Associate Dentist: Contractor or Employee? What Melbourne Practice Owners Need to Know Now

Why This Question Matters More Than It Did Two Years Ago

The contractor vs employee question has always existed for dental associate arrangements. But the 2024 High Court decisions in CFMMEU v Personnel Contracting and ZG Operations v Jamsek fundamentally changed how Australian courts and the ATO approach the question. The written agreement between the parties — which most dental practice owners relied on as their primary protection — is no longer sufficient on its own. What matters now is the totality of the actual working relationship, and many associate arrangements that were structured as contracting look much more like employment when assessed against that standard.

What the Multi-Factor Test Actually Looks At

The ATO's worker classification test considers multiple factors together, none of which is individually determinative:

• Control over how work is performed — does the practice dictate the associate's hours, clinical protocols, appointment scheduling and patient communication? If yes, this points to employment.
• Provision of tools and equipment — does the associate use the practice's dental chair, X-ray equipment, handpieces, practice management software and sterilisation equipment? If yes, this points to employment.
• Ability to work for others — can the associate work in another practice during the same period, or does the schedule and patient load make this practically impossible? Genuine contractors can.
• Ability to subcontract — can the associate send a substitute dentist to fill their chair? In most dental associate arrangements, the answer is no — the practice has engaged that specific dentist, not a dentistry service.
• Who bears the business risk — if the associate's appointment list is empty one day, who bears the cost? A contractor bears their own business risk; an employee is paid regardless of demand fluctuations.
• Integration into the business — does the associate appear on the practice's website, use the practice's email address, wear the practice's uniform? High integration points to employment.

For most Melbourne dental associate arrangements, several of these factors point clearly toward employment. The question is whether the combination is strong enough to override the written contractor agreement — and increasingly, it is.

What Misclassification Actually Costs

If an associate dentist is later found to be an employee, the practice is liable for everything an employer owes from the date the relationship began:

• Superannuation Guarantee Charge (SGC) — 11.5% of ordinary time earnings (rising to 12% from 1 July 2025), plus 10% interest on unpaid amounts per annum, plus a $20 administration fee per quarter per worker. The SGC is not tax deductible, unlike compliant super contributions.
• PAYG withholding — the practice should have withheld income tax from the associate's payments and remitted it to the ATO. Failure to do so makes the practice potentially liable for that tax, even if the associate has already paid it personally.
• FairWork Act entitlements — annual leave, personal leave, notice periods, and potentially unfair dismissal protections if the relationship ends, depending on how it's structured.

For a dental associate billing $200,000 per year over three years, the SGC liability alone — before interest — can exceed $60,000. With interest and the non-deductibility of the SGC payment, the actual cost to the practice is significantly higher.

The Percentage-of-Billings Argument Doesn't Help as Much as People Think

A common justification for contractor classification is that the associate is paid a percentage of their billings — not a salary — which feels like a business arrangement rather than employment. The ATO and the courts have consistently held that payment structure alone is not sufficient to establish contractor status. A worker can be paid on results and still be an employee if all the other factors of the relationship point that way. What matters is whether the associate is running their own dental business through the practice's premises, or whether they are dentists providing personal services through a practice that controls almost all aspects of how those services are delivered.

What a Practice Owner Should Do Now

The most practical starting point is an honest assessment of each associate arrangement against the multi-factor test — not just a review of the written agreement. If the arrangement looks more like employment than contracting on that assessment, a practice owner has several options: restructure the arrangement to reflect a contractor relationship (which may not be possible given the clinical environment), or transition the associate to employment and manage the super and PAYG obligations prospectively. Voluntary correction is always better than audit discovery.

From a bookkeeping perspective, a practice that correctly classifies associates as employees needs payroll set up in Xero with correct super calculations, PAYG withholding and STP (Single Touch Payroll) reporting from the first pay run. That's a different administrative structure to processing contractor invoices — and getting it right from the start avoids the need to restate historical records.