Engaging contractors can seem like a simple way to keep your workforce flexible — no payroll and no leave entitlements. But when it comes to superannuation obligations, things aren’t always that clear-cut.
The ATO take the stance that, even if someone works for you under an ABN or service agreement, they may still be deemed an
employee for superannuation purposes. If they’re paid mainly for their labour (rather than for delivering
a specific result or providing materials and equipment) you could be liable to pay super on their behalf.
This can catch employers off guard if they're not prepared, regardless of the industry. The ATO regularly reviews contractor arrangements
and has the power to reclassify workers, leading to back-dated super payments, penalties, and interest charges.
The key takeaway here is that: Labeling someone a contractor doesn’t automatically remove your super obligations.
To remain compliant, it's worth reviewing all contractor agreements carefully to test whether they meet the ATO’s definition
of an “independent contractor.” It’s also worth documenting how the work is performed, who provides the tools, and whether the
contractor is free to subcontract or delegate their work. These are some of the questions that the ATO ask to help determine how a
worker is classified (as an employee or contractor).
Super compliance is one area where getting it right the first time, is far cheaper than correction after the fact. If you’re unsure,
now is the time to review your contractor arrangements before the ATO does it for you. If you need a hand to assess
whether contractors should be receiving super, we can help guide you through this and assist in getting you setup so that you can pay
your super obligations on time.
