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The ATO has responded to recent High Court decisions that will change the way employers need to distinguish between employees and contractors.

Working out the difference between employees and contractors can be challenging, and making the wrong decision about a worker’s status can have severe ramifications on the business.

To help businesses make this decision, the ATO has now drafted a new public ruling and practical compliance guidelines.

These documents will replace previous guidelines.

What are the new guidelines concerning classifying of workers about?

The draft Guidelines outline the Commissioner's compliance approach for businesses that engage workers and classify them as employees or independent contractors. It sets out how the commissioner will identify compliance based on the risk associated with the classification.

For many businesses, getting workers’ classification wrong may have a significant impact on their PAYG withholding, superannuation, payroll tax and reporting obligations.

This Guideline does not apply to matters that are outside the scope of the laws administered by the Commissioner.

This includes matters concerning:

  • The Fair Work Act 2009
  • Payroll tax
  • Workers' insurance-related matters, and
  • Obligations under a contract or an applicable award or enterprise agreement (including where those obligations concern payment of superannuation).

When finalised, this Guideline is proposed to apply from its date of issue.


The ATO has also published TR 2022/D3 Income tax: pay as you go withholding - who is an employee?

This draft Ruling explains when an individual is an 'employee' of an entity for the purposes of the Taxation Administration Act 1953 (TAA).

The ruling takes into account developments in case law, particularly the High Court's decision of ZG Operations Australia Pty Ltd v Jamsek (2022) and Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contacting Pty Ltd (2022).

Both these documents are open for consultation until 17 February 2023.

To view these guidelines, please visit:

  • Draft - PCG 2022/D5 Classifying workers as employees or independent contractors
  • Draft - TR 2022/D3 Income tax: pay as you go withholding - who is an employee?

With thanks to The Association for Payroll Specialists (TAPS), established in 1990 is Australia's original Association representing the payroll industry. As the voice of the payroll community, they represent over 8,500 payroll professionals and businesses including every sector of the economy, from small and medium-sized enterprises to major corporations and government departments.