Detailed Discussion

The Australian Taxation Office has an Employee/Contractor Decision Tool to help determine whether the artist or arts worker will be deemed an employee or contractor for tax and superannuation purposes when carrying out a contract. The designation is not a choice but is determined by the terms of the contract.

The results will help determine if the artist or arts worker should be engaged as:

• an employee with tax deducted from payments and superannuation paid directly to the employee’s super fund

• a contractor with no tax deducted from payments and superannuation paid directly to the contractor’s super fund

• a contractor with no tax deducted from payments and superannuation included in payments made to the contractor

Workers Compensation Insurance

Workers compensation insurance provides compensation to a ‘worker’ who suffers a work-related injury. Note that the definition of ‘worker’ in each state or territory may extend to: 

• people who are engaged under a 'contract of service' (employees) and who work on a full-time, part-time or casual basis

• people engaged under a 'contract for service' who perform work as an independent contractor or who are sub-contractors (working for a principal contractor)

• company directors engaged under a 'contract for service'

• volunteers or interns who do not receive payment for the work (apart from any payment for expenses)

Hiring Contractors

Artists and arts workers who are not being employed to undertake work will be contractors who:

• are hired to do a set task or tasks based on certain terms within a contract

• will generally use their own processes, tools and methods to complete the work

• can specify their own rates of pay which may be more than rates outlined in this Code

• are able to subcontract or delegate the work to others

• are legally responsible for the work and liable for the cost of rectifying any defects

• have freedom in the way the work is done, subject to the contract

• are free to accept or refuse additional work

A contractor who is an artist or arts worker will generally be a sole trader, but sometimes they will be part of a partnership or a proprietary limited company business structure.

It is important to be aware of the on-costs that the contractor is paying in running their own business. These costs can take up to 50% of the fee an organisation is paying to the contractor.

Costs include:

• sick leave, annual leave, long service leave

• insurance, such as liability, accident and sickness and studio insurance

• sometimes superannuation, see Superannuation

• studio or office overheads

• phone and internet costs

• computer and other equipment costs including maintenance and depreciation

• office supplies

• vehicle costs

• advertising costs such as maintaining a website

The Fair Work Ombudsman provides information about the difference between Independent Contractors and Employees.

Contractors and Superannuation

Employers must pay superannuation to a contractor’s superannuation fund if the contractor is deemed to be an employee (for the purposes of superannuation only). This includes contractors delivering one-off projects.

It is good practice for employers who are contracting artists or arts workers for their labour to pay superannuation on top of an artist fee, regardless of whether the contractor is deemed to be an employee or not (for superannuation purposes). It is good practice to pay this directly into a contractor’s chosen super fund. 

The employer will need to calculate and pay superannuation at the required percentage of fees for labour invoiced by the contractor. The employer should consider and budget for superannuation when negotiating a contractor’s fee, ensuring it is separated from the artist's fee.

Contractors and Workers Compensation Insurance

If you are engaging people to work on a creative project, you should check the workers compensation legislation of your state or territory to understand your obligations as an ‘employer’ to have workers compensation for your ‘workers’.

There are differences between the workers compensation legislation of each state or territory regarding the obligation of an employer to obtain workers compensation insurance (different thresholds apply) and in relation to licensed insurers and whether employers can self-insure. Contact Safe Work Australia to find the applicable regulator in your state or territory who can provide further information.

Hiring Employees

Hiring artists and arts workers as employees carries obligations to: 

• pay super to eligible employees 

• meet PAYG, fringe benefits and payroll tax obligations, see Taxation

• meet WHS obligations, see Workplace Health and Safety

• meet legal obligations relating to wages, conditions, award and leave entitlements and ending employment

For more information, see NAVA's Superannuation Contribution Obligations for Employers guide and the Australian Government's Business Support and Fair Work Ombudsman websites.