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

What actually decides if a tiler is a subcontractor or an employee?

There is no single form, ABN or invoice heading that settles it. According to the ATO, whether a tiler is an employee or an independent contractor comes from the whole working agreement between the tiling business and the person doing the waterproofing, screed or floor preparation, whether that agreement is written, verbal, or a mix of both. For a tiling business taking on help for a bathroom renovation, that means looking at how the job is actually run, not what the invoice says.

The ATO says “To check if your worker is an employee or independent contractor, you need to review the whole working arrangement.” That review covers who carries the risk on a leaking shower recess, who supplies the tools, adhesive and levelling clips, and who the builder actually deals with on site. The ATO also treats a business as always contracting, never employing, when it engages a company, trust or partnership to do the tiling, even though the person on the tools might be a director or employee of that entity.

Why does this get confusing on a bathroom or wet area job for a builder?

It gets confusing because a tiler can look like a subcontractor on paper and still behave like an employee on site, especially when a builder controls the schedule, the falls and the sign-off on waterproofing. The ATO’s building and construction example applies the same tools-and-site test to real trades, and it can land either way depending on who turns up with what.

In that example, a worker who must do the work personally, and whose materials and equipment are contractually supplied by the business engaging them, points toward an employee relationship. A worker who services different customers in response to changing demand, and brings their own equipment, points toward an independent contractor relationship. A tiling business that moves people between a builder’s renovation, its own bathroom jobs and the occasional splashback or large format floor needs to notice that this can change job to job. A tiler laying screed and membrane for one builder on a day rate, using the builder’s gear, sits in a different position to a tiler quoting a square metre rate on their own tile supply and carrying their own warranty on the wet area.

What should you check before you call someone a subcontractor?

Before you book a tiler as a subcontractor rather than an employee, check whether they carry their own tools, set their own price, quote by the job or the square metre rather than a wage, and answer for their own waterproofing warranty. Some roles never pass that test, whatever the paperwork says.

The ATO states “If you are working as an apprentice, labourer, or trainee you will always be an employee for tax and super purposes.” That rules out treating an apprentice tiler as a sub no matter how the invoice is written. Licensing adds another layer, and it is a different test to the tax one. In New South Wales, NSW Fair Trading says “You must have a licence or certificate to do wall and floor tiling work.” In Western Australia, Build a Life WA notes a tiler employed by a registered builder does not need their own licence, while contracting work above a set value does require registration, and that “Each state and territory in Australia have individual licensing requirements.” None of this on its own decides employee versus contractor status for tax and super purposes, but it shapes who can legally run the job as their own business.

What happens if the paperwork does not match the real job?

Getting it wrong is called sham contracting. The Fair Work Ombudsman says “Sham contracting is misrepresenting an employment arrangement as an independent contractor arrangement.” It also notes employers can now be required to show they reasonably believed a worker was a genuine contractor at the time, rather than relying on a lower standard of care. The Victorian Government adds that “The distinction between an employee and independent contractor is based on many factors,” so an ABN or an invoice on its own proves very little.

There is also a super obligation that sits alongside this. The ATO’s guidance on super for independent contractors explains that super can still be owed where a contract is mainly for a person’s labour, for their personal skill rather than a result, and cannot be delegated to someone else. That can catch a tiler engaged as a sole trader whose day-to-day work looks like an employee’s. The same page notes that if the business instead contracts with a company, trust or partnership, it does not owe super for the person that entity employs. This is general information, not legal, tax or employment advice. Check your own situation with the body named here or a qualified adviser.

This is where the paperwork starts costing real time, not just sitting in a drawer. Keeping a record of who did the waterproofing and screed, on whose tools, for which builder, as each job happens is the kind of task an AI agent, software that does a job the way you would, using your prices, your wording and your rules, can carry without anyone in the office setting time aside for it.

How does this change what your margin figures actually mean?

If the tiler doing your waterproofing and screed is really an employee but is booked through the invoices as a subcontractor, the real cost of that bathroom job is sitting in the wrong place, and the gross profit margin you read off it is not telling you the truth. Fixing the classification is not just a compliance step, it is what makes the number mean something.

A day rate paid to a genuine sub sits differently in the books to a wage, super and workers compensation cost for an employee doing the same tiling. If a tiler is misclassified, cost of sales can look lighter than it really is, and a bathroom renovation that looks profitable on paper is quietly eating the margin on the next one. This is the data first point: a decision about who is on the books as a sub and who is part of the crew should come from what the job and pay records actually show about risk, tools and control, not from habit or what was done last time. Once that record is accurate, an AI agent can keep flagging any new engagement that looks more like an employee than a sub before it ever reaches the books the wrong way, so the margin figure a tiling business owner reads at the end of the month reflects the job that was actually done.

Where can you check the current rules?

• Employee or contractor, how to work it out: the ATO’s main test for reviewing the whole working arrangement.
• Building and construction industry examples: worked examples close to tiling and other trades.
• Wall and floor tiling work, NSW: NSW licensing requirements for tiling work.
• Super for independent contractors: when super is still owed on a contract.
• Independent contractor changes, Fair Work Ombudsman: sham contracting and the employer’s defence.
• Sham contracting in building and construction, Victoria: Victorian guidance on what counts as sham contracting.
• Wall and floor tiler, Build a Life WA: Western Australian licensing for tilers.
• Employee or independent contractor, individuals: the ATO’s note that apprentices and labourers are always employees.

How does Data First Coaching approach this?

Data First Coaching starts from the tiling business’s own job and pay records through the Trade Business Intelligence, not from a description of how the business usually engages people. It looks at where labour cost actually sits against each job, whether that matches how the work was really run, who held the risk, whose tools, who the builder dealt with, and where the margin figure is quietly wrong because of it. Greg Allan has talked about the real test being closer to “subcontracting for a mate of mine” than a line on an invoice. The how, working through each engagement and fixing the books, is worked through inside the Academy, with members, because the Trade Business Intelligence is powered by every member, for owners who are open minded, innovative and willing to share.