Superannuation for Contractors

Generally, employers are not required to pay superannuation to contractors who are bona fide contractors. When you engage independent contractors to work in your business, you need to be aware of whether they are contractors or are actually employees. This will affect your obligations to pay superannuation. The Australian Taxation Office (ATO) is actively targeting employers who aren’t paying employees and certain contractors their full compulsory superannuation guarantee entitlements.

Contractor vs Employee

You must pay superannuation for anyone who is an employee. ATO has taken steps to increase investigations of businesses who engage contractors. They are investigating whether contractors engaged independently are being paid appropriate superannuation payments if they are entitled to them.

The ATO views that whether a person is an employee, is a question of fact, which can only be answered through the consideration of the employment contract’s terms and circumstances.

The key indication can be found here.

Your business must pay superannuation to everyone you engage who is entitled to it. In most cases, these will be employees. However, in some cases, you may still need to pay superannuation to contractors, such as when they provide substantial labour under a contract. The ATO has extensive powers to enforce superannuation laws. It is vital that you are clear on your obligations.

Any questions about Superannuation? Please call us today for an obligation free consultation, or visit ATO website.

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