The Direct Control Test for 186 Nominations: Associated Entities and Client Sites

A 186 nomination in the Temporary Residence Transition or Direct Entry stream must show the worker will be employed under the employer’s direct control. The test is designed to stop nominations for independent contractors or staff who really work for someone else.

Signs of direct control

The Department’s instructions list indicators that a business is the real employer. The employer generally:

• has the legal right to appoint, dismiss or suspend the worker;
• pays the salary and leave entitlements, withholds PAYG tax and pays super, payroll tax and fringe benefits tax;
• holds workers compensation cover for the worker;
• decides who does the work and when, how and where it is done;
• provides tools and training and is responsible for work health and safety;
• is generally liable for the worker’s actions at work.

Paying the wages is not enough. The employer must also show responsibility for the work environment, such as supervision, reporting lines and safety. An employer’s statement on its own is generally not enough.

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Service fees and contractor arrangements

If the worker pays the business a service fee or other charge to use its premises or equipment, the Department treats that as a sign the worker is an independent contractor. The common example is a medical practitioner paying a percentage to a clinic. For TRT, some occupations specified by the Minister are exempt from the direct control test. See the 186 TRT rule for medical practitioners.

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Associated entities

Large groups often split employment between a parent company and a related company. Under the Department’s policy, employment by an associated entity within sections 50 or 50AAA of the Corporations Act should not count against the direct control assessment. The nominator must prove the relationship exists, and officers check both entities for active and lawful operation and adverse information. Unrelated businesses cannot employ the worker. Read more about business structures in ENS nominations.

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Working at a client’s site

Working at a client’s premises is not automatically a problem, if the employer still directs the work. For Direct Entry nominations, on-hire arrangements are dealt with separately under the position not for hire rule. See position not for hire in the Direct Entry stream.

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What you should do now

• Document the relationship: provide the employment contract, payroll records and reporting lines that show you direct the work.
• Remove service fees: make sure the worker is not charged to use your premises or equipment.
• Group structures: if an associated entity employs or pays the worker, provide evidence of the Corporations Act relationship.
• Check TRT exemptions: if the occupation is specified by the Minister, confirm whether the exemption applies.