Australia is easy to pay and strict about labels. A contractor with an ABN invoices in AUD, GST normally does not apply to a foreign client, and the payment is a plain bank credit. The risk is classification: since 26 August 2024 the Fair Work Act asks for the real substance of the relationship, and misdescribing an employee as a contractor is sham contracting, penalised per contravention. If the work is genuinely independent, an Australian contractor is straightforward to engage.
The classification test and sham contracting
A constitutionally covered business, which includes a foreign corporation, uses the whole of relationship test: the real substance, practical reality and true nature of the relationship, including the contract’s terms and how it is performed in practice (fairwork.gov.au, checked 2026-10-07). State referred businesses, such as sole traders and partnerships in NSW, Victoria, Queensland, South Australia and Tasmania, use the older start of relationship test. Whether a given foreign payer with no Australian presence falls within the Act is a question for Australian counsel.
The factors are control over how work is done, financial responsibility and risk, who supplies tools, the right to delegate or subcontract, hours of work and the expectation that the work will continue. A worker with an ABN or who issues invoices is not automatically a contractor (fairwork.gov.au, checked 2026-10-07). See contractor misclassification.
Sham contracting is telling a worker they are a contractor when you do not reasonably believe it, or dismissing an employee to re-engage them as a contractor for the same work. Courts can impose up to AUD 21,840 per contravention on an individual, AUD 109,200 on a business under 15 employees and AUD 546,000 on a larger one (fairwork.gov.au, checked 2026-10-07). Since February 2024 the defence is a reasonable belief rather than a lack of recklessness.
Contractors earning under the high income threshold, AUD 190,100 from 1 July 2026, can also ask the Fair Work Commission to set aside unfair terms in a services contract, where there is a constitutional connection (fairwork.gov.au, checked 2026-10-07; fwc.gov.au, checked 2026-10-07).
ABN, GST and the contractor’s tax
The contractor is a sole trader or a Pty Ltd company with an ABN, which goes on every invoice. Resident sole traders pay income tax at nil to AUD 18,200, 15% to AUD 45,000, 30% to AUD 135,000, 37% to AUD 190,000 and 45% above, plus the 2% Medicare levy (ato.gov.au, checked 2026-10-07).
GST. Registration is required at AUD 75,000 of GST turnover (ato.gov.au, checked 2026-10-07). A service supplied to a recipient outside Australia and used outside Australia is GST-free (ato.gov.au, checked 2026-10-07), so a registered contractor still shows no GST on the invoice to you.
Companies and personal services income. Income a company or trust earns mainly from an individual’s skills falls under the PSI rules unless the contractor self-assesses as a personal services business: the results test for 75% of that income, or another test plus the 80% rule, under which less than 80% may come from one client and its associates (ato.gov.au, checked 2026-10-07). A one-client company gets no relief from incorporation.
Super and payroll tax on contractors
Super. The ATO treats a contractor as an employee for super if the contract is mainly for their labour (more than half its value), pays for personal labour and skills rather than a specified result, and requires the work to be done personally; an ABN does not change that. The 2026–27 guarantee is 12% (ato.gov.au; ato.gov.au, checked 2026-10-07). A contract for a deliverable with acceptance criteria sits on the other side of that line.
Payroll tax. States tax wages, and NSW counts payments to contractors as taxable wages unless one of seven exemptions applies, including services for 90 days or fewer, or 180 days or fewer, in a financial year. The rate is 5.45% above AUD 1.2 million a year (revenue.nsw.gov.au; thresholds, checked 2026-10-07). Where services are performed wholly in one state in a month, tax is payable there (nexus provisions, checked 2026-10-07). Other states set their own rates and thresholds; keep records of the contractor’s ABN and the written contract.
What to put in the contract
- A written services agreement, scoped to deliverables, rate, currency and acceptance, not to hours.
- IP assignment in writing. The author owns copyright, and the employer exception applies only to a work made under a contract of service (Copyright Act 1968 s35, checked 2026-10-07). An assignment has no effect unless it is in writing and signed by the assignor (s196). Moral rights stay with the author; a written, specific consent covers acts that would otherwise infringe them (s195AWA).
- Independence markers: the contractor’s own tools and schedule, the right to delegate and to serve other clients.
Paperwork on your side
Pay against invoices that show the contractor’s ABN. The ATO tells a payer to withhold 47% from a supplier that does not quote an ABN (ato.gov.au, checked 2026-10-07); whether it reaches a foreign payer with no Australian presence is not stated, so ask for the ABN every time. US payers collect Form W-8BEN from a sole trader or W-8BEN-E from a company; work performed in Australia is foreign-source income, so no 1099 (irs.gov, checked 2026-10-07). Keep contract, invoices and proof of payment.
How to pay contractors in Australia
| Method | What the contractor sees | Notes |
|---|---|---|
| Wise AUD payout | AUD to a BSB and account number or PayID | Usually 0–2 working days; up to AUD 5 million per transfer |
| SWIFT wire | Credit to an AUD or foreign-currency account | CommBank charges up to AUD 11 to receive; intermediary charges possible |
| Payout platform | AUD or other currency per platform | Contract and documents often in the same flow |
Sources: wise.com; commbank.com.au, checked 2026-10-07. There is no currency control, and banks report international transfers of any value to AUSTRAC (austrac.gov.au, checked 2026-10-07). Rails, timing and failure points are on our Australia payouts page.
Platforms that cover Australian contractors
The platforms we rate document Australia in their country lists, but check the current state on each provider’s own site. Broad global platforms (Deel, Remote, Multiplier, Oyster, Native Teams), Wise for the transfer alone and 4dev.com cover Australia. Full field: contractor payouts rating and contractor management rating.
Contractor of Record and EOR in Australia
A Contractor of Record is the contracting party for the contractor and reduces reclassification risk; it does not change the facts of the relationship, so read the liability clause rather than the product name. 4dev acts as Contractor of Record, the contracting party for each contractor. For work that is really a job, hire through an Employer of Record; our Australia EOR page covers employer costs and providers. Compare providers in our COR rating.