How to determine whether a worker is a sole trader? (2024)

By Charles Power

A sole trader is a person who provides services to you as part of a business that the worker carries on. This person is described at law as an independent contractor.

It is an offence under the Fair Work Act to represent that you have an independent contractor arrangement with a worker when you are actually in an employment relationship. But how do you tell whether a worker is an independent contractor or not?

You can determine whether a worker is a sole trader through the nature of their business activity.

Here are some distinguishing features:

• A sole trader performs work as an entrepreneur who owns and operates a business; and
• In performing the work, a sole trader works in and for their business as a representative of their own business and not yours.

A sole trader will do some or all of the following:

• Advertise in the ‘Yellow Pages’;
• Negotiate their own fees;
• Take out their own professional indemnity insurance;
• Have a business banking account;
• Operate a business-based accounting system;
• Develop goodwill (name, brand or reputation) through their work;
• Employ or sub-contract individuals to perform the work;
• Use their own standard rates and terms and conditions of trade;
• Be registered for GST;
• Have their own systems for invoicing and payment, debt collection systems and budgeting; and
• Have their own business names.

In On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (2011), the fact that the worker provided services to a number of different ‘clients’ did not mean they were a sole trader. The Court said that this feature was, on its own, no different to that of a casual or part-time employee working for a small number of employers.

A worker might be a sole trader and still trigger the same obligations for you as if they were an employee, e.g. you may have to pay payroll tax, SGC and WorkCover premiums.

Laws dealing with health and safety, privacy and anti-discrimination will still apply to a worker even if they are a sole trader.