Super for contractors¶

It is easy to assume that if someone invoices you as a contractor, super is never your problem. That is not always true. The ATO explains that some contractors are treated like employees for super purposes. If that applies, you may have to pay super for them even though they send you an invoice and quote an ABN.

Whether super applies comes down to the nature of the contract — not the label on it, and not the fact that an invoice is involved.

Why this matters¶

Getting this wrong is a common trap. A business hires a contractor, assumes no super is owed, and later finds out super should have been paid all along. That can leave you owing super you did not budget for. Knowing that super can apply to some contractors — and knowing how to check — protects you from a surprise down the track.

What you will learn¶

• That some contractors are treated as employees for super
• What "wholly or principally for labour" means in plain terms
• Where to go to check whether super applies

Understanding the concept¶

The ATO explains that you may have to pay super for a contractor if their contract is wholly or principally for their labour. In plain terms, that means the contract is mainly for the person's own work and skills, rather than for a product or a finished result.

The ATO describes signs that a contract is mainly for labour, including where:

• the person is paid mainly for their personal labour and skills;
• they do the work themselves, rather than passing it on to someone else; and
• they are paid for the hours they work, rather than to deliver a set result.

An important point from the ATO: this is about the contract being directly with the person. If you contract with a company, trust or partnership instead of the individual, that changes things.

The key takeaway is that a person quoting an ABN and invoicing you does not automatically put them outside super. What matters is what the contract is really for. Because this depends on the details of each arrangement, the ATO provides guidance and an online tool to help you work it out. This lesson does not decide it for you — use the ATO's tool for your own situation, and get advice if you are unsure.

Example¶

A business hires Jordan to do work for it. Jordan invoices the business and quotes an ABN. But looking at the arrangement, Jordan is paid for their own hours, does the work personally, and the contract is really for Jordan's labour and skills rather than a finished product. That pattern points to a contract that is principally for labour, so super may apply — even though Jordan invoices like a contractor. Because it depends on the details, the business checks the arrangement using the ATO's tool rather than guessing.

Common mistakes¶

• Assuming an invoice or an ABN means super never applies — the nature of the contract is what counts.
• Relying on the word "contractor" in the agreement instead of what the work really is.
• Deciding it yourself for a tricky case rather than checking with the ATO.
• Overlooking that the contract needs to be directly with the person, not their company or trust.

How this works in myaccountant¶

Key points¶

• Some contractors are treated like employees for super.
• Super can apply where a contract is wholly or principally for the person's labour.
• "Principally for labour" means mainly for the person's own work and skills.
• An invoice or an ABN does not automatically rule super out.
• The contract needs to be directly with the person, not a company or trust.
• Because it depends on the details, check with the ATO's guidance and tool.

Learn next¶

• Who is eligible for super
• The super guarantee
• How much super to pay

General information only — not tax, super or financial advice.