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Working as a Contractor
Working as a contractor remains a popular choice among Australians in 2025, spurred by the evolving gig economy and the increasing demand for flexible work arrangements. From an employer’s perspective, there are many factors that legally distinguish employees from contractors.
An independent contractor is someone who performs work for a company under their own ABN. Often, you’ll be operating as a sole trader – if you need further insights on managing your business structure, our article on operating as a sole trader is a great resource.
Contractors may choose to diversify their client base or work exclusively with one company at a time, depending on their business model and risk appetite.
If you’re a contractor, it can be challenging to navigate your responsibilities, particularly in complex areas such as superannuation, tax, insurance and invoicing. With the right legal advice and digital tools at your disposal, managing these obligations can become a seamless part of your business operations.
But don’t stress! Below, we’ve outlined everything you need to know if you’re working as a contractor in 2025.
Your Responsibilities as a Contractor
As a contractor, you have several responsibilities related to superannuation, tax and insurance that ensure your business remains compliant with the latest regulations.
Superannuation
Since contractors are not automatically entitled to superannuation contributions from the companies they work for, you might consider making voluntary contributions to your chosen super fund. Whether you opt for a self-managed super fund or an industry option, this proactive approach can help secure your retirement savings well into the future.
Taxation
The sharing economy faces various taxes such as Goods and Services Tax (GST), income tax, and other applicable levies. In line with the latest ATO guidelines for 2025, if you earn through digital platforms or other channels, it’s crucial to understand your tax obligations. When assessing your income tax options, you may even be eligible for a voluntary agreement with your hirer to withhold tax on your behalf.
Be mindful of the rules surrounding Personal services income (PSI), as these can affect the deductions you’re permitted to claim. For more in-depth guidance on regulatory obligations, check out our Legal Requirements for Starting a Business article.
Insurance
Contractors do not receive paid sick leave or worker’s compensation for work-related incidents. Therefore, it is essential to consider income protection insurance, liability insurance and asset/revenue insurance to safeguard your business against unforeseen events.
You can read more about the different types of business insurances here. It’s always a smart move to consult with an insurance specialist to ensure your coverage meets your specific needs.
Creating Invoices: What to include
Having a robust invoicing system is crucial for protecting your business’s cash flow, maintaining detailed records, and ensuring you meet your tax obligations. In 2025, many contractors are leveraging digital invoicing platforms to streamline these processes and stay compliant.
An invoice acts as a record of the transaction for your customers and provides details of the services or products delivered, along with the agreed price.
If your business isn’t registered for GST, your invoice remains a ‘regular invoice’ without a tax component.
However, if you make a taxable sale of more than $82.50, you are required to provide GST-registered customers with a tax invoice.
Tax invoices must be clearly labelled as a ‘tax invoice’ and include the GST amount for each item. They must contain seven compulsory elements to be valid, ensuring that they clearly detail:
- That the document is intended to be a tax invoice
- The seller’s identity
- The seller’s ABN or ACN
- The date the invoice was issued
- A brief description of items sold (including the quantity and price)
- The GST amount (if any) payable (you can learn how to calculate GST here)
- A statement indicating whether the item sold includes GST, either by showing the GST amount for each item or by noting that the total price includes GST
These tax invoices must also include the buyer’s identity or ABN if the taxable sale exceeds $1000. For further details on invoicing standards, visit the ATO’s Tax Invoices page.
While these are the basic requirements for a valid tax invoice, you can find more detailed tips to personalise your invoices here.
Different Types of Invoices
As a contractor, you have several invoicing options to suit different business scenarios. Here’s a breakdown of the most common types:
Pro forma invoice
This is a preliminary invoice sent before completing work, detailing the expected costs once services are provided. The terms in a pro forma invoice are subject to change, reflecting any adjustments that may occur during the project.
Interim invoice
For large projects, an interim invoice breaks down the total value into multiple payments throughout the project’s duration. This approach is particularly useful for maintaining steady cash flow as you can invoice as you complete different phases of work.
Final invoice
Sent after project completion, a final invoice is a demand for payment and typically includes an itemised list of services rendered and goods delivered. Issuing a final invoice promptly helps ensure a healthy cash flow for your business.
Past due invoice
This invoice is issued as a follow-up when payment has not been received by the due date indicated on the final invoice. It may include reminders as well as any applicable late fees or interest charges.
Recurring invoice
Used for regular, ongoing work where the same amount is billed at consistent intervals, recurring invoices function much like utility bills. This method is ideal for subscription services or retainer arrangements.
Credit memo
A credit memo is issued when you need to acknowledge any credits owed to a customer-often due to product returns, faulty goods, or billing errors. It is typically equal to or less than the original amount charged.
In 2025, many contractors are embracing digital solutions that automate invoicing, payment reminders, and record keeping. These innovations not only improve efficiency but also ensure compliance with the latest GST and ATO requirements. For more insights on modern invoicing practices, check out our Business Start-Up Checklist.
Talk to a Lawyer
Having a well-drafted contractor agreement is vital for securing your revenue streams and clearly outlining your payment terms. Whether you’re a business engaging a contractor or an independent contractor providing services, a solid legal foundation is essential in today’s competitive market.
If you have any questions, or if you think you might need a Contractor Agreement or a Service Agreement, feel free to reach out to us on 1800 730 617 or email team@sprintlaw.com.au for a free consultation.
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