Super for Contractors: Clearing Up the Confusion

Work arrangements today are more flexible than ever, and the rules don’t always feel straightforward. Rather than focusing on job titles or paperwork, what really matters is the nature of the arrangement - and that’s where many employers need clarity.

Why this matters under Payday Super

Contractors, working under a contract that is wholly or principally for their labour, are included in the definition of employees for superannuation guarantee purposes and as such, their super must also be generally paid within 7 business days under Payday Super. Including contractors in Single Touch Payroll (STP) reporting will continue to be optional. Even though they may not get picked up in real time reporting to the ATO there is still the requirement to generally pay super within 7 business days of payday. We recognise that some employers might have different departments handle payments to contractors e.g. accounts payable department rather than payroll teams. Part of your Payday Super preparation may be to adjust processes so that contractors are administered similar to your employees and you can meet your compliance obligations.

Super for Contractors

Whether a contractor is an employee for super guarantee purposes doesn’t just look at job titles; it looks at what the contract is for. If the arrangement is mainly for someone’s labour, superannuation obligations kick in.

The guidance from the ATO provides that super should be paid to independent contractors if:

• They’re paid for their personal labour and skills.
• They can’t delegate the work to someone else.
• Payment is based on time worked rather than being dependant on a fixed result.

Even if they have an ABN, you may still need to pay super.

It’s not about the paperwork — it’s about the substance of the arrangement. On the other hand, if you’re contracting with a company, trust, or partnership, super obligations generally don’t apply because the contract is with a business entity, not an individual.

Examples in practice

• Super applies: You hire a graphic designer as a contractor to work three days a week in your office, paid by the hour. They do the work personally and can’t send someone else in their place. This is a contract wholly or principally for their labour and you need to pay super (ATO guidance).
• Super does not apply: You engage a design agency to deliver a full branding package for a fixed price. They manage the project and allocate staff internally. This is a contract for a result — super isn’t required).