Should your virtual assistant be on payroll, on a contractor agreement, or through an agency?

There is a recurring fear in the AU small business community: “if I hire a VA, am I accidentally hiring an employee?”. Here is the honest answer.

This is not legal advice. Your accountant signs off the specifics. But the framework is clean.

Overseas VA (Manila, Eastern Europe, South Africa)

If the VA is overseas and remains overseas, they are an overseas contractor. You pay an invoice in AUD or USD. There is no PAYG withholding, no super, no leave loading. The VA pays their own income tax in their country.

ATO guidance on foreign residents performing services overseas confirms this, provided:

• The VA is not Australian-resident for tax purposes
• The work is performed overseas
• The contract is genuinely a contractor agreement, not an employment contract dressed in different language

In practice: a Manila VA invoicing you AUD $1,500/month is the same kind of arrangement as a software-as-a-service subscription. Pay the invoice. File it as a contractor expense. Move on.

Australian-resident VA on a contractor agreement

This is where it gets nuanced. The ATO’s contractor-vs-employee test does not care what you call the relationship; it cares about the substance.

The classic indicators of an employee (not a contractor):

• You control when they work and how
• They work exclusively for you
• You provide the tools, equipment, software
• You can dictate the method of work, not just the result
• They are integrated into your business (your email address, your branded materials)

If three or more apply, the ATO is likely to classify them as your employee for super and PAYG, regardless of the contract.

The honest read: if you want an AU-resident VA, the simplest path is to make them a part-time employee on payroll. The contractor classification only works if the VA genuinely runs their own business with multiple clients.

Agency placement

The third option, which side-steps the classification question. When you place a VA through an agency (DotVA, Virtual Coworker, Hire Overseas, etc.):

• The agency has the employer/contractor relationship with the VA
• You are a client of the agency
• You pay the agency on a monthly invoice
• You have no PAYG, super, or leave obligation regardless of the VA’s location

Plus you get:

• Replacement guarantees (if the VA leaves or is replaced, the agency finds you a new one)
• Recruiting + vetting handled by the agency
• Performance management as a service

The trade-off is that agency placements cost 20-40% more per hour than direct-hiring the same VA on a marketplace. For most small businesses, the saved time + reduced risk is worth it.

How to decide

A simple decision tree:

1. Want the lowest hourly rate and willing to manage employment risk yourself? Direct-hire overseas. Use a marketplace.
2. Want an AU-resident VA? Hire on payroll as a part-time employee. Stop trying to call it contracting.
3. Want stability + replacement coverage + no admin? Use an agency.

Get your accountant to confirm the structure before you sign anything. The ATO tests are well-documented but the application varies.

Want the agency option without the agency markup? DotVA’s pricing is on the page. No quotes-by-email.