How to pay international contractors in Australia [2025]

Global companies hire Australian contractors to tap into the country’s skilled workforce. But when it’s time to pay them, what steps do you need to take to comply with all of Australia's complex labor and tax laws?

Before you receive your first invoice, read on to learn what you need to know about working with Australian contractors, including how to correctly classify, onboard, and pay them according to Australia's labor laws.

Here’s a step-by-step guide on how to run payroll for contractors in Australia.

Step #1: Classify your workers

When you choose to hire independent contractors around the world, classifying them correctly is crucial. Misclassifying Australian workers, specifically claiming employees as contractors, can result in fines, back taxes, and other harsh penalties from Australian courts and the Australian Taxation Office (ATO). “Sham contracting” penalties can include:

• Court-ordered fines of up to AUD 16,500 for individuals and AUD 82,500 for companies

• Make-up payments for every missed superannuation (Australia’s pension system) contribution, plus interest and admin fees 

• Additional fines up to twice the amount of the superannuation charge

• A failure-to-withhold-taxes cost of the full amount that should’ve been withheld, including a Medicare (Australia’s health system) levy 

To help employers determine whether a hire meets the criteria for an employee or independent contractor, the Australian government’s Fair Work Ombudsman laid out a series of indicators that, when considered all together, draw the distinction:

Step #2: Determine the best way to pay your contractors

The first thing to do before you can pay contractors in Australia is to determine how you'll pay them. With the rise of global workforces and remote work, employers now have more choices than ever for sending paychecks to Australian contractors. Here are some options:

• Bank wires. You can open an Australian bank account and use it to deposit funds into Australian contractors' accounts or use your bank to send a global wire transfer to pay an Australian contractor.

• International money orders. This long-standing payment method can be slow—especially because the employer needs to physically purchase the money order, and the contractor needs to physically deposit it upon receipt. Money orders can also come with fees and bad exchange rates.

• Digital wallets or payment platforms. Note that not all digital payment platforms are available in Australia (for example, Venmo only works within the US) though some employers use platforms like Wise to transfer money across borders. Remember that exchange rates can change from day to day, making it difficult to predict your outgoings.

• Global payroll services. Typically, contractors aren't included in payroll, since they aren't subject to the same withholdings as employees—instead, they invoice for their services, which goes through accounts payable for many companies. But with Rippling, you can pay Australian employees and Australian contractors, simplifying Australian pay runs for your team.

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Step #4: Ensure your contractor has the right tax information 

Employers aren't required to withhold and pay income taxes for contractors in Australia. The ATO sends contractors activity statements to keep track of their income and business expenses (to claim any qualifying deductions), which contractors then complete and file quarterly. 

However, some employers make voluntary agreements with their contractors to make tax payments on their behalf, through a process known as Pay as You Go (PAYG) withholding (making these payments is mandatory for employees). 

To file taxes, contractors typically need:

• An individual tax file number

• An Australian Business Number (since individual contractors run their own businesses)

• A PAYG withholding registration

• A Goods and Services Tax (GST) registration if your business income exceeds AUD 75,000

Independent contractors usually make their own superannuation contributions. However, companies may have to make payments on a contractor’s behalf if the worker is paid mainly for their labor and not contingent upon a specific result (e.g., a freelance secretary doing clerical work 15 hours a week). In this case, employers have to offer contractors a choice of super fund within four weeks of their start date and guarantee to contribute a percentage of their wage. 

Effortlessly manage contractors around the world

Expanding your international workforce has never been easier. With Rippling, you can pay international contractors in Australia and around the world in one system.

FAQs about paying contractors in Australia