Let’s unravel the mystery of superannuation for contractors.
- Super Contributions for Independent Contractors:
- If you pay independent contractors mainly for their labor, they’re considered employees for superannuation guarantee (SG) purposes. So, yes, you may need to pay super contributions for them.
- It doesn’t matter if the independent contractor has an Australian Business Number (ABN). ABN or no ABN, the super spotlight is on!
- When do you need to make super contributions for contractors?
- Under a verbal or written contract that’s primarily for their labor (more than half the contract’s value is for their work).
- When they provide personal labor and skills (payment isn’t tied to achieving a specific result).
- If they’re the ones performing the contracted work (no delegating to others).
- Example 1: Meet Amanda, the freelance administrative assistant. David’s Caravan Park has a contract with her to answer phones and handle admin tasks. Amanda invoices weekly based on hours worked. She’s an employee for SG purposes because:
- Her contract is all about the labor and skills she provides.
- She’s paid based on hours worked.
- She does the work herself.
- Example 2: Harry’s Hobby Shop hires Pete’s Paints to paint their new shop. Pete’s Paints sends one painter to complete the job. Since the contract is about achieving a result (the painted shop), the painter isn’t an employee of Harry’s Hobby Shop for SG purposes. No SG obligations for Harry’s Hobby Shop in this case!
- Offering Independent Contractors Choice of Fund:
- Even contractors deserve a say in their super destiny! If you’re paying super for them, they can choose their super fund. It’s like letting them pick their favorite dance partner.
- Remember, the Super Guarantee (SG) requires employers to contribute a minimum of 9.5% of ordinary time earnings to their employees’ super funds (if they earn $450 or more in a calendar month). Whether you’re full-time, part-time, casual, or a contractor, that SG rhythm keeps playing!
So, my contractor friend, keep those financial pirouettes graceful, record your income and expenses, and let your super fund pirouette its way to a secure future! If you need further help, just give us a shout— we are here to guide you through the tax and super ballet!
Disclaimer: Any advice on this site is general nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.
