One of the most expensive surprises in a small business review is finding out a long term contractor should have been getting super the whole time. The rule is simple and widely missed: if you pay someone under a contract that is mainly for their labour, they count as an employee for super guarantee purposes. Having an ABN and sending invoices changes nothing.
The three part test
- Mainly labour. More than half the value of the contract is for the person's labour rather than materials or equipment.
- Paid for their skills, not a result. They are paid for hours worked or work performed, not a fixed price for a delivered outcome.
- Cannot delegate. They have to do the work personally and cannot send someone else in their place.
Tick all three and you owe super on the labour component of their invoices, at the same super guarantee rate as your employees.
Why it matters more now
With payday super in force since 1 July, super is due when you pay people, not once a quarter. A missed contractor discovered late no longer means one catch up payment; it means a growing trail of late contributions, and the super guarantee charge is not deductible.
What to do
List every contractor you paid this year and run the three questions over each one. For anyone who ticks all three, start paying super on the labour part of their invoices now and talk to your accountant about the back period. Getting ahead of it is far cheaper than the ATO finding it first, especially with TPAR data now matched against contractor returns.