAQs

Frequently Asked Question

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Sham contracting is when a business misrepresents an employment relationship as an independent contracting arrangement. This can be done intentionally or unintentionally, but the consequences are the same either way. The ATO and Fair Work Ombudsman look at the reality of how the work is performed, not just what the contract says.
Under the Fair Work Act, penalties can reach up to $19,800 per contravention for individuals and $99,000 for businesses with fewer than 15 employees. For larger businesses, the penalty is the greater of $495,000 or three times the underpayment amount per contravention. On top of this, you face back pay liabilities, unpaid superannuation with interest, PAYG withholding penalties, payroll tax exposure and potential workers compensation liabilities.
The ATO uses a multi-factor test that looks at the totality of the working relationship. Key indicators include whether you control how, when and where the work is done, whether the worker can subcontract or delegate, whether they provide their own tools and equipment, whether they work exclusively for your business, and whether they bear genuine commercial risk. If most of these point toward employment, the arrangement is likely non-compliant regardless of what the contract says.
Not necessarily. While the High Court decisions in Personnel Contracting and Jamsek shifted the focus toward the written contract, the ATO and Fair Work Ombudsman still look at the practical reality of the arrangement. A well-drafted contract is essential, but it needs to reflect how the work actually happens. We help you align both.
Yes. All of our contractor compliance services are offered on a fixed-fee basis. You will know exactly what you are paying before we start. No hourly billing. No surprises.
The ATO and Fair Work Ombudsman have highlighted building and construction, road freight, cleaning, courier services, security, IT and the gig economy as high-risk sectors. However, sham contracting can occur in any industry where contractors are engaged. If you hire contractors in any capacity, it is worth getting your arrangements checked.

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