Are Software Developers Independent Contractors or Employees in Australia?

Whether a developer is an employee or an independent contractor turns on the real working arrangement, not just the label on the invoice. An ABN alone does not make someone a contractor, and calling the relationship a contract does not prevent a later finding that it was employment.

The consequences extend beyond wages to sham contracting penalties, payroll tax, superannuation and who owns the intellectual property the developer creates.

The legal test

In CFMMEU v Personnel Contracting Pty Ltd [2022] HCA 1, the High Court held that where the relationship is wholly in a written contract, the contract’s terms are central to whether a worker is an employee. That decision focused attention on the written terms where a comprehensive contract existed.

From 26 August 2024, s 15AA of the Fair Work Act 2009 (Cth) requires the real substance, practical reality and true nature of the relationship to be considered, looking at the totality including how it operates in practice. The provision directs attention to how work is actually performed, not only what the contract says.

Misrepresenting employment as an independent contracting arrangement is prohibited sham contracting (s 357). A business that engages a worker as a contractor while treating the worker as an employee may be found to have misrepresented the relationship.

Payroll, super and IP

Contractors can still be treated as employees for superannuation guarantee purposes if paid mainly for their labour, and Queensland payroll tax can apply to certain contractor payments. That means a business that pays a contractor for labour may still have super and payroll tax obligations even where the worker is not an employee for other purposes.

Employees’ work created in the course of employment is generally owned by the employer (s 35(6)). Contractors keep copyright unless assigned in writing (s 196(3)). Where a developer is misclassified, the business may discover it does not own the code it paid to have written, because the contractor retained copyright and no assignment was signed.

Example

A developer on an ABN works 38 hours a week for one startup, uses the company’s laptop, attends daily standups, cannot delegate the work and invoices monthly. The contract says the developer is an independent contractor. On the totality of the real substance, the arrangement may still be found to be employment for some purposes, with sham contracting, super, payroll tax and IP ownership consequences. A contractor who had a genuine business, could delegate, set hours and worked for multiple clients would point the other way.

See Also

• Queensland startup legal guide
• Who owns copyright in AI-generated code?
• Restraint of trade and your lead developer
• Written employment contracts in Queensland

This page provides general legal information only; it is not personal legal advice. Everyone’s situation is different, so please seek independent legal advice for your own circumstances.