Independent Contractors

An independent contractor is different from an employee in a number of ways. In short, a contractor hires out their services to other individuals or organisations. It is good to be aware of the different ways an employer can engage your services – within the agriculture industry, most people will be employed as employees (either permanent, part time, or casual) rather than engaged as a contractor.

If you are interested in finding out more about independent contractors, you can read the information under different types of employment in the employer section on the People in Agriculture website.

This is a complex area so it’s worth doing your research.

Important Changes to Contractor Law (from 26 August 2024)

The Closing Loopholes amendments to the Fair Work Act have significantly changed how independent contractor relationships are assessed and protected.

New “whole of relationship” test

To determine if a worker is genuinely an independent contractor or actually an employee, the test now considers:

• The real substance, practical reality, and true nature of the working relationship
• How the contract is performed in practice, not just what the written contract says
• The totality of the relationship between the parties

This is a significant change from the previous approach, which focused primarily on the terms of the written contract.

Sham contracting changes

The old “recklessness” defence for sham contracting has been replaced with a “reasonableness” test. If an employer misrepresents an employment relationship as a contractor arrangement, the employer must now prove they reasonably believed the worker was a genuine independent contractor. This is a higher bar than the previous test.

Key thresholds

• Contractor high income threshold: $183,100 per annum (from 1 July 2025)
• Certain protections and unfair contract term provisions may only apply to contractors earning below this threshold

What should employers and contractors do?

• Review existing contractor arrangements to ensure they reflect a genuine independent contractor relationship in practice
• Consider whether the worker has genuine independence in how they perform the work
• Ensure contractors provide their own tools, have the ability to delegate, and bear financial risk
• Seek legal advice if unsure about the status of any working arrangement