Not Sure if You're a Contractor or an Employee? Here's How to Tell (and Why It Matters)

Published: May 2025

You’ve got a job, you’re making money—good start.
But when tax time rolls around, the big question hits:
Am I a contractor or an employee?

Get this wrong, and you could end up owing the ATO more than you think—or missing out on legit deductions.
Get it right, and you can claim what’s yours, stay out of trouble, and seriously boost your refund.

Let’s break it down Derek-style: clear, quick, and with real examples.

Why It Even Matters

✅ If you’re an employee, your boss covers your super, tax, insurance, and maybe even gives you some perks.
✅ If you’re a contractor, you’re your own boss. You sort your own tax, super, insurance—and you get way more deductions.

Bottom line:

• Employees have fewer deductions but fewer responsibilities.

• Contractors have more claimable expenses but more admin to deal with.

Quick Test: Are You a Contractor or Employee?

Here’s a super simple checklist to see where you stand:

Real-World Examples

Example 1: Employee

• Sam works for a plumbing company.

• His boss tells him where to be, when to work, and supplies his tools.

• He’s on wages, gets sick leave, and the company pays his super.
  ✅ Sam = Employee

Example 2: Contractor

• Taylor runs her own carpentry gig.

• She quotes jobs, brings her own tools, and invoices when the job’s done.

• No sick leave. No boss breathing down her neck.
  ✅ Taylor = Contractor

Tax Time: What Changes if You're a Contractor?

If you’re a contractor, you:

• Must lodge your own BAS if you're registered for GST

• Pay your own tax (no boss taking PAYG out)

• Claim heaps more deductions (tools, travel, insurance, phone, home office, etc.)

• Handle your own super contributions

If you’re an employee, you:

• Lodge a simpler tax return (most info pre-filled)

• Can only claim limited work-related expenses (travel, uniforms, etc.)

Common Contractor Deductions You Might Be Missing

As a contractor, you can usually claim:

• ✅ Work vehicle running costs and logbook expenses

• ✅ Tools and equipment (instant asset write-off rules may apply)

• ✅ Phone and internet bills

• ✅ Work insurance premiums (like public liability)

• ✅ Home office costs if you work from home

• ✅ Professional fees (accountants, legal advice, union dues)

Want a full guide to tradie, contractor, and self-employed deductions?
Check this out: https://www.gotax.com.au/blog/tax-deductions-for-contractors-gotax:
 

What Happens If You Get It Wrong?

If you claim contractor deductions but the ATO says you're actually an employee, you could:

• Lose the deductions

• Cop a fine or penalty

• Owe unpaid tax and super

If in doubt—get help BEFORE you lodge.
(Even better? Let Gotax guide you through it online:
https://www.gotax.com.au/guest-user)

Contractor Business - Start your return now

Quick Recap

• ✅ Employees get super, sick leave, and simpler tax returns

• ✅ Contractors have bigger deductions but bigger tax responsibilities

• ✅ Always know your status to avoid nasty ATO surprises

• ✅ Good records = good deductions = bigger refunds

Still Unsure? Let’s Make It Simple.

At Gotax, we make sure you:

• Know if you’re a contractor or an employee

• Claim everything you’re entitled to

• Lodge fast and easy, online, no awkward office visits

Start your tax return today (and know exactly where you stand):
https://www.gotax.com.au/contractor-tax-return