Is a Virtual Assistant a Contractor or Employee in Australia? (2026)
Contractor vs employee for virtual assistants in Australia: the Fair Work/ATO test, sham contracting, the 2024 Pascua v Doessel case, and where a managed offshore VA sits.
In Australia, whether a virtual assistant is a contractor or an employee is one of the most misunderstood questions in remote hiring. The short answer: it is decided by the substance of the working relationship, not the label on the agreement. Get the substance right and a VA is generally a contractor. Get it wrong and you can end up with an employee you never meant to hire, plus the back-pay and penalties that come with it.
This is general information, not legal or tax advice. For your situation, check the ATO and Fair Work Ombudsman resources linked through this guide, or speak to a registered adviser.
Why the label does not decide it
You can write “independent contractor” at the top of an agreement and still have created an employment relationship in the eyes of the law. Both Fair Work and the ATO apply a multi-factor test that weighs the whole relationship, asking questions like:
- Control - do you direct how, when and where the work is done, or does the worker run their own show?
- Who bears the risk - does the worker stand to make a profit or wear a loss, carry their own insurances and fix their own mistakes?
- Right to delegate - can the worker subcontract or send a substitute, or must they personally do the work?
- How they are paid - for their time and hours (employee-like), or for a result or deliverable (contractor-like)?
- Integration - are they treated like part of your team, on your roster and your systems, or a genuinely separate business serving multiple clients?
No single factor is decisive. A worker who is controlled hour by hour, cannot delegate, is paid for time and is fully integrated into your business looks like an employee, whatever the contract says. From 2024, the Fair Work Act also directs decision-makers to consider the real substance and practical reality of the relationship, not just the written terms, which reinforces this approach.
Sham contracting: the trap to avoid
Sham contracting is treating someone who is really an employee as an independent contractor. It is prohibited under the Fair Work Act. A business that mislabels an employee as a contractor can be exposed to claims for unpaid entitlements (leave, notice and the like), back-pay, and penalties, on top of the reputational hit.
The 2024 Closing Loopholes changes also tightened the defence. Previously a business could defend a sham-contracting claim if it did not know, and was not reckless about, the true relationship. The test is now an objective one of whether the business reasonably believed the worker was a contractor, which is harder to satisfy, so getting classification right at the outset matters more than ever.
The practical risk is highest where a business hires a worker directly, controls their daily work like a staff member, and then papers it as contracting to avoid entitlements. That is the pattern the courts and the Fair Work Commission look through.
Pascua v Doessel: the 2024 case to read
The leading recent example for offshore VAs is Pascua v Doessel Group Pty Ltd [2024] FWC 2669, a Fair Work Commission decision handed down in late 2024.
Joanna Pascua was based in the Philippines. From July 2022 she was engaged by Doessel Group Pty Ltd, a Queensland law firm specialising in credit-repair disputes, to do paralegal and administrative work remotely at around AUD $18 an hour, documented as an independent contractor arrangement. The Commission looked past the label to the substance of the relationship and found that, in reality, she was an employee, not an independent contractor. That finding let her pursue an unfair-dismissal claim; the remedy was dealt with in a separate, later decision. Importantly, this is a Fair Work classification matter, not a tax or super ruling.
Two points make it important for Australian businesses hiring offshore:
- Offshore does not automatically mean “not an employee.” Being based overseas did not, by itself, make Pascua a contractor. The nature of the engagement did the work.
- Direct, controlled engagement is the risk. The arrangement was a direct one between the firm and the worker, with the firm directing and integrating her work. That is the fact pattern that can convert a “contractor” into an employee.
Pascua is not authority that every offshore VA is secretly an employee. It is a cautionary example that how you engage matters far more than where the person sits.
Where a managed-agency VA sits
This is where the managed-agency model is genuinely different, and the difference is structural rather than cosmetic.
When you engage a VA through a managed agency like DotVA, your contract is with the agency for a service. The agency engages the VA. You pay a single GST/service invoice for the work delivered. You are not the worker’s employer, you do not pay the VA directly, and you do not set up a direct, employee-style relationship with an individual offshore worker.
That structure speaks directly to the issue in Pascua, which was a direct engagement that, in substance, looked like employment. In the managed-agency model the engaging party is the agency, the agency carries the worker relationship, and from your side the arrangement is the purchase of a service - which can support a contractor characterisation, depending on the facts.
A fair and important caveat: this is not a bulletproof shield. The position depends on the agency genuinely being the engaging party and properly bearing the worker relationship. The model works because the substance matches the structure, not merely because there is an agency name on an invoice.
What about super, PAYG and payroll tax?
Here is the part that surprises many business owners: even in the worst case, where a Manila-based VA were treated as an employee, the usual Australian on-costs generally still do not attach, because of where the VA is a tax resident and where the work is performed.
| Obligation | Position for a Manila-based VA working overseas |
|---|---|
| Superannuation | The ATO states an employer is not required to make super contributions for a foreign tax resident who is paid to do work outside Australia. So even if the s12(3) labour-based deeming rule applied, the residency-and-location exclusion generally removes the super liability. |
| PAYG withholding | The ATO says PAYG withholding is unlikely to be required for a foreign resident for services performed outside Australia, unless the work is in special categories (entertainment, sports, construction, gaming junkets) or the income is Australian-sourced. General VA admin work performed and sourced overseas is not in those categories. |
| Payroll tax | A state/territory tax on wages connected to Australia. Under the harmonised nexus rules, wages for services performed wholly outside Australia for more than six continuous months are exempt from the start. Note the first six months only fall away once that threshold is passed, and WA has historically differed in some nexus respects, so confirm your state. |
Layer the agency model on top and the point becomes cleaner still: because you pay a service invoice rather than wages, the super, PAYG-withholding and payroll-tax wage rules generally do not bite on you at all. There is no wages/super/PAYG split to administer, and the whole invoice is ordinarily a deductible business expense under section 8-1 of the Income Tax Assessment Act 1997.
The pillar guide below works through the super, PAYG, payroll-tax, GST and deductibility detail in full, with ATO sources.
The bottom line
- A VA’s status is decided by the substance of the relationship, not the word on the contract.
- Sham contracting is unlawful, and direct, controlled engagement is where the risk concentrates, as Pascua shows.
- Engaging a VA through a managed agency is generally a contractor outcome for the client, provided the agency genuinely is the engaging party.
- And for a Manila-based, foreign-resident VA, the super, PAYG and payroll-tax wage rules generally do not attach in any case.
This guide is general information only, not legal or tax advice. For your circumstances, see the Fair Work Ombudsman (fairwork.gov.au) on employee vs contractor and sham contracting, and the ATO (ato.gov.au) on super, PAYG and payroll tax, or speak with a qualified adviser.
Want the full money side of this question? Read the pillar: Do you pay super and tax on a virtual assistant in Australia? Or if you would rather just get a compliant, agency-engaged VA without the paperwork, book a discovery call.