As an employer, if you pay contractors mainly for their labour, they ought to be classified as employees for Superannuation Guarantee (SG) purposes. It doesn’t matter if the contractor has an Australian Business Number (ABN). Some contributing factors to determine whether you need to make super contributions for your contractors if you pay them:
- Under a verbal or written contract that is mainly for their labour (more than half of the dollar value of the contract is for their labour).
- For their personal labour and skills (payment isn’t dependent on achieving a specified result).
- To perform the contract work (work cannot be delegated to someone else).
If the employer enters a contract with another company, trust or partnership, the employer ought not have to pay SG for the person they employ to do the work.
Just like with employees, where you are required to pay SG for a contractor, then the employer must offer a choice of super fund within 28 days of their start date.
Please note other costs may also be applicable where you engage contractors such as Workers Compensation and Payroll Tax and so if you have any concerns about how you are currently paying your contractors please contact Waterford Accountants.