Typically, superannuation Australia is associated with employees, but there are circumstances where it is also owed to contractors.
Many existing businesses in Australia understand that contractors and employees are dealt with separately, but to what degree?
Superannuation is a right for all Australians in the workforce, and that sometimes includes contractors. It is very important as it ensures that your retirement savings continue to grow while you are still working and able to contribute. However, superannuation for contractors has few minor differences compared to employees.
Let us first identify what separates employees from contractors.
Work. If you are an employee, you can’t pay someone else to do the work. On the other hand, if you are a contractor, you can subcontract or delegate your work to others.
Payment. As an employee, you will be paid either for your time worked or on a commission basis. While if you are a contractor, you will be paid for the results achieved based on the provided quote.
Equipment. The company you are employed will be the one to provide the equipment and assets required for your work. With contractors, they are the sole provider of all or most of the tools needed for the completion of the work.
Legality. The work done by the employees is a responsibility of the business. Whilst, contractors assume the commercial risks of doing the work.
Freedom. The way you do your work is directed by the business. In contrast, contractors have the freedom in the way the work is done but is subject to conditions.
Additional work. Employees need to complete all of the work that is considered part of the business, while contractors only perform the services that are specified in the contract or agreement, as well as accept or refuse extra work.
As stated in the rules of Superannuation Guarantee (SG), contractors that are being paid for their labour are considered employees and that is also for superannuation purposes. Whether you are a casual employer, part-time employer, or a contractor, you must be paid for a super fund, even if you are a temporary resident of Australia.
So, if you are hiring a contractor, you are required to make super contributions for them under certain circumstances.
Additionally, there are factors that make contractors not eligible for superannuation. And there are key things that disqualify them from such entitlements:
To learn more about superannuation Australia for contractors, contact us today!
