If the role looks more like ongoing employment than a project-based engagement, use an Employment Contract.
What's the difference between a contractor and a subcontractor
A contractor works directly for a client. A subcontractor is hired by another contractor to help complete part of a job — often a specialised task.
If you're a contractor bringing on extra help, use a Subcontractor Agreement to set the terms.
How to determine worker classification
The Australian Taxation Office (ATO) and the Fair Work Ombudsman use a "whole of relationship" test to decide whether someone is a contractor or an employee. They look at the full picture, not just the label in the contract.
Factors include:
- Who controls how the work is done
- Whether the worker can subcontract or delegate
- Who supplies the tools and equipment
- Whether the worker bears commercial risk
- How payment is calculated
What to include in an Independent Contractor Agreement
A strong Independent Contractor Agreement covers more than just the fees. Each clause protects one or both parties and removes the grey areas that lead to disputes.
Parties and engagement details
Naming the contractor and client in full — along with ABN, ACN, and address details — makes it clear who's bound by the agreement.
It also helps establish the contractor as a separate business entity, which matters if the relationship is ever scrutinised for tax or worker classification purposes.
Scope of work and deliverables
The scope is where most contractor disputes begin.
A clear description of services, deliverables, and milestones provides both parties with a shared reference point when expectations drift, deadlines slip, or the client requests work that wasn't part of the original deal.
It also makes it easier to prove the work was (or wasn't) completed as agreed.
Payment terms
Setting out the fee structure protects the contractor's right to be paid and provides the client with certainty about costs.
The terms also reduce the risk of cash flow issues, late payments, and disagreements over what's included.
Common structures include:
- Flat fee: A single payment for a defined piece of work.
- Hourly, daily, or weekly rate: Paid based on time spent.
Addressing GST, invoicing, due dates, and interest on overdue amounts up front avoids confusion when invoices land.
Term and termination
A defined term tells both parties when the relationship starts, when it ends, and what happens in between.
Termination clauses give each party a lawful way to exit if circumstances change, without exposing either party to a breach-of-contract claim.
If you need to formally end an existing arrangement which does not include termination provisions, a Termination Agreement can record the terms.
Intellectual property (IP) rights
Without an IP clause, ownership of the work the contractor produces can default to the contractor — even when the client paid for it.
If the contract will involve the creation of intellectual property, spelling out who owns deliverables and who retains rights to any pre-existing tools or materials prevents costly arguments over the use, resale, or modification of the work later.
Confidentiality
Contractors often encounter sensitive information, such as client lists, pricing, strategies, or trade secrets. A confidentiality clause limits how that information can be used and shared, both during and after the engagement.
It also gives the client a contractual basis to act if information is leaked. For stronger or standalone protection, or if it turns out the engagement will involve access to material not originally envisaged when the contract was signed, pair the agreement with a Non-Disclosure Agreement.
Relationship of the parties
Stating that the contractor isn't an employee reinforces the nature of the engagement. This matters if the ATO, Fair Work Ombudsman, or a court later examines the relationship for signs of sham contracting or misclassification.
Remember though, the actual conduct of the parties and the reality of the working arrangement are more important than the paperwork.
Insurance and liability
Insurance and indemnity clauses decide who carries the financial risk when something goes wrong, whether that's property damage, a professional mistake, or a third-party claim.
Without them, liability can fall on whichever party is least able to absorb it, regardless of who was actually at fault.
Restrictive covenants
Non-compete and non-solicitation clauses can stop a contractor from competing with your business or poaching staff and clients for a defined period.
Australian courts will only enforce these clauses if they're reasonable in scope, duration, and geographical extent.
Independent contractor laws in Australia
Several pieces of legislation govern contractor relationships in Australia:
- The Independent Contractors Act 2006 sets out protections for contractors and allows unfair contracts to be reviewed.
- The Fair Work Act 2009 includes sham contracting provisions that prevent employers from disguising employment as a contractor arrangement.
- ATO rules on ABN registration, GST, and tax reporting for self-employed workers.
Contractors are generally responsible for their own tax, GST registration (if turnover exceeds the threshold), and superannuation — though some contractors paid mainly for their labour may be entitled to super contributions from the hiring business.
How to write an Independent Contractor Agreement
LawDepot's template walks you through each section in under 5 minutes. Here's what to expect:
- Choose the service type and location: Pick the kind of service being done and the state or territory where it'll be performed. The agreement is customised to local rules.
- Add the parties' details: Enter the contractor's and client's names, addresses, and ABN or ACN where relevant.
- Set the duration and scope: Decide whether the work runs until complete, ongoing, or until a set date. Describe the services in thorough detail; each service detail you add builds a bullet point list in the document.
- Choose the payment terms: Select a flat fee, hourly rate, or other structure. Add invoicing schedules, sales tax treatment, retainer details, and late-payment interest if applicable.
- Set the termination terms: Decide whether either party can terminate the contract, and on what grounds. Specify notice periods and any conditions that apply.
- Cover expenses, IP, and confidentiality: Decide who will reimburse expenses, who owns the intellectual property, and for how long confidentiality applies.
After adding a signing date and witnesses, you can also electronically sign your completed agreement with eSign to speed up turnaround and avoid the hassle of booking appointments or travel.
Common mistakes to avoid when writing an Independent Contractor Agreement
A few small oversights can turn a contractor arrangement into a costly dispute. Watch out for common mistakes such as:
- Vague scope of work: "Build a website" isn't enough. List pages, features, revisions, and deadlines. Our questionnaire allows you to enter separate service details, which are used to build a bullet-point list.
- No IP assignment clause: Without one, the contractor may legally own the work product you paid for.
- Skipping insurance details: Unclear cover leads to arguments when something goes wrong.
- Forgetting GST treatment: State whether the fee is inclusive or exclusive of GST.
- No termination clause: If the relationship sours, you'll need a clean way to exit.
LawDepot's Independent Contractor Agreement template questionnaire prompts you through every one of these points, so no crucial components or steps get missed in the final document.
Independent Contractor Agreement FAQs
