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Considerations to Make Before Becoming a Contractor

Considerations to Make Before Becoming a Contractor

The decision to become a contractor is a big one. Before doing so, make sure you understand the different considerations necessary. We break these down.

3rd October 2019

The decision to become a contractor is a big one. Before doing so, it is necessary to consider the different legal considerations. We break down these considerations, and whether the decision is right for you.

What is a contractor?

In short, a contractor is someone who is self-employed, and gets to choose what jobs they undertake. They’re responsible for managing their own taxes, and how to do the work. The work they’re dictated to do is offered to them by an employer, who then gets to choose if they accept the contract.

Why should I become a contractor?

Becoming a contractor allows you to explore various opportunities that may not be available to you if you’re working as an employee. This can mean increased income, and more flexibility when deciding working hours and projects.

The legal considerations

When deciding to become a contractor, there’s a series of questions to consider. Below, we break down these different legal considerations, to ensure you can make the best choice for you.

Sole trader or running a business?

You can decide whether to act as a sole trader, or whether to run your own business. Running your own business may allow you to hire additional employees to complete your contract work for you. As a sole trader, it’s only you, and you have no one to fall back on if issues arise.

Income considerations

Many assume that when they become a contractor, that their income will automatically increase, as their hourly rate has increased. This isn’t necessarily true. Whilst your hourly rate may have increased, unless you’re finding 38-hours of work per week, your income may not increase.

Becoming a contractor means you have limited certainty in your short-term financial future. Similarly, you won’t get paid for sick leave or on public holiday’s that you don’t work.

Upfront costs for a contractor

As a contractor, you will likely have to provide your own equipment. In contrast, as an employee it is likely that your employer provides these items for you. This can lead to upfront costs that you weren’t expecting. However, these can be tax deductible.


Generally, banks will be more reluctant to provide loans to contractors. As contractors don’t have the same security and financial backing of a business, banks tend to request more information before providing a loan. This information may include a history of continuous regular work, and additional savings. This is to ensure that you will be able to repay the loan in the future.

Final thoughts

Becoming a contractor is a significant business decision. However, it’s necessary to consider the various factors listed above to ensure it’s a decision you’re ready to make. If you decide to follow through with becoming a contractor, a contractor agreement can get you started. For further issues or enquiries, a business lawyer may be able to assist.

Don’t know where to start? Contact us on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest lawyer marketplace.

Kyle McIndoe

Kyle worked in the content team as a legal intern for Lawpath. He is undertaking a Bachelor of Laws with a Bachelor of Psychology (Honours) at Macquarie University.