Employee or Subcontractor? What Getting an ABN Actually Means
This is one of the most consequential things a tradie can misunderstand, and it's genuinely common in the industry — the difference between being an employee and being a legitimate subcontractor affects your superannuation, workers compensation cover, leave entitlements, and how tax is handled.
Why it's not just about having an ABN
Being asked to “get an ABN” doesn't, by itself, make someone a legitimate subcontractor. What actually matters is the real nature of the working relationship — who controls how, when, and where the work is done, whether you can subcontract the work to someone else, whether you provide your own tools and take on your own commercial risk, and more.
Sham contracting is illegal
When a business treats someone as a contractor specifically to avoid paying entitlements they're legally owed as an employee, that's called sham contracting — and it's illegal under the Fair Work Act. Both the Australian Taxation Office and the Fair Work Ombudsman actively investigate and pursue this.
Not sure which you are?
The ATO publishes a free employee/contractor decision tool that walks through the actual factors that determine your status — worth checking if your ABN was set up at an employer's request rather than your own choice.