If you are using contractors within your business, you may need to double check that you are meeting all of the required criteria as set forth by the Australian Taxation Office (ATO) as this is an ongoing area of small business that is being scrutinised.

A "sham contractor" typically refers to a situation where an individual or business is labelled as a contractor, but in reality, they do not meet the legal criteria to be considered an independent contractor. Instead, they may be treated as an employee for legal and tax purposes.

Employers sometimes misclassify workers as contractors to avoid the responsibilities and costs associated with traditional employment, such as providing benefits, paying taxes, and adhering to labour laws. This misclassification can lead to legal issues and penalties.

Generally, the ATO will consider factors, such as:

• How the worker receives assignments/work.
• Financial control, such as who pays for supplies and materials used by the worker and benefits provided under the relationship.
• Relationship control issues, such as whether the arrangement can be readily terminated.

It's important for both employers and workers to understand and comply with employment classification laws to ensure fair treatment, proper taxation, and adherence to labour regulations. If there are concerns about misclassification, individuals can seek legal advice or contact relevant labour authorities in their jurisdiction. If you are an employer, we suggest you check out the relevant section of the ATO HERE