How does a painting business tell a subcontractor from an employee in Australia?

Why do painting businesses get subcontractor vs employee wrong?

Most painting businesses answer this with the invoice: an ABN and an invoice means subcontractor, a time sheet means employee. The Australian Taxation Office and the Fair Work Ombudsman say it is not that simple, and a painter who has it wrong can be running the whole business on a false assumption without ever knowing it.

The ATO's guidance on the difference between employees and independent contractors explains that an employee serves inside the business, while a genuine subcontractor runs their own business and is engaged to produce a result for someone else's. Control is one test: an employer has the right to direct how, where and when the work is done, while a real subcontractor can choose, subject to reasonable direction. The Fair Work Ombudsman says plainly on its independent contractors page that it cannot decide the classification for any painting business; it can only point to the factors, which leaves the call with the owner.

Why does this question matter more for pricing than for tax?

For a painting business, the real risk is not the classification box, it is where the cost of that person's hour lands in the job's numbers. Whichever way the painter doing the work is engaged, employee on wages or subcontractor on an invoice, if the true cost of their time is not booked into cost of sales correctly, the quote and the margin are built on a guess.

Picture a strata repaint running alongside a busy run of new build handovers. One crew is on wages, prepping, cutting in and spraying primer and topcoats. Another is subbed in for the exterior work because the weather window is short and the scaffold is already up. If the cost of either crew sits in the wrong place, every job on both sites can look profitable on paper while the real margin has already gone into overhead, touch-up and defect rework nobody priced for.

What tests actually decide if your painter is an employee or a subcontractor?

The ATO and Fair Work Ombudsman look at the whole relationship, not one clause in the contract. Control, integration, who carries the risk for a defect, who supplies the gear, and whether the person can send someone else to finish the job all matter more than the label on the invoice.

The Fair Work Ombudsman's page on contractors in building and construction sets this out as a side by side comparison for the sector a painter works in: a contractor carries their own tools, decides how the job is done, carries the risk for the quality and completion of the work, and can engage another painter or a subcontractor to help finish it. An employee works under direction, uses a mix of the business's equipment and their own, and the painting business carries the risk and the responsibility for the standard of the finish. The ATO's own domestic painting example shows a painter on an ongoing written contract, told what to paint next, treated as an employee, against a painter engaged under a comprehensive contract to paint specified units for a retirement village, treated as a subcontractor. The same ATO ruling on this question looks at the totality of the relationship rather than any single clause, which is why a painting business cannot rely on the written contract alone. One group cannot be engaged as a subcontractor at all: the Fair Work Ombudsman is clear that apprentices and trainees working towards a trade qualification must be employees.

Does calling your painter a subcontractor get you out of paying super?

Not automatically. The ATO's page on super for independent contractors says that if a painter is paid mainly for their labour, they are treated as an employee for superannuation purposes even if they invoice with an ABN. Its own example contrasts a shop that contracts a whole painting job to a painting business, where the painting business itself may owe super to the painter doing the work, against a painter paid directly for their own labour on a job.

The Fair Work Ombudsman has flagged sham contracting, where a business tells a worker they are a contractor when they are really an employee, as an ongoing issue in building and construction specifically, noting that a worker engaged mainly for their labour is entitled to super regardless of how they are classified on paper. Painting businesses in New South Wales should also check Revenue NSW's guidance on payroll tax in building and construction, which treats some contractor arrangements as employment for payroll tax purposes; rules can differ in other states, territories and in New Zealand, so check with the revenue body where the business operates. This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.

How do you know what that painter's time really costs your business?

The number that tells the truth is the true cost of operations per billable hour, built from wages or subbed rates, super, insurance and overhead, set against the hours actually spent painting rather than the hours paid. Until that cost sits correctly against the job, a quote built from memory or from the bank balance is a guess dressed up as a number.

Picture a painter running two crews, one on a commercial strata repaint, one on a colour consultation and feature wall job for a new build, mixing employed painters with subbed-in labour to cover the busier run. He could not get an accurate cost of operations figure. Non-billable hours, driving between sites, loading the paint supplier account, waiting on weather, were loading a heavy overhead cost onto every individual job, so every job looked unprofitable. Stripping those non-billable hours back out dropped the figure so low it was clearly wrong too, which told him the whole costing picture, not just one job, was broken.

AI agents can pull the actual wages and overhead figures straight from a painting business's live job and finance data and work out the true cost of operations, with billable hours properly factored in. An AI agent is simply software that does a job the way the owner would, with their prices, wording and rules, so it can do this pull and this calculation without the owner stopping mid-job to do it by hand. All the overhead and non-billable cost now sits in its own bucket instead of being spread across every job, and AI agents like this keep the costing current as crews, sites and the mix of employed and subbed labour change. That is a data first way to answer the sub or employee question profitably as well as correctly: start from the business's own numbers, not from memory of what a painter costs to put on a job.

Where can you check the current rules?

• Difference between employees and independent contractors, the ATO's main test for working out whether someone on the tools is an employee or a subcontractor.
• Independent contractors, Fair Work Ombudsman, what the Fair Work Ombudsman can and cannot tell a painting business, and the test that applies to existing arrangements.
• Super for independent contractors, when a subcontractor is still owed super because they are paid mainly for their labour.
• Contractors in building and construction, Fair Work Ombudsman, a side by side comparison built for the building and construction sector, including apprentices and trainees.
• Sham contracting in the spotlight, the Fair Work Ombudsman and ATO on the risk of calling an employee a contractor.
• Domestic painting, independent contractor, the ATO's own worked examples using a domestic painter.
• Employee or independent contractor ruling, the detailed ATO ruling the shorter guidance is drawn from.
• Payroll tax and the building and construction industry, Revenue NSW, how contractor arrangements are treated for payroll tax in New South Wales.

How does Data First Coaching approach this?

Data First Coaching does not start with the contract wording, it starts with the painting business's own job and finance data through the Trade Business Intelligence. Greg Allan's method looks at where the cost of every person on the tools, employed or subbed, actually lands against the jobs they worked, because that is usually where the real problem sits, not in the classification label itself. From there it works out whether pricing, utilisation or the mix of employed and subbed labour is the root cause worth fixing first. The how, the exact costing build and the agents behind it, is worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member and the Academy is built for owners who are open minded, innovative and willing to share what they learn.