In the trades there are generally three types of workers, and one of the most common types are subbies.
The three main types of workers are employees, subcontractors and business owners.
Technically subcontractors can also be considered as business owners, but for the sake of this guide we will be treating them separately.
To understand exactly what makes someone a subcontractor it is important to look at the three different types of workers in more detail:
These types of workers will be employed on a full time, part time or casual basis.
As a permanent employee you will generally be entitled to superannuation, annual leave and sick leave.
Employees do not operate under their own ABN (Australian Business Number) and will have their PAYG tax withheld and paid to the ATO by their employer.
As an employee you will be covered by your employer’s workers compensation insurance, and whilst income protection insurance will not be mandatory for you, you could still benefit from having it.
As a subcontractor you work under your own ABN for one or more different people or companies.
You won’t be eligible for annual leave, sick leave or workers compensation in most cases, which therefore means income protection is extremely important and in some cases mandatory.
As a subcontractor you will have mandatory public liability requirements in most cases.
You will need to pay your own PAYG tax to the ATO, and you will also have to pay your superannuation contributions yourself.
Although subcontractors are generally working for someone, the relationship is different to that of an employer/employee.
Many of the attributes of a business owner are very similar to a subcontractor, and technically a subcontractor is a business owner anyway.
The major difference is that most business owners are working on their own projects rather than working for others.
For example a subbie may be working under the direction of the head contractor, whilst a business owner will be doing their own thing without answering to anyone other than the client.
There are always exceptions to the rules, and the information we have detailed above should only be seen as a guide rather than gospel.
If you are unsure of your status, or are wondering which structure you should go with, the best option is to speak with your accountant.