The ATO classifies contractors paid for their labour as employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).
Super contributions must be made 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 – they must not delegate.
You do not pay super to a person when you make a contract with someone other than the person who will actually provide the labour, like a company, trust or partnership.
How much to pay
The minimum super amount you have to pay is 9.5 per cent of each worker’s ordinary time earnings. For contractors, employees calculate the minimum super amount on the labour component of the contract. The ATO will accept their market values of the labour if the values of the various parts of the contract are not detailed in the contract.