Do contractors get super?
Where an individual contractor is wholly or mainly supplying personal labour, then the contractor may be entitled to receive 11% super, just like an employee. This is on top of their fee, even if they quote an ABN.
When is a contractor more like an employee?
If a contractor is engaged by a business on an ongoing basis, and is paid mainly for their labour, then they may be regarded as an employee for super purposes.
However, the work must be personally done by the contractor, not delegated to a subcontractor. Likewise, if the contractor is a company, and one of its employees does the work for the client, then that employee is not paid super by the client.
Common mistakes to avoid
The most frequent mistake is assuming that super does not need to be paid for a contractor. It’s an easy error to make, but an expensive one if a company gets it wrong, because the ATO does make it simple to work out the difference.
Other mistakes to avoid include:
- Paying super on the whole value of the contract when some of it is not labour
- Paying the 11% super guarantee direct to the contractor. The super payment needs to go to a super fund to meet the requirements of the Super Guarantee laws.
- Paying super for a contractor when they’re not doing the work themselves. This often happens with long-term contractors, where the contractor started doing the work themselves but then changed the arrangement over time.
How do I pay contractor superannuation?
If you need to pay super to a contractor, calculate it as 11% of the labour component of the contractor invoice. Exclude any chargeable items such as materials, exclude overtime paid at overtime rates and exclude GST. You then make the payment to the super fund that the contractor has nominated.
Super is not normally payable to subcontractors except where the subcontractor provides wholly or mainly labour. In this case the super is normally payable by the contractor, not by the company that took on the contractor. The contractor pays 11% super on labour, excluding materials, overtime paid at overtime rates, and GST.
Can contractors and the self-employed join TWUSUPER?
Yes. Contractors and self-employed workers can definitely join TWUSUPER.
Contractors need to join TWUSUPER online themselves (unlike employees who receive Super Guarantee and can join TWUSUPER through their employer).
Need more answers?
If you still have any questions about super for contractors, give us a call between 8am and 8pm (AEST/AEDT) weekdays on 1800 222 071.
If you’re an employer who is contributing to TWUSUPER for your other employees, you can contact your TWUSUPER Account Manager directly.