Purpose has fielded a few queries regarding superannuation obligations, and the definition of employees vs contractors. Below we share some of our recent advice on these topics…

Q: My organisation is unsure what our super obligations are for contractors – can you help?

A: This issue needs a judgement from your organisation based on the rights and obligations within the work contract/employment agreement:

• The ATO has a ‘common indicia’ checklist that you can use to determine whether a contractor is deemed an employee or not. The ATO also states that if the worker works under a contract that is wholly or principally for their labour, the worker is deemed an employee for superannuation purposes. The exception is where an organisation hires a company, trust or partnership to do the contracted work – for these entity types, super does not apply.  
  
• If your organisation determines that the contractor is deemed an employee, their invoice should clearly indicate the labour component separately from others (such as reimbursement, materials etc), as the business pays super on the labour portion only (excluding GST).   
  
• In terms of process – we have had some instances where clients have needed to pay super to a contractor that has been deemed an employee.  In this case, clients have used the ATO super choice form to collect super information and Xero clearing house to pay the super. One good policy we’ve seen adopted is where our client only paid the bill once the super information was collected – this avoided the risk of late payment for super.

If you have any further queries on these issues, please reach out to your Purpose contact for advice.