Do contractor payments count for WA payroll tax?
Paying subbies in WA and not sure if their invoices count for payroll tax? They count if the work is really like a job, even when the worker has an ABN. If so, the whole payment counts, less GST.
WA has its own rules on this. So advice about other states may not apply here.
Checked against Revenue WA's rules · 4 November 2026
Work out your WA payroll taxHow do I know if my subbie is really a contractor?
Revenue WA looks at the whole relationship. No single thing decides it. It's likely to accept someone as a contractor if all 5 of these are true:
- They're paid for a result. It's a fixed fee for a finished job, not pay for their time.
- They bring more than tools. They supply the materials or equipment the job needs.
- They can send someone else. They're free to hand the work to another person.
- They can lose money. They carry real costs in running a business.
- They work for the public. They offer their services to anyone, not just you.
Missing one or more? It doesn't mean they're an employee. Revenue WA then looks closer at the whole picture. But if most are missing and they're paid by the hour, it's likely to be employment.
An ABN doesn't settle it. Revenue WA says an ABN, a written contract, a company, their own tools or an ATO ruling won't decide it alone. What happens on site matters most.
Does my subbie count? Common situations
These come from Revenue WA's own examples. They show the likely direction, not a ruling on your business.
| The worker | Do payments likely count? |
|---|---|
| Landscaper paid a fixed $10,000 for a finished garden | Probably not. It's a fee for a result. |
| Sparky with their own tools, installing materials you supply | Probably yes. Revenue WA calls this labour only. |
| Construction worker paid by the hour | Probably yes. It's pay for time, not a result. |
| Truck driver with their own truck who also works for others | Maybe not. It may be a real business. |
| Full-time driver paid hourly, driving your truck | Probably yes. That's unlikely to be a separate business. |
| Fruit pickers paid per bin | Probably yes. Piece rates aren't a result, and it's not their own business. |
| Salespeople on commission, doing the same work as your staff | Probably yes. They're part of your business. |
| Worker invoicing through their own company or trust | It can still count. If it cuts payroll tax, Revenue WA can look through the company. |
| Temp from a labour hire firm | Not on your return, usually. The agent is treated as the employer. |
What it does to your payroll tax, with real numbers
- $65,000 + $25,000 = $90,000A Perth builder pays $65,000 a month in wages. It also pays subbies $25,000 a month, not counting GST. If those payments count, the month is over $83,333. It must register within 7 days after that month ends.
- $780,000 + $300,000 = $1,080,000Now the full year. On wages alone, $780,000 is under $1 million, so the tax is nil. With the subbies, it's over.
- $1,000,000 − $80,000 × 2/13 = $987,692.31The deduction. It's $1 million, less $2 for every $13 over $1 million.
- $92,307.69 × 5.5% = $5,076.92The tax for the year. That's $1,080,000 less the deduction, taxed at 5.5%. So calling those subbies contractors or not is the difference between $0 and $5,076.92.
- $33,000 ÷ 1.1 = $30,000GST doesn't count. On a $33,000 invoice that includes GST, $30,000 is the taxable amount if the relationship is like employment.
What if the invoice has labour and materials?
This one's less clear, so here's what each source says:
- Revenue WA's guide says all payments count once the relationship is like employment, less GST.
- Its ruling doesn't give a way to split labour from materials. It does say supplying materials points towards a real contractor.
- Accounting firm RSM says only the labour part is potentially taxable on a mixed contract.
So don't assume. If big invoices mix the two, ask for separate labour and materials on each invoice. Then get Revenue WA's answer in writing.
What to do next
- List everyone you pay on invoice. Note how each is paid and who supplies the materials.
- Check each one against the 5 signs above.
- Fill in Form FPRT6 for each type of contractor you're unsure about.
- Take it to your tax agent, or send it to Revenue WA and ask for written advice.
- Run the numbers with those payments included. If a month goes over $83,333, check when you have to register.
