advantages of using external consultants

You May Have to Pay Superannuation for Your Contractors

Workforce Advisors Group director and my fellow lecturer at my upcoming “Business Booster” seminars – Neil Fairley – has kindly let me publish this item he wrote about the paying of Superannuation for your contractors.

Here is Neil’s comment on the issue of Superannuation contributions:

You have a person who wants to engage with you as a contractor.

You draw up a contract that makes it clear that the person is a contractor.

However, do you have to make Superannuation Contributions for this person?

The answer is ‘maybe‘: even if your contract is with a corporation (i.e. proprietary limited company) that is supplying the services of the worker, there still may be a liability.

However, if the contract is with the individual directly (sole trader, ABN etc), it becomes a little more difficult and risky.

The fact that the person has an ABN and invoices you for his or her services is irrelevant – instead, the first question you need to ask yourself is whether the person is technically deemed an employee for the purposes of the superannuation guarantee charge legislation.

It is important to realise that you cannot change the nature of a relationship from technically being one of employment to being that of a legitimate independent contractor merely by having a written agreement. 

A duck is still a duck.

So how do you tell if the relationship is technically one of employment? The following factors might point to an employment relationship:

  • The person does not operate independently.
  • Payments are based on time worked rather than work performed, i.e. paid on hourly or daily rate for turning up to the job.
  • The worker does not have their own insurance and indemnity policies.
  • The worker uses your tools and equipment.
  • The worker does not pay all business expenses.

This is not an exhaustive list as there many other factors to take into account when an individual is offering up personal services such as labour or intellectual input.

And even if your worker is not technically an employee under the law, you might still have to make Superannuation Contributions if your contract with them is wholly or principally for their labour instead of labour and goods.

Sleep well in the knowledge that you are not exposed and that your contractors are engaged compliantly by attending our upcoming “Business Booster” events in Sydney, Melbourne and Brisbane.

Find out more and register at: