New Contractor Provisions for Victorian WorkCover
New Provisions for the WorkSafe contractor guidelines are now in effect since 1 July 2011. In Practice there is unlikely to be significant differences in what contractors will be subject to compared to pre-existing legislation. However, the amendments do mean that certain provisions once aligned with payroll tax will now have significant differences. Notwithstanding that, in most cases, the same result will be achieved.
The main purpose of the general contractor provisions under section 8 of the Accident Compensation Act 1985 (the Act) is to deem an individual to be the worker of the hirer for WorkSafe purposes where the contractual arrangement is similar to an employment relationship. In most cases, an objective three-part test under the provisions will determine if deeming applies.
The rules for incorporated contractors under section 9 and 10 of the Act are required because an individual may be a deemed worker of a hirer under the general contractor provisions and also be a worker of their own company in respect of an instance of work. The rules clarify when an incorporated contractor is required to hold a policy, what is the rateable remuneration under that policy and how WorkSafe will handle a compensation claim received from the deemed worker.
As with the pre‐existing provisions, the amendments are broadly designed to capture payments to Contractors who work solely or mainly for the same principal. The provisions can apply regardless of whether the contractor is a sole proprietor, partnership, company or trust.
The main contractor provision deems that a contractor engaged by a principal is a worker for Victorian WorkCover purposes if all the following apply:
1. The main purpose of the contract is the provision of labour and not the provision of materials and equipment; and
2. The same individual performs 80% or more of the services under the contract; and
3. At least 80% of the contractor’s gross income (based on income for the same type of services) is derived from the principal in question.
Even if all of the above are met, WorkSafe will have the power to exclude a contractor if it determines that the contractor is carrying on an independent trade or business.