Fair Work Amendment (Contractor High Income Threshold) Regulations 2024

Administered by Department of Employment and Workplace Relations

Legislation au F2024L01033 Regulations Not in force Legislative Instrument

Legislation content

EXPLANATORY STATEMENT

 

Issued by the authority of the Minister for Employment and Workplace Relations

 

Fair Work Amendment (Contractor High Income Threshold) Regulations 2024

 

AUTHORITY

 

The Fair Work Amendment (Contractor High Income Threshold) Regulations 2024 (Instrument) are made under the Fair Work Act 2009.

 

Fair Work Act 2009

 

The Fair Work Act 2009 (FW Act) provides a framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion. The Fair Work Regulations 2009 (FW Regulations) support matters of detail within the framework established by the FW Act.

 

Subsection 796(1) of the FW Act provides that the Governor-General may make regulations prescribing matters required or permitted by the FW Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the FW Act.

 

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (the Amendment Act) received Royal Assent on 26 February 2024.

 

Part 15 of Schedule 1 to the Amendment Act amends the FW Act to insert an interpretive principle for determining the ordinary meanings of ‘employee’ and ‘employer’ for the purposes of the FW Act. This would require that the ordinary meanings of ‘employee’ and

‘employer’ be determined by ascertaining the real substance, practical reality and true

nature of the relationship between the parties. Part 15A of Schedule 1 to the Amendment Act amends the FW Act to permit an independent contractor earning over the contractor high income threshold to ‘opt out’ from the application of the interpretive principle, remaining a contractor rather than converting to an employment relationship.

 

Part 16 of Schedule 1 to the Amendment Act amends the FW Act to empower the Fair Work Commission (FWC) to exercise functions and powers that relate to regulated road transport contractors performing work in the road transport industry and employee-like workers performing digital platform work (together known as ‘regulated workers’) and the ability to resolve disputes in relation to services contracts. This will create new frameworks to protect independent contractors in these industries. It also makes amendments to the Independent Contractors Act 2006, to provide that an application to the federal courts must not be made in relation to a services contract unless the independent contractor’s annual rate of earnings is over the contractor high income threshold within the meaning of the FW Act. These amendments commence on 26 August 2024.

 

The new provisions inserted by Part 15A and Part 16 of Schedule 1 to the Amendment Act provide for the regulations to prescribe a range of matters to support this new framework, as described at Attachment A.

 

The FW Act specifies no conditions that need to be satisfied before the powers to make the proposed regulations may be exercised.

 

Acts Interpretation Act 1901

 

Some of the items in the Instrument are made in contemplation of the commencement of the provision conferring the power to make the regulations. In these circumstances, the Instrument relies on section 4 of the Acts Interpretation Act 1901 (AI Act).

 

Further, where the Instrument amends another instrument, and there no express power in the enabling legislation to do so, subsection 33(3) of the AI Act is relied upon to amend or modify the instrument.

 

EXEMPTIONS FROM SUNSETTING

 

The regulations amended and inserted by the Instrument are not subject to ordinary sunsetting processes, pursuant to item 27(e) of the table in section 12 of the Legislation (Exemptions and Other Matters) Regulation 2015. Regulations made under the FW Act are exempt from sunsetting because they form part of an intergovernmental scheme.

 

PURPOSE AND OPERATION

 

The Instrument amends and inserts new provisions into the FW Regulations to prescribe the amount of the contractor high income threshold for the current year and set out the manner in which the contractor high income threshold is to be worked out for a later year.

 

Details of the Instrument are set out in Attachment A.

 

The Instrument is a legislative instrument for the purposes of the Legislation Act 2003.

 

REGULATORY IMPACT

 

The Office of Impact Analysis has advised that an Impact Analysis is not required for this Instrument. The amendments to the FW Regulations are covered by the Impact Analysis Equivalent: Minimum standards and increased access to dispute resolution for independent contractors (OBPR22-02873).

