How to manage subcontractors without losing track of compliance and payments

"He's got an ABN" is not the test

On every site you'll hear that he's right, he's got an ABN. An ABN is not the test. What decides it is the nature of the working relationship, and the law has moved: the High Court leaned hard on the written contract in 2022, then the Fair Work Act was amended in 2024 to look at the real substance and practical reality of the relationship. Ask the real questions. Can he send someone else in his place? Is he paid for a result or for hours? Who says how and when it gets done? A bloke you direct like an employee, on your hours and with your tools, is not a subcontractor because he holds an ABN. Get it wrong and it is sham contracting, with penalties under the Fair Work Act. Read the ATO's employee or contractor guidance, check the Fair Work Ombudsman, and buy an hour with an employment lawyer or your accountant on anything borderline.

What you must hold before a subbie sets foot on site

Nothing starts until you hold all of this, current and in writing. Public liability. Get the certificate of currency, not a renewal notice. Check the insured entity matches the one on the invoice, and that the limit meets what your head contract requires. 0m or $20m is common, but read the contract. Workers compensation, if he has workers. A sole trader on his own is generally not covered by the state scheme for his own injuries, so ask for personal accident and illness cover. Schemes differ, check your state. Trade licence, right class, right state, not expired. Plumbing, gas, electrical and building each have their own licensing body. White card for anyone stepping onto a construction site. High risk work licences for what they will actually do: boom type EWP of 11 metres or more, forklift, dogging, rigging, scaffolding. A SWMS for high risk construction work, in your hands before work starts, not emailed after. The high risk categories are listed in the WHS regulations, though Victoria runs its own OHS regime, so check your regulator.

Superannuation is the one that catches builders out

This is the one that catches builders out. Under the super guarantee rules, a contractor working under a contract that is wholly or principally for their labour is treated as an employee for super. ABN or no ABN. Rough guide, and it is only that: if you are paying a bloke mainly for his time and his hands, and he cannot send someone else in his place, assume super is in play until your accountant says otherwise. The numbers stack up quietly. Pay a chippy $6,500 a month, labour only, for two years and that is 56,000. At the current super guarantee rate of 12%, that is 8,720 you should have paid. Unpaid super comes back as a super guarantee charge, with interest and an administration component on top, and it is not deductible. Super is due quarterly on the 28th after each quarter, and payment timing rules have been changing, so check the ATO.

The paperwork that actually protects you

A handshake and a text message is not a subcontract. Per subbie, then per job, three things. A written subcontract agreement, signed once, covering insurance requirements, indemnity, variations, defects liability, retention, payment terms, site rules and termination. Start from a standard form, AS 4903 or your state master builders subcontract, not something a mate wrote in Word. A scope that says what is in and what is not. "Fit off bathrooms levels 1 to 3, tapware and wastes supplied by builder" beats "plumbing". A work order per job with a number on it, carrying the site address, the dates, the price or rate, the retention and how variations get approved. Once every job has a number, an invoice without one is one you can question before it hits the ledger. StackLyft raises subcontractor work orders off the job, so the scope and price sit on a numbered document before anyone leaves the yard, part of the standard job management setup. Plenty of systems do this. The habit is the point.

Why expiry dates are the killer

Certificates are a snapshot, and that is the trap. A $20m public liability policy that expired on 14 March is worth nothing to you on an incident dated 20 March, and "he had it when he started" is not a defence when your own insurer starts asking questions. Policies also get cancelled mid term for non payment, which no certificate will ever tell you. So track expiry dates as data, not as a memory. Every document you collect gets its expiry recorded against that subbie: public liability, workers compensation, licence, white card, high risk work licences. Chase at 30 days out, chase again at 14, and they stop working at zero. Not after this job. Zero. Worth knowing: in several states the workers compensation year runs 1 July to 30 June, so a big slab of your subbie file expires on the same day. Better to find that in May than on the Monday after.

Check the claim against the work order before you pay

Never pay an invoice because it turned up. Pay it because you checked it against the work order and what was actually done. Worked example. You put a bathroom fit off out on WO-1184 at 2,400 ex GST. Mid job you approve one variation in writing, relocating a floor waste, at $680. The claim lands at 4,900. Approved value is 3,080, so ,820 of that claim is not approved. Might be real work someone forgot to write up, might not. Either way it gets sorted before payment, not after. Then retention. If the subcontract says 5%, you hold $654 against the certified 3,080 and pay 2,426 ex GST. How GST applies to a retained amount is one for your accountant. Release terms vary, commonly half at practical completion and half at the end of the defects liability period, but read your contract. Several states regulate retention money, including trust account rules above certain contract values, so check yours. Then pay to terms. Good subbies work for the people who pay on time.

Security of payment obligations flow down to you

Every state and territory has security of payment legislation, and it reaches you the moment you engage a subbie on construction work. The mechanics differ between jurisdictions, and not cosmetically. Broadly, a subbie can serve a payment claim on you. If you do not respond with a payment schedule inside your state's timeframe, setting out what you propose to pay and why, you can lose the right to argue the amount and become liable for the lot, including for work you reckon is rubbish. From there they can take it to adjudication, which is fast and binding on an interim basis. Response timeframes, maximum payment terms and what a valid claim has to contain all differ between the acts, and some states cap how long a head contractor can take to pay a subbie. Get your state's act, or the plain English summary your building authority publishes, and stick the timeframe on the office wall.

Keep a compliance register, not a shoebox of PDFs

A folder of PDFs on the office computer is not a compliance register. A register is one row per subbie with fields you can act on: entity name and ABN, licence number, class and expiry, public liability insurer, policy number, limit and expiry, workers compensation or personal accident and expiry, white card, high risk work licences, signed subcontract yes or no, bank details verified, super treatment decided and by whom. Then a document set per subbie, held against the contractor, not filed under whichever job you were doing the day they emailed it. A certificate buried in "Wattle St Stage 2" is invisible next time that bloke turns up on another site. StackLyft holds documents against a contractor record with expiry dates, sitting next to the subcontractor work orders. Run it in whatever you like, even a spreadsheet with conditional formatting on the expiry columns. What a system costs matters far less than whether someone owns the register and works it every week.

Questions

Does a subcontractor with an ABN need super?

Sometimes, yes. If the contract is wholly or principally for that person's labour, the super guarantee rules can treat them as an employee for super even though they invoice you with an ABN. It catches builders out on labour only chippies and labourers. Check the ATO's guidance and put the arrangement in front of your accountant.

What insurance should I ask a sole trader subbie for?

A current public liability certificate of currency at the limit your head contract requires, plus workers compensation if he has anyone working for him. Most state schemes do not cover a sole trader for his own injuries, so ask for personal accident and illness cover as well, and confirm the rules with your state authority.

Who writes the SWMS, me or the subbie?

The business doing the high risk construction work prepares the SWMS, so usually the subbie for their own work. As principal contractor you have to obtain it before work starts and keep it available. Check your regulator, because Victoria runs a separate OHS regime.

How long can I take to pay a subcontractor?

Whatever your subcontract says, subject to your state's security of payment act, which in some jurisdictions caps the maximum payment term. The timeframes are not the same across the country, so read your own act rather than copying terms from an interstate job.