Generally, you have to pay super for an employee if they’re 18 years or over and you pay them $450 or more (before tax) in salary or wages in a month. However, you are also considered an employer if you make payments to a person wholly or principally for labour under a contract, even if the person quotes you an ABN.
Generally, a contract is principally for labour if more than half the dollar value of the contract is for a person’s labour. A contract may be considered ‘wholly or principally for labour’ if the individual:
- Is paid for their labour and skills
- Must perform the contract work personally and is not able to delegate
- Is paid for hours worked, rather than to achieve a result
If the obligations for a contractor that is eligible for superannuation are not correctly met, large penalties can be imposed and the expense will become non-deductible. Please contact your Client Manager if you require any assistance in correctly making this important determination.
This article was written by Paul Miller. Paul is working towards completing his final module to becoming a Chartered Accountant in the coming months. Out of the office Paul enjoys spending time with his wife and 2 young children. Paul is also a keen indoor Soccer player and enjoys flying Cessna's whenever he gets the chance.