Under Australian super laws, some independent contractors are deemed (or considered) to be employees. These independent contractors need to be paid super by the businesses or organisations who engage them.
It is possible for a worker to be a legitimate independent contractor and be considered an employee for the super guarantee.
It is important for businesses and organisations to carefully consider whether a worker is an employee or an independent contractor. This can help avoid sham contracting arrangements and other penalties.
The super guarantee
The super guarantee is the minimum amount of super a business or organisation must pay their employees and independent contractors deemed to be employees for super purposes.
The super guarantee is 12%.
Be sure to also read our general superannuation information to learn about:
- Setting up to pay super
- What to do about unpaid or underpaid super
- Asking the ATO for a ruling if you’re not sure if super needs to be paid.
Working out which independent contractors need to be paid super
Only some independent contractors are entitled to be paid super from organisations that hire them.
Step 1 — How is the independent contractor set up?
To be entitled to super, an independent contractor needs to be set up as an individual or sole trader. If they are, go to step 2 below.
You can use ABN Lookup to check how the independent contractor is set up – or just ask them.
If they are set up as a business (for example, a Pty Ltd or Ltd company), they are not entitled to super. However, they can choose to pay themselves super (see independent contractors not entitled to super).
Step 2 — What is the contract mainly for?
Independent contractors who are set up as individuals or sole traders, are generally entitled to super if their contract is for:
If you’re still not sure if super is payable, find out how to ask the ATO for a tax ruling on our superannuation page.
Contracts for personal labour and skills
Independent contractors only get super if the contract is mainly for their labour and skills.
Generally, this is when the independent contractor:
- is paid under a contract that is mostly for their labour (generally more than half of contract value needs to be for labour)
- uses their own personal labour and skills to do the work (and can’t delegate it to someone else)
- is not being paid based on achieving a specific result (for example, for painting a mural, composing music for a film, or writing a short story).
If all these criteria are met, the independent contractor is usually entitled to super.
Contracts for performing or presenting
Independent contractors may also get the super guarantee if the contract is for, or connected to, a performance or presentation. This includes performing connected to making films or other recordings, or TV or radio broadcast.
Artists, entertainers and arts workers set up as independent contractors are entitled to super if they’re being paid for:
Performing, participating in or presenting music, a play, dance, entertainment, display or promotional activity
To be entitled to super, the payment generally needs to relate to the person’s active participation in a performance or presentation.
For example, a person being paid to for dancing, presenting, singing, performing or commentating will usually be entitled to the super guarantee.
In contrast, most composers, painters, photographers, writers or visual artists would not be entitled to super under the performers or presenters provisions.
Providing services in connection with performing, participating in or presenting music, play, dance, entertainment, display or promotional activity
Some independent contractors who are paid to provide ‘behind the scenes’ services connected to performances or presentations are also entitled to super. The services they’re providing need to be ‘in connection’ to (or directly involved with) the performance or presentation.
For example, a sound technician who is being paid to control sound quality at a concert, or a stage manager being paid in connection with theatre shows.
On the other hand, an independent contractor paid to help someone prepare in the lead up to a performance is unlikely to be entitled to super on the basis of their work being connected with the performance.
For example, a music teacher hired to teach students before a performance and not directly involved in the performance.
Performing in, or performing services in connection with, making a film, tape or disc, or of a TV or radio broadcast
Independent contractors paid to perform services in or connected with making films or other recordings or broadcasts are also usually entitled to the super guarantee. The payment needs to be for services connected (or directly involved) with producing the film or broadcast.
This may include filming, acting, performing, presenting, and other technicians or crew roles involved in making the recording or broadcast.
How to pay an independent contractor super
To pay independent contractors super, businesses and organisations need to:
1. Work out which super fund to pay
Like an employee, a business needs to ask an independent contractor to choose a super fund within 28 days of the independent contractor starting work.
Ask the independent contractors to choose a fund by completing the standard super choice form.
If the independent contractor doesn’t choose a fund, request their stapled super fund from the Australian Taxation Office. Follow the steps to request stapled super fund details on the ATO website.
If the Australian Taxation Office says the independent contractor doesn’t have a stapled super fund, the employer must pay the super into the employer’s default fund.
2. Check that the fund is compliant
If the contractor chooses a fund (or has a stapled super fund), check that their fund is compliant before making super payments.
To check:
- call the fund to ask
- use the Super Fund Lookup tool.
3. Work out how much super to pay
If an independent contractor is entitled to super, they’re entitled to be paid the super guarantee.
Super is paid on ordinary time earnings. For independent contractors, this is the labour part of the contract only.
Super is not paid to independent contractors on payments under their contract for things like:
- materials or equipment
- reimbursement for expenses like travel costs
- GST.
It is a good idea to ask independent contractors who are entitled to super to clearly itemise on their invoices:
- payments for their labour
- GST payable (if it applies)
- payments for other things like materials, equipment or other expenses.
If you don’t know how much of the payment is for labour
Sometimes there isn’t a breakdown of payments for labour and payment for other things. The contract might be for a lump sum payment or expenses may not be itemised on the invoice.
If you don’t have the details, it’s ok to look at market or industry standards to work out the value of the labour.
Independent contractors should not invoice for super
If independent contractors are entitled to super, the business organisation that hires them must pay it directly to their super account. Paying the contractor directly may result in penalties.
If they’re not entitled to super, the independent contractor can choose to make personal contributions to themselves. This does not get noted on the invoice.
Keep learning:
4. Pay super and submit data electronically
Businesses and organisations need to pay and report super electronically. It must be paid in a way that meets the SuperStream requirements.
Payments need to be made electronically:
- by the quarterly due dates, or
- more frequently – for example, if the rules of the employee’s super fund require monthly payments.
Learn more about setting up your systems for super on our Superannuation page.
5. Keep records
Keep records to show:
- that you asked the independent contractor to choose a super fund
- the super contributions you made to them.
Keep learning:
Keep learning:
Independent contractors not entitled to super
If you are an independent contractor not entitled to super, you can choose to pay yourself super by making personal contributions. You don’t have to do this, but it can be a good idea.
If you do decide to pay yourself super, make sure your super fund has your tax file number. If they don’t have it, your contributions will be taxed more or your fund might not accept your contributions.
Also, you might miss out on super co-contributions if you’re entitled to them. Co-contributions (where the government matches your contributions) are for eligible low to middle income earners.
Keep learning:
More in this section:
About super
Superannuation (or super) is a type of long-term investment for retirement. Businesses and organisations must pay super to their employees – and to some independent contractors, entertainers and performers.
Paying employee super
Superannuation (or super) is a type of long-term investment for retirement. Businesses must pay super to their employees – regardless of how much they earn.
