Legal Considerations to Make Before Becoming a Contractor

As a contractor, it’s important to understand what your legal rights are as they differ from those of an employee. In this article, we’ll explain what you should consider if you want to work on a contractual basis.

Main legal considerations

Contractors need an ABN to deal with other businesses. Further, an ABN ensures that your hirer cannot legally withhold the top rate of tax from your payment. You will need to pay your own tax and GST.

Depending on the work you do, you may need to acquire a specific licence. For example, you will need a licence if you’re going to be undertaking electrical work.

Contractor Protection

The specific tasks covered by a contractor are specified in a Contractor Agreement. Under the Fair Work Act (2009), contractors are protected from:

  • Adverse action: A business cannot fire a contractor on the basis of a complaint to a regulator about their workplace rights. 
  • A company cannot coerce a contractor into doing something. 
  • A contractor will not be restricted from joining a trade union or another employer group.

Contractor responsibilities

As a contractor, you do not have minimum wage entitlements. Further, you are not entitled to paid sick or annual leave, as well as financial risk insurance.

The onus of making a profit or loss on each job is also up to you and you will not be entitled to workers’ compensation. Due to this, it’s important to have an adequate insurance policy.

Further, income insurance will help to manage the contractor’s expenses. It is useful if they are unable to find work. However, some companies will offer this kind of insurance.

Other forms of insurance that you might want to consider are:

  • Liability insurance: It will cover the damage or injuries that you may cause to other people or property while working. 
  • Asset and revenue insurance: It will cover the loss, damage or theft of your work-related assets or revenue. 


Ultimately, contractors have the freedom to dictate their working conditions, but in doing this, you also need to ensure you comply with national rules. This includes acquiring an ABN, paying tax, and paying superannuation. If you’re unsure about how to be legally compliant, consult a business lawyer near you.

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.

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