How important is independent contracting?

Independent contracting is a quintessential part of the residential building industry and underpins the high productivity rate of the industry in Australia. It is a legitimate business model which needs to be preserved for workers, businesses, consumers, and the national economy.

The rise of the ‘gig’ economy and contractors that work through online platforms is fuelling confusion regarding the definition of a genuine independent contractor.

Some of this confusion arises from the inconsistent treatment of contractors by government agencies based on varying definitions.

Make it clear

A streamlined, nationally consistent approach is essential and will ensure that more than 200,000 genuine independent contractors operating in residential building can continue to do business.

This election, HIA is calling for the establishment of one single national objective test, based on the ‘results test’, for determining who is an independent contractor for all relevant commonwealth and state legislation.

The results test forms part of the APSI test, an approach currently used by the ATO to differentiate independent contractor arrangements from PAYG employees in relation to taxation. Contractors who satisfy the APSI test qualify to utilise the business tax deductions regime.

Under the ‘results’ limb of the test an individual can make a self-assessment regarding how their income has been generated based on the traditional criteria used to distinguish independent contractors from employees, namely, working to produce a result; providing their own plant, equipment and tools of trade; and being liable to rectify defective work. This reflects the approach taken by the courts when assessing whether someone is a contractor or an employee and was just reconfirmed by the High Court.

Genuine independent contracting and the gig economy

This election HIA is also asking that any regulatory proposals to address the gig economy do not seek to extend or change the existing regulation of genuine independent contractors.

Independent contracting arrangements are a traditional and well-known feature of the residential building industry. Equally well established legal and other arrangements can and have been applied to those operating in the ‘gig’ or ‘on-demand economy’. Irrespective of commentary otherwise, evolving case law confirms that those operating in the sharing economy can be classified as either ‘employees’ or ‘independent contractors’ in line with long standing approaches.?

In seeking to define ‘gig’ workers there is potential for more stringent regulations that unduly impact genuine independent contracting.

New and evolving ways to organise a workforce have been a feature of the Australian economy for decades. This innovative spirit should be celebrated and fostered.

Independent contracting is critical!

For residential builders, independent contracting provides a flexible, workable and efficient model for engaging workers and managing the peaks and troughs of the home building cycle. Builders rely on access to good and reliable trade contractors to maintain competitiveness. For contractors it is a pathway to business ownership, career flexibility and entrepreneurship.

Home ownership matters and letting business do business, including preserving the rights of independent contractors is critical.