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  • Super for contractors

    If you pay contractors mainly for their labour, they are employees for superannuation guarantee (SG) purposes and you may need to pay super to a fund for them.

    It doesn't matter if the contractor has an Australian business number (ABN).

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    Super contributions for contractors

    Make super contributions for contractors if you pay them:

    • under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour)
    • for their personal labour and skills (payment isn't dependent on achieving a specified result)
    • to perform the contract work (work cannot be delegated to someone else).

    Example: employee for super guarantee purposes, not contractor

    David's Caravan Park has a contract with Amanda, a freelance administrative assistant, to answer phones and do administrative work for 15 hours per week.

    The contract specifies that Amanda herself must perform the work. Amanda has an ABN and invoices David's Caravan Park weekly for the hours she works. Amanda is an employee for SG purposes because:

    • her contract is wholly for the labour and skills she provides
    • she is paid according to the number of hours worked
    • she performs the work herself.

    Assuming that Amanda is paid at least $450 per month, David's Caravan Park pays SG contributions for her in addition to her pay.

    End of example

    If you enter into a contract with a company, trust or partnership you do not have to pay super for the person they employ to do the work.

    Example: contractor, not employee for super guarantee purposes

    Harry's Hobby Shop wants to paint their new shop. They contract Pete's Paints for the job. The entire job is completed by one painter from Pete's Paints.

    • The contract is between Harry's Hobby Shop and Pete's Paints.
    • Harry's Hobby Shop paid Pete's Paints to achieve a result.
    • The painter is not an employee of Harry's Hobby Shop for SG purposes.

    Harry's Hobby Shop does not have any SG obligations for the painter or Pete's Paints. This is the case even if Pete is a sole trader and does the work himself, because he was contracted to achieve a result.

    Pete's Paints may have SG obligations for the painter.

    End of example

    If you need further help, use the:

    How much super to pay for contractors

    The minimum super you must pay is the super guarantee percentage of the worker's ordinary time earnings. This is the labour component of the contract. Do not include:

    • any contract payments that are for material and equipment
    • overtime for which the worker was paid overtime rates
    • GST.

    If the values of the different parts of the contract aren't detailed in the contract, we'll accept their market values. We'll consider normal industry practices. If you cannot work out the labour part of the contract, you can use a reasonable market value of the labour section.

    Paying an additional amount equal to the SG rate to the contractor on top of their usual pay does not count as a super contribution. To avoid the super guarantee charge, you must make the SG contribution to the contractor's super fund each quarter.

    Last modified: 30 Jun 2021QC 33854