Employers beware: Just because a subcontractor provides an ABN and agrees to pay for their super does not mean that you are not liable. If you pay contractors mainly for their labour, they are most cases deemed employees for superannuation guarantee (SG) purposes and you are responsible for their super payments.
Simply saying ‘I’m a contractor’ and sending an invoice doesn’t always mean that is the case in terms of superannuation. It is always important to look at the substance of the relationship, advises Xact Accounting Owner and Client Director Joshua Robertson.
In a case decided by the Administrative Appeals Tribunal (AAT) earlier this year, a plumber has been deemed an employee for super guarantee charge purposes.
The plumber worked as a casual subcontractor for a company that sells and installs cooling and heating systems. He has agreed orally and in writing to work under the following conditions:
He was supplied with all the necessary materials to complete his work, but he paid for expenses relating to his van and his mobile phone. And although he was allowed to work for other companies, he couldn’t do so because he had little time as he was working “full-time”.
Following an ATO audit, the Commissioner ruled that the plumber was engaged to perform services as an employee and issued superannuation guarantee charge assessments against the company for each of the quarters from 1 October 2013 to 31 March 2018 in respect of unpaid superannuation contributions. This decision was later affirmed by the AAT.
Even though the plumber was invoicing the company each week, the company was still liable for super as, really, the plumber was their employee after satisfying the components in the SG Act:
Important note – the superannuation guarantee scheme does not consider private arrangements you might have to pay amounts to substitute or avoid superannuation contributions. Simply, you cannot offset your obligations.
