Immediate answer
Sham contracting is when a business presents a worker as an independent contractor even though, in reality, the worker should be treated as an employee. For working holiday makers, students and other temporary visa holders, this often appears as: “You need an ABN,” “no payslip,” “cash or invoice only,” or “contractors do not get minimum wage.”
Do not assume an ABN makes the arrangement legal. A person can have an ABN and still be an employee for the work they are actually doing. The Fair Work Ombudsman and the ATO both say the real relationship matters: who controls the work, how the person is paid, whether they can genuinely run their own business, and whether the arrangement is being used to avoid workplace obligations.
If the job looks like ordinary shift work — rostered hours, one boss, one workplace, uniform or tools controlled by the business, no real ability to quote a price or send someone else — treat “just get an ABN” as a red flag and check official sources before accepting.
Why this matters for visa holders
Sham contracting can hide several problems at once:
- underpayment below the legal minimum or award rate;
- no payslips or unclear records;
- unpaid superannuation where it should be paid;
- tax and ABN problems shifted onto the worker;
- unpaid trials or “training” framed as contractor time;
- deductions for accommodation, transport, equipment or admin fees;
- threats that complaining will affect a visa or future work.
For working holiday makers doing regional or short-term jobs, the risk is practical as well as legal. If a worker cannot prove who employed them, what they were paid, where they worked and when they worked, it becomes harder to resolve pay problems and harder to keep reliable records for later decisions.
Red flags / what to watch
A contractor arrangement needs extra checking when:
- the business says every worker must get an ABN before starting;
- the job is advertised as casual hourly work, but the paperwork says “contractor”;
- the worker is paid a flat cash amount with no payslip, invoice detail or written rate;
- the business controls the roster, workplace, uniform, tools, method of work and breaks;
- the worker cannot negotiate the price, reject work, subcontract the work or send another qualified person;
- the worker is doing the same job beside employees but with fewer rights;
- the business says “contractors do not get minimum wage,” “you pay your own super,” or “tax is your problem”;
- the worker is charged “admin,” “placement,” “transport,” “accommodation,” or “invoice processing” fees before they understand the pay;
- the recruiter, hostel or labour-hire contact will not give the legal business name and ABN;
- the worker is warned not to contact Fair Work, the ATO, a union or an interpreter.
One sign alone does not prove sham contracting. But several signs together are enough to pause, save records and check.
Employee or contractor: the practical difference
The label in a message or contract is not the whole answer. Official guidance looks at the real working arrangement.
An employee-style arrangement usually has signs like:
- the business directs when, where and how the work is done;
- the worker is paid for time worked, such as hourly shifts;
- the worker cannot send someone else to do the work;
- the business provides the main tools, systems, uniform or instructions;
- the worker is part of the business’s ordinary workforce.
A genuine contractor-style arrangement usually has signs like:
- the worker operates a business and can make a profit or loss;
- the worker quotes or negotiates a price for a result;
- the worker controls how the work is done;
- the worker can accept or reject jobs and may work for multiple clients;
- the worker may provide significant tools, insurance or business systems;
- the worker may be able to subcontract or delegate the work.
Many real situations are mixed. That is why official advice matters. Do not rely only on what a recruiter, boss, hostel or community-group post says.
What to check before accepting “ABN work”
Before starting, ask for the basics in writing:
- the legal business name;
- the ABN, and whether it matches the business name on ABN Lookup;
- the worksite address;
- the name of the person directing the work;
- the hourly rate, piece rate or job price;
- whether pay includes or excludes superannuation, tax, GST or deductions;
- whether you will receive payslips, invoices or both;
- what award or agreement the business thinks applies;
- whether the role is employee, casual employee or contractor, and why.
An ABN lookup can confirm that a number exists and who it is registered to. It does not prove that the worker is legally a contractor. It is only one record check.
If you already started
Do not panic. Start preserving evidence quietly:
- screenshots of the job ad and messages;
- the ABN, business name, phone numbers and addresses used;
- rosters, timesheets, invoices, payslips or missing-payslip notes;
- bank transfers, cash records and deductions;
- photos of signs, uniforms, equipment or work locations;
- names of supervisors, labour-hire contacts, hostels or transport providers;
- any threats about visas, police, blacklisting or future work.
Then use official help. Fair Work is the starting point for sham contracting and workplace rights. The ATO is relevant for tax, ABN and employee/contractor classification. If you need language support, call TIS National on 131 450 and ask to be connected to the official service.
If there are threats, passport control, debt, restricted movement or fear of leaving, treat it as a safety issue too. Use the official help directory rather than trying to classify the problem alone.
What employers and supporters should do
If you employ, supervise, host, teach or support working holiday makers:
- do not tell someone to “just get an ABN” to make a normal job cheaper;
- do not use contractor labels to avoid minimum wages, payslips, super or record-keeping;
- give the legal employer name, ABN, rate, deductions and payslip process up front;
- keep written records and make them understandable to someone new to Australia;
- avoid public confrontation if a worker is scared of a recruiter, landlord or boss;
- help the person contact Fair Work, the ATO or TIS National from a private phone if they ask.
The safe response is not to diagnose the entire legal relationship yourself. The safe response is to preserve evidence and route the person to official advice early.
Relevant references
- Fair Work Ombudsman — Sham contracting: explains sham contracting and workplace protections against misrepresenting employment as independent contracting.
- Fair Work Ombudsman — Independent contractors: explains contractor-related workplace issues and where Fair Work can help.
- Fair Work Ombudsman — Visa holders and migrants: confirms visa holders and migrants have workplace rights in Australia and can seek Fair Work help.
- Australian Taxation Office — Employee or independent contractor: explains the employee/contractor distinction for tax and super purposes.
- Australian Business Register — ABN Lookup: lets you check whether an ABN exists and what name it is registered to.
- TIS National — 131 450: phone interpreting for contacting government and essential services.
This page is general information only. It is not legal, migration, tax or employment advice.