 

COMMENCEMENT

 

The Instrument commences on the later of the day after the registration on the Federal Register of Legislation or and immediately after the commencement of Schedule 1 to the Fair Work Amendment (Closing Loopholes) Regulations 2024.

 

CONSULTATION

 

The Department of Employment and Workplace Relations (department) consulted with all states and territories (except Tasmania, which declined to participate in the consultation) under the Inter-Governmental Agreement for a National Workplace Relations System for the Private Sector. The department also consulted with the Committee on Industrial Legislation (a subcommittee of the National Workplace Relations Consultative Council, established under the National Workplace Relations Consultative Act 2002).

 

The department also conducted targeted consultations with a range of stakeholders, including unions, employer peaks, digital labour platforms, road transport organisations and the FWC.

 

Note: throughout this Explanatory Statement references to the FW Act are a reference to the FW Act as amended by the Amendment Act.

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny Act 2011)

 

Fair Work Amendment (Contractor High Income Threshold) Regulations 2024

 

The Fair Work Amendment (Contractor High Income Threshold) Regulations 2024 (the Instrument) is compatible with human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview

 

The Fair Work Act 2009 (FW Act) provides a framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion. The Fair Work Regulations 2009 (FW Regulations) support matters of detail within the framework established by the FW Act.

 

The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 (the Amendment Act) received Royal Assent on 26 February 2024.

 

Part 15 of Schedule 1 to the Amendment Act amends the FW Act to insert an interpretive principle for determining the ordinary meanings of ‘employee’ and ‘employer’ for the purposes of the FW Act. This would require that the ordinary meanings of ‘employee’ and

‘employer’ be determined by ascertaining the real substance, practical reality and true

nature of the relationship between the parties. Part 15A of Schedule 1 to the Amendment Act amends the FW Act to permit an independent contractor earning over the contractor high income threshold to remain a contractor rather than converting to an employment relationship.

 

Part 16 of Schedule 1 to the Amendment Act amends the FW Act to empower the Fair Work Commission (FWC) to exercise functions and powers that relate to regulated road transport contractors performing work in the road transport industry and employee-like workers performing digital platform work (together known as ‘regulated workers’) and the ability to resolve disputes in relation to services contracts. This will create new frameworks to protect independent contractors in these industries. It also makes amendments to the Independent Contractors Act 2006, to provide that an application to the federal courts must not be made in relation to a services contract unless the independent contractor’s annual rate of earnings worked out in accordance with the regulations, is over the contractor high income threshold within the meaning of the FW Act. These amendments commence on 26 August 2024.

 

The new provisions inserted by Part 15A and Part 16 of Schedule 1 to the Amendment Act provide for the regulations to prescribe a range of matters to support this new framework, such as the contractor high income threshold. The contractor high income threshold is an amount set by regulation for a variety of purposes. From 1 July 2024, it will be set at $175,000. The Instrument amends and inserts new provisions into the FW Regulations to prescribe the amount of the contractor high income threshold for the current year and set out the manner in which the contractor high income threshold is to be worked out for later years.

 

Human rights implications

 

The Instrument does not engage human rights as it makes amendments of a consequential, minor or technical nature.

 

Conclusion

 

The Instrument is compatible with human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

The Hon. Murray Watt, Minister for Employment and Workplace Relations


ATTACHMENT A

 

Details of the Fair Work Amendment (Contractor High Income Threshold) Regulations 2024

 

Section 1 – Name

 

  1. This section provides that the title of the instrument is the Fair Work Amendment (Contractor High Income Threshold) Regulations 2024 (the Instrument).

 

Section 2 – Commencement

 

2.      The table in this section sets out when the provisions of the Instrument commence.

 

Section 3 – Authority

 

3.      This section specifies that the Regulations are made under the Fair Work Act 2009 (the FW Act).

 

Section 4 – Schedules

 

4.      This section provides that each instrument that is specified in a Schedule to the Instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to the Instrument has effect according to its terms.