This is general information, not advice. Each case turns on its own facts, and only Revenue WA or a court can decide yours. See the Revenue WA contractor guide or ask a registered tax agent. Only WA rules are covered. Other states use different contractor rules.
Words you might not know
- Payroll tax
- A state tax businesses pay on the wages they pay.
- Subbie
- A subcontractor. Someone you pay on invoice to do part of a job.
- ABN
- Australian Business Number. Having one doesn't prove someone runs a real business.
- Common law
- Rules built up from court decisions, rather than written in an Act.
- Given result
- A finished outcome you agreed to pay for, rather than time spent working.
- Tools of trade
- The hand tools a worker normally brings. They don't make someone a contractor.
- Employment agent
- A business that supplies workers to clients for a fee, like a temp agency.
- Harmonised
- When states agree to use the same rules. WA doesn't on contractors.
Questions people ask
Do contractor payments count for WA payroll tax?
They do if the relationship is really like employment. Revenue WA looks at how the work runs in practice, not what the contract calls it. If it's like a job, all the payments count, less any GST.
My subbie has an ABN. Does that mean payroll tax doesn't apply?
No. Revenue WA says an ABN doesn't settle it on its own. Neither does a written contract, a company, the worker's own tools or an ATO ruling.
Does WA have the same contractor rules as other states?
No. Revenue WA says WA isn't harmonised with other states on contractors. WA uses the ordinary common law meaning of employee. If you pay contractors in another state, check with that state's revenue office.
Do contractor payments count towards the $83,333 monthly test?
Yes, if they're taxable wages. Taxable contractor payments are added to your wages for the month. So $65,000 of wages plus $25,000 of taxable contractor payments is $90,000, which is over the line.
Is it only the labour part of a subbie's invoice that counts?
Revenue WA's guide says all payments count once the relationship is like employment, less GST. Its ruling gives no way to split labour from materials. Some advisers say only labour is taxable on a mixed contract, so ask Revenue WA in writing if a big invoice has both.
Who pays payroll tax on labour hire workers in WA?
Usually the employment agent. The law treats the agent as the employer. If an agent charges you $200 a day and pays the worker $140, payroll tax applies to the $140, and the agent pays it.
How do I find out for sure if my contractors count?
Fill in Revenue WA's Form FPRT6 for each type of contractor. You can use it with your tax agent, or send it to Revenue WA and ask them to review the arrangement and advise you in writing.
For detail-lovers: Revenue WA's 8 questions and official sources
From Schedule 1 of Ruling PT 6.1. If most answers are yes, it's a strong sign of employment:
- Paid on a time basis, like an hourly rate, rather than per job?
- Contract wholly or mainly for labour?
- Do you have the authority to control how the work is done?
- Blocked from delegating or subcontracting without approval?
- Engaged for a long period or on a continuing basis?
- Are the services normally needed in your business?
- Is the work similar to what your employees do?
- Are the work hours set?
Control means the right to direct the work, even if you never use it. Last checked 4 November 2026.
- Revenue WA: Contractor payments, Payroll Tax Employer Guide. WA isn't harmonised, common law test, GST excluded, employment agent example. Page updated 16 February 2024.
- Revenue WA: Revenue Ruling PT 6.1, Guidelines on Subcontracting Arrangements and Employment Agents, with addendum. The 5 signs (para 52), Schedule 1 and the worked examples. Ruling history: PT 6.1 dated September 2011.
- Revenue WA: Form FPRT6, Questionnaire: Contractor Payments.
- Revenue WA: Calculation. 5.5% rate, $1,000,000 threshold and 2/13 tapering value, in effect from 1 July 2023.
- RSM Australia: Understanding payroll tax risks for WA construction firms. An adviser's view on mixed labour and materials contracts, not an official source. Last modified 13 June 2025.
Related
- WA payroll tax calculatorYearly WA payroll tax with the $1 million threshold, the shrinking deduction and interstate wages.
- Do I have to register for payroll tax in WA?The $83,333 monthly test, the 7 day deadline and bonus months.