By Greg Allan, tradesman and creator of Data First Coaching
Why isn’t an ABN or an invoice enough to prove a subcontractor is a subcontractor?
Many cabinetmakers treat an ABN, an invoice, or the word “subcontractor” in a text message as proof a worker isn’t an employee. According to the ATO, having a registered business name makes no difference to the classification, and the real answer sits in the detail of the working agreement for that job, reviewed as a whole. (ATO: employee or contractor, ATO: employee or independent contractor)
A worker who runs their own installing crew on one kitchen fit-off could be genuinely independent, while the same cabinetmaker doing bench work alone in the workshop the following month, under direction and on an hourly rate, could be an employee for that job alone. The ATO also treats an employee as always a natural person: if a joinery business has engaged a company, trust or partnership to do a job, such as a specialist two pack spray run, that entity is the contractor, and the people doing the work are its employees or directors, not the cabinetmaker’s.
What does it actually cost a cabinetmaker to get this wrong?
Getting the call wrong is not just paperwork. The Fair Work Ombudsman describes sham contracting as happening when a business tells a worker they are a contractor when the relationship is really employment, often done to avoid paying entitlements such as super, leave and workers’ compensation. (Fair Work Ombudsman: sham contracting)
A joinery business that gets this wrong can face a PAYG withholding penalty for not deducting tax from pay, the super guarantee charge, and further penalties under the Superannuation Guarantee (Administration) Act 1992, on top of anything owed under the Fair Work Act. Cabinetmaking sits inside building and construction, so a cabinetmaker also needs to work out whether a Taxable Payments Annual Report is owed for payments to subcontractors doing install, site measure or fit-off work, a reporting obligation that doesn’t fall away just because this work is a small slice of total income. (ATO: work out if you need to lodge a TPAR)
What should you actually look at in your own subcontractor agreements?
Start with how each job is really run, not the label on the invoice. The ATO’s super guarantee rules treat a worker as an employee for super purposes if you pay them mainly for their labour, under a contract for their personal skill rather than a measurable result, and where they can’t send someone else to do the work, and this applies even if the worker holds an ABN. (ATO: super for independent contractors)
If your workshop supplies the CNC time, the board, the edging run and the install van, that points toward employment. If the installer brings their own ute, tools and insurance and prices the job as a finished vanity or wardrobe rather than a day rate, that points the other way. The ATO’s ruling TR 2023/4 notes that a worker bringing some of their own tools doesn’t automatically make them a contractor; the scale and cost of what they supply has to be weighed against everything else. (TR 2023/4, ATO: equipment, tools and other assets)
Does it matter if your joinery business is a sole trader or a company, or which state you’re in?
Yes, and this is where many cabinetmakers get caught out. The Fair Work Ombudsman runs two different tests for contracts in building and construction: companies, and sole traders or partnerships based in the Australian Capital Territory or the Northern Territory, use what it calls the whole of relationship test, while sole traders or partnerships based in New South Wales, Queensland, South Australia, Tasmania or Victoria use the start of relationship test instead. (Fair Work Ombudsman: contractors in building and construction)
Either way, the Fair Work Ombudsman is plain that calling someone a contractor in writing doesn’t make them one if the real relationship meets the test for employment, a myth that catches out joinery businesses that copied a subcontractor agreement from somewhere else and never checked it against the job actually being done.
This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.
How can your own job and pay data settle this instead of guessing at tax time?
The honest answer sits in your own records, not in memory of how last year’s installer was set up. Your site measure and shop drawing bookings, your workshop timesheets, who invoiced for the CNC cutting list, and who was paid a day rate versus a price for the finished kitchen, wardrobe or vanity, together show the real pattern across every job, not just the one you remember.
A data first look at that pattern, instead of a guess made once a quarter when the activity statement is due, is what tells a cabinetmaker whether last month’s subcontractor agreement actually matches how the job was run. AI agents, software that does a job the way you would, with your own prices, wording and rules, can hold that paperwork as it happens, flagging when a worker who usually quotes by the job has slipped into an hourly rate, or when a “subcontractor” has started using your tools and taking direction on site like an employee. AI agents built around your own joinery business don’t replace the judgement call, they make sure it is made from what actually happened on each install, not from a template contract sitting in a drawer.
Where can you check the current rules?
- ATO: employee or contractor, how to work it out, explains how the working agreement decides classification for tax and super.
- ATO: super for independent contractors, sets out when a contractor is treated as an employee for super guarantee purposes.
- ATO: employee or independent contractor, whole section, clears up common myths, including business names and job by job classification.
- Fair Work Ombudsman: contractors in building and construction, the tests used in building and construction, including by state and territory.
- Fair Work Ombudsman: sham contracting, what sham contracting is and why it happens.
- TR 2023/4, the ATO’s ruling on weighing up the full set of indicators.
- ATO: work out if you need to lodge a TPAR, whether a joinery business must report payments to subcontractors.
- ATO: equipment, tools and other assets, who is treated as supplying the equipment for a job.
How does Data First Coaching approach this?
Data First Coaching starts from your own job and pay records, through the Trade Business Intelligence, before any conversation about subcontractor agreements. Greg Allan looks at the pattern across every kitchen, wardrobe, vanity and install job, not the one contract an owner remembers, because that is where a joinery business actually finds out whether its subcontractor relationships match how the work is really run. From there the question becomes why the pattern formed, whether it’s pricing, control on site, or how jobs get scheduled, and that is worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member and the Academy is for owners who are open minded, innovative and willing to share what they learn.
