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).
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).
Offering contractors choice of fund
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.
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, the ATO will accept their market values. 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.
