As an employer or business engaging a contractor you have legal responsibilities. Your superannuation, taxation and other government obligations are different for contractors than they are for employees. You or your company may face penalties and charges if you incorrectly treat an employee as a contractor and don’t meet your obligations.

Your tax, super and other obligations vary depending on whether the worker is an employee or contractor. Your business needs to keep records to support the decision on whether the worker is an employee or contractor and whether superannuation is payable. The business faces penalties and charges if it incorrectly treats an employee as a contractor and/or does not pay superannuation if required.

When am I required to pay superannuation?

If your worker is an employee by law, then you need to pay superannuation. The current minimum contribution is 9.5%.

Under certain circumstances, employers must pay the superannuation of their workers. These criteria include:

  • when an employee gets more than $450 in a single month of work before tax;
  • when an employee is older than 18 years (or less than 18 years but works more than 30 hours a week); and
  • when an employee is full-time or part-time, or the superannuation can be payable to certain casual employees.

What amount do I pay?

If the worker is a contractor then you need to assess if superannuation is payable.

  1. Is the agreement with an individual, rather than a company?
  2. Is the agreement principally for labour? For example, do you pay the contractor for services that are made up of over 50% labour.

Answering ‘Yes’ to both of the above propositions means that your worker will (most likely) be eligible for superannuation contributions.

You should use the ATO test to find out whether your worker is eligible for superannuation contributions.

Please keep a copy of the test results for your records.


Would you like help with deciding whether or not you have to pay superannuation, and what amounts? LegalVision can help you. Please call our office on 1300 544 755 and our Client Care team will happily provide you with an obligation-free consultation and a fixed-fee quote to help you sort out your superannuation obligations.

Ursula Hogben
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