Who pays PAYG, super and fringe benefits tax when a cleaning business uses labour hire?

When a cleaning business hires a worker through a labour hire firm and pays that firm for work performed in the business, it contracts with the firm, not the individual worker. Under the Australian Taxation Office (ATO) guidance, updated 17 December 2024, the labour hire firm is responsible for the worker’s PAYG withholding, superannuation and fringe benefits tax obligations. Figures checked 1 October 2026.

What does the cleaning business actually contract with?

Under the ATO’s labour hire example, the cleaning business contracts with the labour hire firm. The firm is paid for the work undertaken by the worker in the cleaning business.

Labour hire firms may also be called on-hire firms, recruitment services or group training organisations. They refer to the hiring business as the “host employer”.

Who handles PAYG, super and fringe benefits tax?

In this labour hire arrangement, responsibility rests with the firm:

This answers who holds the listed obligations, rather than what amount may be payable in a particular engagement.

Does this answer every employment question?

No. The ATO passage addresses the tax and superannuation position described in its labour hire example: the cleaning business contracts with the labour hire firm, and the firm is responsible for the worker’s PAYG withholding, superannuation and fringe benefits tax obligations.

Other employment issues should be checked against the labour hire agreement, the agreement covering the worker’s engagement and the applicable law. The tax position should not be treated as a complete answer to every employment question.

Does a contract label decide whether a worker is an employee?

No. The ATO states that a label used in a contract, including “independent contractor”, will not determine or be relevant to how the relationship is characterised.

For an individual engaged directly, the ATO says classification depends on whether the worker is serving in the business. The assessment focuses on the legal rights and obligations in the working agreement or contract.

The ATO also explains that:

• a contract may be written, wholly oral, or a combination of written terms, oral terms and terms implied from conduct;
• the contract may be varied based on the business’s or worker’s conduct;
• the business’s essential activities should be compared with the contract’s legal rights and obligations;
• no single indicium is determinative, and the indicia should not be applied as a checklist; and
• a business is responsible for correctly classifying its worker for tax and superannuation purposes and may face penalties for an incorrect decision.

What should a cleaning business check before relying on labour hire?

• Check that the contracting party is the labour hire firm and that the business is paying the firm for the work performed.
• Check that the agreement clearly records responsibility for PAYG withholding, superannuation and fringe benefits tax.
• If engaging an individual directly, review the legal rights and obligations in the working agreement rather than relying on its title or label.
• Review the whole working arrangement, including any terms varied by conduct.
• Check the ATO guidance for the current tax and superannuation position.

This is general information, not financial or legal advice. Check the regulator’s page for current guidance and the relevant policy’s PDS for insurance cover, exclusions, definitions and claims conditions. Responsibility for PAYG, superannuation and fringe benefits tax does not, by itself, determine whether an insurance policy covers the worker.

Sources

• Difference between employees and independent contractors | Australian Taxation Office

FAQ

Does the cleaning business pay the labour hire firm or the individual worker?

In the ATO’s labour hire example, the cleaning business pays the labour hire firm for the work undertaken in its business. Its contract is with the firm, not the individual worker.

Who is responsible for the worker’s PAYG, super and fringe benefits tax?

The labour hire firm is responsible for the PAYG withholding, superannuation and fringe benefits tax obligations associated with the worker in the stated arrangement.

Does calling the worker an independent contractor settle the classification?

No. The ATO says a contract label such as “independent contractor” will not determine or be relevant to how the relationship is characterised. Classification depends on the legal rights and obligations making up the relationship.

What if the cleaning business engages the individual directly?

The ATO says the details in the working agreement or contract determine whether the individual is a contractor or employee for tax and superannuation purposes. The business must classify the worker correctly and may face penalties if its decision is incorrect.