Schedule 1Contractor High Income Threshold

 

Fair Work Regulations 2009

 

Item 1 – Before Subdivision C of Division 3A of Part 1-2

 

1.08AA Meaning of contractor high income threshold

 

5.      Item 1 inserts new regulation 1.08AA.

 

6.      Section 15C of the FW Act provides that the contractor high income threshold (the threshold) is the amount prescribed by, or worked out in the manner prescribed by, the Instrument.

 

7.      The threshold is relevant for the following provisions:

  • it is the amount that an individual must earn above to ‘opt out’ of the application of the interpretive principle for determining whether a person is an employer/employee (see new sections 15AA and 15AB of the FW Act);
  • it sets the compensation cap the Fair Work Commission (FWC) can order for a person in the unfair termination jurisdiction as the lesser of (see new section 536LT of the FW Act):
  • half of the threshold; or
  • 26 weeks total remuneration received by the person or to which the person was entitled (whichever is the higher).
  • from 26 February 2025, a worker earning below the threshold can apply to the FWC for an unfair termination or unfair deactivation remedy if they have served a minimum of 6 months’ service (see new sections 536LD, 536LE and 536LU of the FW Act);
  • from 26 August 2024, an independent contractor earning below the threshold may apply to the FWC to resolve disputes in relation to unfair contracts terms in services contracts entered into after that date (see new section 536ND of the FW Act);
  • from 26 August 2024, only an independent contractor earning above the threshold can continue to apply to the federal courts to review a services contract on the grounds that it is unfair or harsh under the Independent Contractors Act 2006 (see new subsection 12(2A) of that Act).

 

8.      New regulation 1.08AA prescribes the amount of the threshold for the year starting on 1 July 2024 to be $175,000; as well as setting out the manner in which the threshold is to be worked out for a later year starting on 1 July.

 

9.      The amount of the threshold mirrors the employee high income threshold. However, it is set on the basis that it captures the entire value of the relevant contract or contracts.

 

Illustrative example 1

Maddie is an independent contractor working in the construction industry. She wants to opt out from application of the new interpretive principle. Maddie’s earnings for work performed under the relationship are $150,000. Maddie is not eligible to opt out under new section 15AB as she does not earn over the threshold.

 

Illustrative example 2

Milena is an employee-like worker. She was deactivated from a digital labour platform. Milena’s annual rate of earnings is $25,000. Milena is eligible to apply for an unfair deactivation remedy as her total earnings are under the threshold.

 

Illustrative example 3

Gertie is an IT contractor. She considers that one of her contracts contains unfair terms. Gertie’s annual rate of earnings is $150,000. Gertie is eligible to apply to the FWC for an unfair contract remedy.

 

Illustrative example 4

Vaish is a last-mile courier in the road transport industry who drives a van. Her contract was terminated. Vaish’s annual rate of earnings is $165,000. Vaish is eligible to apply for an unfair termination remedy as her total earnings are under the threshold.

 

The maximum amount of compensation that Vaish could receive must not exceed the lesser of:

  • half of the threshold immediately before termination; or
  • the total amount of remuneration received or which she was entitled (whichever is higher) for any period during which she performed work under the services contract during the 26 weeks immediately before her termination.

 

Item 2 – Regulation 2.13 (notes)

 

10.  Item 2 corrects a typographical error in the note to regulation 2.13. It omits ‘of all employees’, (wherever occurring) and substitutes ‘of all employers’.

