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  • Module 2: Working out if you have to pay super

    This module covers:

    Who is eligible for super guarantee?

    Generally, if you pay an employee $450 or more (before tax) in a calendar month, you have to pay super guarantee on top of their wages.

    You have to pay super for some contractors, even if they quote an Australian business number (ABN) – (see Contractors).

    If your employee is under 18 years old or is a private or domestic worker, such as a nanny, they must also work for more than 30 hours per week to be eligible for super guarantee.

    You must pay super guarantee for eligible employees even if the employee:

    • works full-time, part-time or on a casual basis
    • receives a super pension or annuity while they're still working – including those who qualify for the transition-to-retirement measure
    • is a temporary resident. When the employee leaves Australia, they can claim the super contributions you made through the Departing Australia Superannuation Payment.
    • works overseas (see Employees working overseas)
    • is a company director
    • is a family member working in your business.

    Contractors

    Contractors paid mainly for their labour are employees for super guarantee purposes. This is the case even if the contractor quotes an ABN. These contractors are known as employees for super guarantee purposes.

    You must make super contributions for these individuals if you pay them:

    • under a verbal or written contract that is wholly or principally for their labour – that is, more than half the dollar value of the contract is for their labour
    • for their personal labour and skills – which may include physical labour, mental effort or artistic effort – and not to achieve a result
    • to perform the contract work personally – that is, they must not delegate the work.

    If you make a contract with someone other than the person who'll actually provide the labour – for example, with a company, trust or a partnership – you don't pay that person super.

    Domestic workers

    If you engage someone to do work of a domestic or private nature for 30 hours or more per week and you pay them $450 or more (before tax) in a calendar month, you have to pay super guarantee for them.

    'Domestic or private' means work:

    • relating personally to you (not to a business of yours), or
    • relating to your home, household affairs or family – such as work by a nanny, housekeeper or carer.

    If you use funds from the National Disability Insurance Scheme to engage a carer or other domestic help, you may have to pay super guarantee for these workers. This only affects people who choose to manage their National Disability Insurance Scheme plan themselves.

    Employees working overseas

    If you send an Australian employee to work temporarily in another country, you must continue to pay super guarantee contributions for them in Australia.

    The other country may require you or your employee to pay super (or equivalent) there as well. However, Australia has bilateral agreements with some countries so that you don't have to pay it in both countries – as long as you continue to pay compulsory super contributions for the employee in Australia.

    To gain exemption from the super payment in the other country if a bilateral agreement exists, you need to show the authorities in the other country a certificate of coverage, which you get from the ATO.

    Next step:

    To get a certificate of coverage, you can:

    If you're self-employed

    If you're self-employed (that is, a sole trader or a partner in a partnership), you can choose whether to contribute super for yourself. You may want to make personal contributions to a super fund as a way of saving for your retirement.

    How to check if your employees are eligible

    The easiest way to check if someone is eligible for super guarantee is to use the Super guarantee eligibility tool.

    Take a few minutes to explore the Super guarantee eligibility toolThis link opens in a new window.

    If you're unsure whether a person is an employee or contractor, you can use the Employee/contractor decision tool before using the above Super guarantee eligibility tool.

    Check your understanding

    Use the following example and questions to test your understanding of this module.

    Example: Working out if you have to pay super guarantee

    You have a retail business. You have decided to make a contract with Nick, a freelance administrative assistant, to answer phones and do administrative work for 15 hours per week. The contract specifies that Nick must perform the work himself. Nick invoices you weekly for the hours he works.

    Nick is your administrative assistant and has his own ABN.

    Try the following quick questions. What would your answers be?

    Question 1: Do you need to consider super guarantee for Nick?

    A. Nick could be eligible for super guarantee. I should look into this further.

    B. Nick is a contractor so I don’t need to worry about super guarantee for him.

    Question 2: How would you check whether Nick is eligible?

    A. Ask him if he has been paid super for his other contracts.

    B. Use the Super guarantee eligibility tool to work this out.

    If you're stuck, the answers are available below.

    End of example

    Answers

    Question 1: A is correct. Nick has an ABN but he could still be eligible for super guarantee.

    Question 2: B is correct. If you want to be certain, use the Super guarantee eligibility tool – it will tell you if Nick is eligible for super guarantee and you can print the decision for your records.

    Summary of Module 2

    Important points to remember when working out if you have to pay super for your employees:

    • Identify employees who are eligible for super.
    • Use the Super guarantee eligibility tool.
    • Use the Employee/contractor decision tool if applicable.
    • For employees aged 18 and over, you generally need to pay super guarantee if you pay them $450 or more (before tax) in a calendar month.
    • For employees aged under 18, you generally need to pay super guarantee if they work for more than 30 hours per week and are paid $450 or more (before tax) in a calendar month.
    • You need to pay super guarantee for some contractors, even if they quote an ABN.
    • You generally need to pay super guarantee if your employee is a private or domestic worker, works for more than 30 hours per week and is paid $450 or more (before tax) in a calendar month.
      Last modified: 13 Jun 2019QC 58510