Note: This article is general in nature and does not constitute legal advice. Gym owners and fitness businesses should seek independent legal and financial advice specific to their circumstances.
For years, the contractor model has been the default staffing arrangement across much of the Australian fitness industry. Personal trainers operating under their own ABN, group fitness instructors invoicing per class, studio staff engaged without leave entitlements or superannuation obligations. For many years this has been a widely adopted, largely unquestioned approach.
That approach is now under significant legal scrutiny, and the rules governing it have changed materially. If you have not reviewed your staffing arrangements since August 2024, there is a reasonable chance your business is exposed to risks you are not aware of.
The Law Changed in 2022, Then Changed Again in 2024
To understand where things stand now, it helps to understand where they have been.
For decades, Australian courts used what is known as the “multi-factorial test” to determine whether a worker was an employee or an independent contractor. Under this approach, no single factor was decisive. Courts weighed up a range of considerations: who controlled how the work was performed, whether the worker was integrated into the business, whether they could subcontract or delegate, and whether they were running a business of their own.
In February 2022, two landmark High Court decisions shifted the ground significantly: Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2. The High Court held that where parties had entered a written contract that was not a sham, the terms of that contract were the primary determinant of the relationship. The practical reality of how the work played out day to day became less relevant.
For gym owners who had carefully drafted contractor agreements, this appeared to offer greater certainty. An ABN, a service agreement, an invoice arrangement: these became more meaningful under the 2022 framework.
Then, in August 2024, the Federal Government changed it again.
The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 received Royal Assent in February 2024 and came into effect on 26 August 2024. It introduced a new section 15AA into the Fair Work Act, which effectively reinstates the multi-factorial approach for Fair Work Act purposes. Under the new test, the “real substance, practical reality and true nature” of the working relationship must be assessed, not merely what a written contract says.
Why This Matters Specifically for Fitness Businesses
The fitness industry has long operated in a grey zone on this question, and the new legislative environment makes that grey zone considerably more uncomfortable.
Australian Workplace Lawyers, writing in early 2026, noted that in most cases the practical reality is that many personal trainers do not obtain their own clients or operate a genuinely independent business, and have limited real control over their work. They are, in substance, working to promote the gym’s business. When that is the case, the “whole of relationship” test introduced in August 2024 creates meaningful risk that those arrangements may be found to constitute employment, regardless of what the contract says.
Recent Fair Work Commission decisions make this concrete. In Allison Priolo v Derrimut Health and Fitness Pty Ltd [2024] FWC 995, a personal trainer successfully brought an unfair dismissal claim against a gym, with the Commission finding the relationship was one of employment. In Tayla Xerri v Perpetual Health and Fitness Industries Pty Ltd [2025] FWC 2969, the outcome differed: the trainer was found to be a contractor, in part because she could accept or decline clients and payment was made directly to her. The contrast between those two outcomes illustrates how fact-specific these determinations are, and how materially the circumstances of each individual arrangement affect the result.
It is also worth noting that the legal test differs depending on which law applies. For Fair Work Act purposes, the whole of relationship test now applies from 26 August 2024. For Australian Taxation Office purposes (including PAYG withholding obligations), the written contract approach from the 2022 High Court decisions continues to apply, per ATO Tax Ruling TR 2023/4. For superannuation guarantee purposes, a different common law test applies again. A gym owner could theoretically be compliant under one framework and non-compliant under another simultaneously.
The Factors That Courts and the Fair Work Commission Examine
While no single factor is now conclusive for Fair Work Act purposes, the following considerations carry significant weight when the “whole of relationship” test is applied. Gym owners should honestly assess where their contractor arrangements sit against each of these.
Control over work. Does the worker decide how they perform their work, or does the gym direct and supervise them? A PT who is rostered, required to attend team meetings, and expected to follow gym protocols in how they train clients is exhibiting characteristics of employment.
Integration into the business. Is the worker treated as part of the gym’s operation, carrying the gym’s branding, wearing a uniform, representing the business in the eyes of members? Or do they operate as a genuinely separate business that happens to use the facility?
Ability to subcontract or delegate. Can the worker send someone else to deliver a class or training session in their place? Genuine contractors generally can. If the gym requires the specific individual to perform the work personally, that points toward employment.
Financial risk and independence. Does the worker have genuine financial exposure to profit and loss? Do they invoice multiple clients, market their own services, and operate independently of the gym? Or is the gym their sole or primary source of income?
