Hiring a contractor is genuinely exciting. It means your business is growing, you've got more work than you can handle alone, and you're ready to bring in support.

But here's something a lot of creatives don't find out until it's too late: without the right legal setup, bringing on a contractor can create more problems than it solves. IP disputes. Unclear payment terms. Tax compliance issues. Even legal claims from the contractor themselves.

None of that has to be your story. These mistakes are avoidable, you just need to know what to look for. Let's walk through the most common ones.

• Hiring contractors without a written agreement leaves you seriously exposed
• IP ownership doesn't transfer automatically, even when you've paid for the work
• Having an ABN doesn't automatically make someone a contractor in the eyes of the law
• Sham contracting can happen unintentionally, and the penalties are significant
• A lawyer-drafted contractor agreement protects you and the people you hire

Table of Contents

• Do you actually need a contract for contractors?
• What are the biggest legal mistakes creatives make?
• What is sham contracting (and why it matters)?
• Who owns the work your contractor creates?
• What should a contractor agreement include?
• What’s the easiest way to stay compliant?

Do you actually need a contract for contractors?

Yes. Every single time, no exceptions.

Even for a small project. Even when you trust them completely. Even when they come via a warm referral.

A written agreement isn't about distrust, it's about clarity. It makes sure everyone's on the same page: what's included, what's expected, what happens if something doesn't go to plan. Without it, you're relying on memory and goodwill. Neither of those hold up in a dispute.

What are the biggest legal mistakes creatives make?

Here's what we see come up time and time again, and what you can do about each one.

1. Assuming an ABN means someone is a contractor

This one catches a lot of people off guard. Just because someone has an ABN doesn't automatically make them a contractor under Australian law.

Whether someone is a contractor or an employee depends on the actual nature of the working relationship. The ATO and Fair Work look at factors like:

• Who controls how and when the work gets done
• Whether they work for multiple clients, or just you
• Whether they bear financial risk if something goes wrong
• Whether they use their own tools and equipment

If the relationship looks more like employment than contracting, regardless of how it's labelled, you may be exposed to a sham contracting claim. More on that below.

Foundd Tip: Don't rely on labels. Assess the actual working relationship before you engage anyone.

2. Not having a written agreement

Verbal agreements, Slack messages, and informal email chains don't cut it. They're not contracts, and in a dispute, they're rarely enough to protect you.

Without a written agreement, there's no shared understanding of:

• What the contractor is actually responsible for delivering
• When and how payment works
• Who owns the work once it's done
• What happens if either party wants to end things early

A proper agreement removes the ambiguity and gives both parties something concrete to refer back to. It protects you, and it protects them too.

3. Ignoring intellectual property (IP)

This is the one that surprises people most, and it can have lasting consequences.

Here's the thing most people don't know: under Australian copyright law, the person who creates a piece of work is the default owner, not the person who commissioned or paid for it. That means if a contractor designs your brand assets, writes your website copy, or builds out your systems, they may legally retain ownership of that work unless your agreement says otherwise.

A proper IP clause should:

• Confirm that ownership transfers to you upon full payment
• Restrict the contractor from reusing or reselling the work
• Cover all materials created during the engagement — not just the final deliverable

Foundd Tip: This applies even to long-term contractors you've worked with for years. If there's no IP clause in your agreement, the ownership question is still open.

4. Vague scope of work

"Help with socials" and "assist with admin" aren't scopes of work. They're vague enough to mean very different things to different people, and that's where disputes start.

When the scope isn't clearly defined, you get scope creep, mismatched expectations, and awkward conversations about what was and wasn't included. Clarity upfront saves everyone a lot of headaches down the line.

A clear scope of work should cover:

• Exactly what tasks or deliverables are included
• What's explicitly out of scope
• Timelines, milestones, or turnaround expectations
• The process for requesting additional work

5. No confidentiality protections

Contractors often get access to things that are genuinely sensitive, client lists, pricing, business strategies, unreleased campaigns, financial information. Without a confidentiality clause, you have very limited recourse if that information is shared or used in ways you didn't intend.

Your agreement should clearly set out:

• What information is considered confidential
• How it can and can't be used
• Obligations that survive the end of the contract

6. Skipping compliance checks

Contractor relationships in Australia are governed by actual legislation, including the Independent Contractors Act 2006 and, in some circumstances, the Fair Work Act 2009. There are also tax obligations and superannuation considerations depending on the nature of the arrangement.

Non-compliance, even unintentional, can lead to:

• Fines and penalties
• Backpay or entitlement claims
• Legal disputes that are expensive and time-consuming to resolve

Having the right documentation in place from day one is the clearest way to protect yourself.

What is sham contracting (and why it matters)?

Sham contracting happens when someone is engaged as a contractor, but the reality of the relationship means they should legally be classified as an employee. It's not always intentional, but intent doesn't always protect you.

If a contractor successfully argues they were an employee, you may be on the hook for:

• Unpaid leave and entitlements
• Superannuation contributions
• Significant financial penalties

Getting the classification right from the start, and documenting it properly, is the best way to avoid this entirely.

Who owns the work your contractor creates?

Not automatically you, and this is where a lot of creatives get caught out. Payment doesn't equal ownership.

Under Australian copyright law, the contractor retains ownership of their creative work unless a written agreement explicitly transfers those rights to you. That applies to designs, written content, systems, templates, anything created during the engagement.

Your contractor agreement needs to address:

• Assignment of IP rights upon payment
• Restrictions on the contractor reusing or reselling the work
• What happens to the IP if the contract is terminated before completion

Get this right, and your business assets are fully protected. Get it wrong, and you may not legally own what you think you do.

What should a contractor agreement include?

A good contractor agreement isn't just a formality, it's a practical document that reflects how you actually work together. At a minimum, it should cover:

• Scope of work: what's in and what's out
• Payment terms: amount, schedule, and what happens if invoices aren't paid
• Intellectual property: ownership, assignment, and any restrictions
• Confidentiality: what's protected and for how long
• Termination: how either party can exit, and on what terms
• Dispute resolution: a clear process before things escalate

If your current agreement doesn't cover all of this, or if you're working without one at all, it's worth addressing sooner rather than later.

What’s the easiest way to stay compliant?

You could piece something together from a Google search and hope it covers everything. Or you could start with something that was actually built for this.

The Independent Contractor Agreement Template from Foundd Legal is designed specifically for creatives, which means it reflects how your business actually works, not just a generic corporate setup. It includes:

• Compliance with Australian law
• Clear IP and confidentiality protections
• Structured payment and termination terms
• Plain language that's actually easy to understand and explain to contractors

GET THE INDEPENDENT CONTRACTOR AGREEMENT TEMPLATE

Final thought

Hiring a contractor is a big deal, in the best way. It means your business has grown to a point where you need support, and that's worth celebrating.

But getting the legal side right isn't optional. A clear, properly drafted agreement protects your assets, sets expectations from day one, and gives you real options if something doesn't go to plan.

Set it up properly once, and you'll be able to bring on support with a lot more confidence, and a lot less stress.