Do you have to pay Super for Contractors? // Small Business Accounting Australia

In this video Chris Eccles from Empower Accounting and Advisory ensures you know the rules around Contractors and Superannuation in Australia, and how to get it right. So you keep out of trouble with the ATO.

If you employ Contractors in your business, there can be a fine line between them being an actual contractor or an employee for tax and super purposes. Just because your Contractor Invoices you with an ABN or only does short term work does not automatically make them a Contractor. The cost to get this wrong could cost your business thousands.

While there can be grey areas around being a contractor or an employee, generally Contractors will be running their own business and they take on “commercial risk”. Whereas employees can’t delegate the work, they are paid for time worked or a commission, your business provides most of the tools or pays them an allowance, and your business directs the person on how they work. Apprentices, trainees, labourers, trades assistants will always be employees in the ATO’s eyes regardless of how you pay them.

If you are unsure and want piece of mind, i highly recommend jumping onto the ATO website and filling out their Decision Tool. If you complete this and keep a record of the answers, the ATO will be a lot happier with you if something does happen down the track.

The penalties to get this wrong are huge. You will be liable to pay PAYG penalties and Super Guarantee Charge, I have done a whole video on this alone, and trust me this is not a path you want to go down.

So just because your mate down the pub says he has his own business, it doesn't mean the ATO agrees with them. Jump onto the ATO website and give yourself the piece of mind.

[Scholz]

I'm just trying to work out how this would actually be done. Would you as the employer pay the invoice regularly, then calculate 10.5% of the total and pay that in the likes of quick super?
Or would you ask the employee to be paid through regular payroll?