Tools, equipment and workspace. Who provides the equipment and facility? In most gym arrangements, the facility and equipment belong to the gym, which points toward employment under the traditional multi-factorial analysis.
Duration and exclusivity. Long-term, exclusive arrangements with a single gym look considerably more like employment than genuinely independent work across multiple clients and locations.
Sham Contracting: The Risk Gym Owners Often Underestimate
If an arrangement that is substantively employment is structured and presented as an independent contractor arrangement, the Fair Work Act’s sham contracting provisions apply. These provisions make it unlawful for an employer to misrepresent an employment relationship as an independent contracting arrangement.
The consequences extend beyond back-pay liability. Penalties under the sham contracting provisions can reach significant amounts per contravention, and directors of the employing company can face personal liability. The Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 also tightened the sham contracting test: employers must now demonstrate they “reasonably believed” the arrangement was a genuine contracting arrangement, rather than simply that they did not know it was otherwise.
A related issue is payroll tax. BDO notes that in all Australian states except Western Australia, payments to contractors may be included in taxable wages for payroll tax purposes unless a specific exemption applies. Where contractors are long-term, ongoing, and providing services substantially similar to an employee, that exemption may not be available.
Superannuation: A Separate Obligation That Often Catches Operators Out
Even where a worker is a genuine independent contractor, superannuation guarantee obligations may still apply. Under the Superannuation Guarantee (Administration) Act, superannuation is payable to contractors who are engaged primarily for their own labour and who cannot delegate their work to another person. In practice, this captures many personal trainers and group fitness instructors operating under contractor arrangements.
The ATO has a dedicated tool for assessing superannuation obligations and its guidance is worth reviewing for any contractor arrangement in your business. Failure to make superannuation guarantee contributions when required attracts the Superannuation Guarantee Charge, which includes penalties and interest that can significantly exceed the original liability.
What Gym Owners Should Do Now
The legal environment governing contractor and employee arrangements in Australian fitness businesses is more complex and more actively enforced than it has been at any point in the past decade. The key practical steps are:
Audit your current arrangements. Review every contractor relationship in your business against the multi-factorial criteria now used by the Fair Work Commission. Do not rely solely on the presence of an ABN or a signed contractor agreement as evidence of contractor status.
Seek legal advice. Given the complexity of applying different tests under the Fair Work Act, the ATO framework, and superannuation law, businesses with more than a handful of contractors should obtain specific advice from an employment lawyer with experience in the fitness sector.
Review and update contracts. Even where contractor status is appropriate, contracts should be reviewed to reflect the current legislative environment, including the tightened sham contracting provisions and the opt-out provisions now available to high-income contractors earning above the annual threshold (AUD 183,000 from 1 July 2025).
Consider the full cost of each model. For many fitness businesses, a genuine cost comparison between employment and contracting, factoring in superannuation, leave entitlements, payroll tax, and the administrative cost of managing compliance, may reveal that the contractor model is not as financially advantageous as assumed, particularly when the liability exposure of misclassification is included.
Gyms that build better systems are the ones that grow sustainably. On the question of staffing classification, building a better system starts with an honest assessment of where your current arrangements actually sit in practice, not just where your contracts say they sit.
This article is general in nature and does not constitute legal or financial advice. Australian gym owners should seek independent advice specific to their circumstances from a qualified employment lawyer and accountant.
Sources:
AUSactive. (2024). Independent Contractors and Employee New Legislation. ausactive.org.au
Australian Workplace Lawyers. (2026). Work Contracts Between Fitness/Personal Trainers and Gyms. australianworkplacelawyers.com.au
BDO Australia. (2024). Are You Meeting Your Tax Obligations as a Gym Owner? bdo.com.au
Fair Work Commission. Allison Priolo v Derrimut Health and Fitness Pty Ltd [2024] FWC 995.
Fair Work Commission. Tayla Xerri v Perpetual Health and Fitness Industries Pty Ltd [2025] FWC 2969.
Fair Work Commission. Christopher Bond v Doxi Pty Ltd t/a Jetts Wanneroo [2020] FWC 2538.
High Court of Australia. Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1.
High Court of Australia. ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.
K&L Gates. (2024). Workplace Reform Rolls on Again. klgates.com
Taurus Lawyers. (2022). Independent Contractor vs Employee: The Risks, Benefits and Importance of Getting It Right. tauruslawyers.com.au
Tellery Group. (2026). Employee or Contractor? Updated ATO Guidelines Explained. tellerygroup.com
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