Overview

The Fair Work Amendment (Contractor High Income Threshold) Regulations 2024 were enacted to provide for the setting of a contractor high income threshold under the Fair Work Act 2009, as amended by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024. This regulation was introduced to address the need for a defined income threshold that would allow independent contractors to 'opt out' of the application of the new interpretive principle determining the status of 'employee' or 'employer'. The Regulations were made under the authority of the Fair Work Act 2009 by the Minister for Employment and Workplace Relations. The policy objective is to ensure that independent contractors earning above a certain income threshold can retain their contractor status while still being protected by the Fair Work Act. These Regulations are designed to support the new framework established by the Amendment Act, which aims to create better protections for independent contractors in specific industries, including road transport and digital platform work. The Regulations set the contractor high income threshold at $175,000 for the year starting on 1 July 2024 and provide for the calculation of the threshold for subsequent years. This threshold is integral to various provisions of the Fair Work Act, including the ability of contractors to opt out of the new interpretive principle, the compensation cap for unfair termination claims, and eligibility criteria for certain remedies under the Act. The Regulations also address technical corrections to existing provisions to ensure clarity and consistency within the legislative framework.

Scope and Application

The Fair Work Amendment (Contractor High Income Threshold) Regulations 2024 applies to individuals and entities operating within the Australian workplace, specifically targeting independent contractors and regulated workers in industries such as road transport and digital platform work. These regulations are made under the Fair Work Act 2009, providing a framework for cooperative and productive workplace relations. The geographic reach of these regulations is national, affecting all states and territories of Australia. The regulations set the contractor high income threshold, which is a crucial benchmark for determining eligibility for certain protections and remedies under the Fair Work Act. The threshold is set at $175,000 for the year starting on 1 July 2024, and the regulations also detail the method for calculating this threshold for future years. This threshold determines whether an independent contractor can opt out of the new interpretive principle for determining employment status, and it affects the compensation caps for unfair termination claims and the ability to seek remedies for unfair contract terms. Notably, these regulations are exempt from the ordinary sunsetting processes, ensuring their ongoing applicability as part of an intergovernmental scheme. The amendments and insertions in the Fair Work Regulations 2009 are supported by consultations with relevant stakeholders and are compatible with human rights, as they do not engage human rights in a significant manner.

Key Provisions

The Fair Work Amendment (Contractor High Income Threshold) Regulations 2024, made under the Fair Work Act 2009, focus on establishing and amending the contractor high income threshold for the year starting on 1 July 2024. Specifically, Regulation 1.08AA (Section 5) sets this threshold at $175,000 for the specified year and outlines the method for determining it for future years. This threshold is pivotal in various contexts, including determining eligibility to opt out of the application of an interpretive principle that assesses the nature of the relationship between a contractor and a client, setting compensation caps for unfair termination claims, and establishing the eligibility criteria for applying for unfair contract terms remedies through the Fair Work Commission (FWC). These regulations impose obligations on entities and individuals to adhere to the specified threshold when determining their eligibility for various protections and remedies. For instance, independent contractors must ensure their earnings meet or exceed the threshold to remain classified as such and opt out of the new interpretive principle, rather than being reclassified as employees. Additionally, regulated workers in specific industries, such as road transport and digital platform work, must be aware of their earnings in relation to the threshold when seeking remedies for unfair termination or contract terms through the FWC. The regulations also stipulate that only contractors earning above the threshold can apply to federal courts for review of services contracts under the Independent Contractors Act 2006. Breach of these regulations, particularly in misrepresenting earnings to improperly claim contractor status or to avoid the applicability of certain protections, could lead to significant legal consequences. While the regulations themselves do not explicitly detail specific penalties, breaches of the Fair Work Act 2009, which these regulations support, can lead to penalties. For instance, individuals or entities that misclassify employment relationships to circumvent the Act’s protections may face civil penalties, including fines. Furthermore, actions that result in unfair termination or contract terms could lead to compensation claims, with the maximum compensation for unfair termination being the lesser of half of the threshold or the total remuneration received during the 26 weeks before termination. These regulations do not exempt themselves from the general sunsetting provisions, although specific regulations under the Fair Work Act are exempt due to their role in an intergovernmental scheme. This ensures that the protections and obligations outlined remain in effect unless specifically amended or repealed by further legislation. The careful consultation with various stakeholders, including states, territories, unions, and employer peaks, underscores the comprehensive approach taken to balance the needs of different parties within the workplace relations framework.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.