This is probably one of the most common areas of taxation, superannuation and employment law that is handled incorrectly by contractors/employers.
There are quite specific rules whereby a contractor is considered an employee for superannuation guarantee purposes and the payer has super guarantee obligations. These are:
- If the contractor is with an individual and the contract is wholly or principally for their labour, 50% of the contract qualifies as principally for labour and.
- If the contractor is paid more than $450 in a month then the superannuation guarantee is payable.
- The contractor having an ABN does not stop the super guarantee obligation.
You will note that in (1) above I highlighted ‘their’. This is because the contract must be with the individual for their personal labour e.g. a builder contracts with a bricklayer for that person to lay some bricks.
However, what if the bricklayer, even though he operates as a sole trader, himself has a team of bricklayers? In this case, the contract is with the bricklayer not to lay the bricks himself but to simply get the job done.
In this case there is no superannuation guarantee requirement.
Please note, the above is a simplified version of some complex rules. So if you have any concerns, please call our office.
This article appeared in our July 2019 newsletter. Author: Stephen Mason