Why this matters for your practice
Worker classification is one of the highest-exposure compliance issues in general practice, because the same arrangement is judged differently by different regulators, and the consequences stack. A doctor engaged as a contractor might still be an employee for superannuation, trigger payroll tax, or be found to be an employee under the Fair Work Act. Getting it wrong can mean back-paid super, back-paid leave, payroll tax assessments with interest, and penalties.
The widespread "contractor GP" model means almost every practice has real money riding on classifying its practitioners correctly.
There is no single test
At least three separate frameworks apply, and a worker can be classified differently under each:
- Fair Work (employment law): since the 2024 changes, classification looks at the real substance, practical reality, and true nature of the whole relationship, not just the words of the contract. This determines entitlements such as leave, notice, and unfair dismissal protection.
- Superannuation (ATO): the super guarantee uses an extended definition of employee. A contractor engaged wholly or principally for their labour can be an employee for super purposes even if they are a contractor everywhere else.
- Payroll tax (state-based): state "relevant contract" provisions can bring payments to contractors, including some doctors, within payroll tax. This is the basis of the recent medical-practice payroll-tax cases.
What practices should do
- Look at the substance of each arrangement, not just the contract label.
- Assess separately for Fair Work, super, and payroll tax, because a single conclusion does not cover all three.
- Document the reasoning, and review arrangements periodically.
- Get advice before assuming a contractor model removes employee obligations.
Common mistakes
- Relying on the contract label when the substance points to employment.
- Forgetting the extended super definition, leaving super unpaid for labour-only contractors.
- Ignoring payroll tax, which can apply even where Fair Work and super do not.
- Sham contracting, presenting an employment relationship as a contract, which carries its own penalties.
Frequently Asked Questions
What is the difference between an employee and a contractor?
An employee works within and as part of a practice's business, while a genuine contractor runs their own business and provides services to it. The distinction determines obligations such as superannuation, PAYG withholding, leave, and payroll tax, and it is assessed differently under employment law, super, and payroll-tax rules.
Are contractor GPs really contractors?
Not always. A GP engaged as a contractor may still be an employee for superannuation if engaged principally for their labour, may bring the practice within payroll tax under state relevant-contract rules, and may be an employee under the Fair Work Act depending on the substance of the relationship. Each test is assessed separately.
What are the risks of misclassifying a worker?
Misclassification can lead to back-paid superannuation, back-paid leave and entitlements, payroll tax assessments with interest, and penalties. Presenting an employment relationship as a contract can also amount to sham contracting, which carries additional penalties under the Fair Work Act.
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