A business finds the skilled worker it needs. The worker already holds an ABN and prefers to keep invoicing. The parties agree a day rate and sign a services agreement. Six months later the business wants to sponsor that person, and the file stops. An arrangement built for flexibility now sits against a nomination that assumes something else.
In short: a Skills in Demand nomination rests on an employment relationship, with earnings that clear the nominated figure and the $79,423 threshold. An invoicing arrangement fails that test, and labelling a worker a contractor carries separate exposure under the Fair Work Act.
Three regimes read the same arrangement
We are usually asked whether the person is a contractor. That is one question answered three times, by three decision makers, with different consequences. The answers do not have to agree.
A sponsor nominates a position in its own business and employs the person in it. The Department looks for a genuine position and a real employment relationship. It also looks for guaranteed annual earnings, because the nominated figure is a commitment, not an estimate. Invoices for hours worked give no guaranteed figure. A services agreement with a worker's own company moves further away again.
The Fair Work Act now looks at the real substance and practical reality of the relationship. The label in the contract is not the answer. Section 357 prohibits misrepresenting employment as independent contracting, and civil penalties follow a contravention. If the person was an employee in substance, entitlements accrue from the start. Leave, notice, superannuation and award rates all come back into view.
Tax and insurance move separately again. A contractor paid mainly for their labour can still be an employee for superannuation guarantee purposes. State payroll tax has its own contractor provisions and exemptions. Workers compensation policies often deem certain contractors to be workers.
How these arrangements start
In our commercial practice, sham contracting is rarely the plan. The arrangement grows out of ordinary choices, then hardens. These are the patterns we see most.
| How it begins | Why it becomes a sponsorship problem |
|---|---|
| A trial period on an ABN before committing to a role | Those months do not count as employment for a later nomination or the 2 year permanent pathway |
| The worker asks to invoice for tax reasons | No guaranteed annual earnings, so the nominated figure cannot be evidenced |
| A founder contracts to their own company | The relationship is between two businesses, so the person is not an employee of the sponsor |
| The worker is placed with the sponsor's client | On hire arrangements need a labour agreement, not a standard nomination |
| A day rate absorbs everything | Superannuation, leave and the levy end up borne by the worker, which raises cost recovery |
| A payroll company sits between the parties | The sponsor may not be the employer at all, which breaks the nomination |
Our note on employment contracts for sponsored staff sets out the clauses a sponsored role needs from day one.
What we actually look at
No single factor decides this. We work through the relationship, then compare it to the documents the business signed.
Control and integration
Who decides what work is done, and when. Whether the person appears in the roster and the org chart.
Substitution and risk
Whether the person can send someone else. Whether they carry the cost of fixing defects. Whether they quote for a result or charge for time.
Tools, hours and presentation
Who supplies the equipment and software licences. Whether the person presents to clients as part of the business. Whether they work for anyone else in practice, not just in theory.
Check your own arrangement
How is the person you want to nominate paid right now?
The problem that surfaces two years later
Permanent residence is where a mislabelled arrangement usually bites. The temporary residence transition stream asks for 2 years of employment with the sponsor in the nominated occupation. Months spent invoicing do not count. The worker reaches the expected finish line and finds the clock started later.
That costs more than time. A redone nomination means the $540 charge and the skilling levy again. The worker may need a further temporary application at the $4,015 charge while the employment period builds. Our note on the two year plan to 186 sets out how we track that period.
Fixing an arrangement that has already run
Converting a contractor to an employee is straightforward. The period that has already passed is the real work.
- Step 1 Map the relationship as it actually operates, not as the agreement describes it. Gather rosters, emails, invoices and client facing material.
- Step 2 Quantify the exposure if the person was an employee throughout. Superannuation, leave, notice and award rates belong in that figure.
- Step 3 Check payroll tax and workers compensation on the same facts, because those tests differ again.
- Step 4 Decide the remediation and document the reasoning. A considered correction reads differently from a silent change of forms.
- Step 5 Put the employment contract in place, with the occupation, ordinary hours and a guaranteed annual salary.
- Step 6 Run the employment period, keep the payroll evidence, then nominate on a contract that matches practice.
Where money has already been recovered from a sponsored worker, deal with that directly. Our note on an underpayment claim against a sponsor covers the consequences of a shortfall.
Before you nominate a current contractor
Your browser remembers what you tick here.
How we run these files
These matters sit across both halves of the firm. The migration practice tests the arrangement against the nomination requirements. The commercial practice quantifies the back pay, superannuation and payroll tax exposure, then redrafts the contracts behind it. If you are about to nominate someone who currently invoices you, contact us before the papers change.
Figures verified against Home Affairs visa pricing as at 1 July 2026. Obligations come from the Fair Work Act 2009 and the Migration Regulations 1994.
Frequently asked questions
Can we sponsor someone who works for us as a contractor?
Not on that basis. A nomination assumes an employment relationship with the sponsor, so the arrangement needs to change before you lodge.
Does time spent invoicing count towards the permanent pathway?
Generally no. The transition stream asks for 2 years of employment with the sponsor in the nominated occupation.
The worker asked to be a contractor. Does that protect us?
No. The real substance of the relationship decides the question, and consent does not convert employment into contracting.
What is sham contracting?
It is misrepresenting employment as independent contracting. The Fair Work Act prohibits it and civil penalties can follow.
Can a founder on a visa be paid by their own company?
It depends on the structure and the visa. Take advice first, because the entity that pays the salary affects the nomination and the tax position.
General information as at 22 September 2026. Not legal advice. Whether a worker is an employee turns on the facts of your arrangement, so obtain advice before you nominate or restructure.