If you pay contractors mainly for their labour, they are employees for superannuation guarantee (SG) purposes. You may need to pay super to a fund for them.
It doesn't matter if the contractor has an Australian business number (ABN).
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.
David's Caravan Park needs to pay SG contributions for Amanda in addition to her pay. Prior to 1 July 2022, Amanda would have needed to have been paid at least $450 in a calendar month to be eligible for SG.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:
- refer to employee or contractor to help you work out if a contractor is an employee for super purposes
- use the superannuation guarantee eligibility decision tool to work out if they're entitled to super guarantee contributions.
If your contractor is an employee for SG purposes and entitled to receive SG contributions, they are generally eligible to choose their own super fund. You must offer eligible contractors a choice of super fund within 28 days of their start date.
If your contractor is eligible to choose a super fund but doesn't, then to avoid penalties you must request their stapled super fund details from us.
- any contract payments that are for material and equipment
- overtime for which the worker was paid overtime rates
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.Find out if you need to pay superannuation for contractors, about offering choice of fund and how much to pay.