Are You Unintentionally Missing Super Payments? Understanding Contractor Obligations Under SG Rules
If your business engages contractors – whether they’re sole traders, directors, performers, tradies, or creatives – it’s important to understand who the ATO considers an “employee” for Superannuation Guarantee (SG) purposes.
This catches a lot of business owners off guard, because the ATO’s definition of “employee” goes beyond the usual understanding under common law. It’s not just about someone being on your payroll – it’s about the nature of the working relationship.
💼 So, who is considered an “employee” for SG?
Under section 12 of the Superannuation Guarantee (Administration) Act, the following types of workers may be considered employees for SG purposes – even if they’re engaged as contractors:
- Company directors who are paid for their duties;
- Contractors who are paid mainly for their labour and personal skills;
- State/Commonwealth government contract workers in certain situations;
- Entertainers, performers, athletes and creatives (such as musicians, dancers, and actors) who are paid to perform or provide services in connection with a performance or media production.
🤔 What about contractors with an ABN?
This is where many business owners get caught.
Just because a contractor has an ABN, or you’ve signed a contract saying they’re responsible for their own super, doesn’t mean SG doesn’t apply.
If the working arrangement is “wholly or principally for the labour” of the contractor (i.e. more than 50% of what you’re paying them is for their time and skills, not equipment or results), then you’re likely required to pay super on their behalf.
Here’s what the ATO looks at:
- Is the contractor being paid mainly for their personal labour or skills?
- Is the payment not tied to a specific result being achieved?
- Can the contractor delegate the work to someone else? If not, it points to an employee relationship.
If the answer to these leans toward yes, then you may be liable for super – even if your contract says otherwise.
🏗️ Example: Contractors With Equipment
In some cases, contractors provide substantial equipment or tools (like trucks or heavy machinery). That might help show the contract is not mainly for their labour – but the ATO will always look at the full facts of the situation.
👨💼 Do I need to pay super for directors?
Yes. If your business pays a company director for their duties (even if they’re not on payroll), superannuation is payable.
🎤 What about entertainers, performers and athletes?
These workers are specifically included in the SG rules. Even if they’re not your employees in the usual sense, you may still be liable to pay super if they:
- Perform or present music, plays, dance, sport, entertainment, or similar activities;
- Provide services connected with any of these activities;
- Work in film, TV, or audio production (e.g. as voiceover artists or behind-the-scenes contributors).
👉 Who pays the super?
It depends on who is paying the individual directly:
- If you pay a performer directly as a sole trader – you may be responsible for their super.
- If the performer pays other workers (like backup musicians) – then they may be responsible for their workers’ super.
- If you go through an agency and they pay the performers – the agency is usually responsible.
This is a common trap in industries like events, music, and media – so it’s crucial to check who is engaging who.
🏋️ Is a gym instructor a sportsperson?
In many cases, yes – and therefore may fall under the SG rules.
Let’s say a gym contracts a fitness instructor who:
- Operates as a sole trader with an ABN;
- Is paid per class or session (mainly for their time and expertise);
- Uses the gym’s equipment and wears the gym’s branding;
- Is trained by the gym to deliver services a certain way.
Despite the contract saying they’re an independent contractor, the ATO is likely to treat them as an employee for SG purposes. The key question is: are they building their own business or working within yours?
If it’s the latter – and no SG has been paid – the business could be liable for backpaying super from when the relationship began.
🚩 The Bottom Line for Business Owners
If you’re engaging contractors, don’t assume you’re in the clear just because:
- They have an ABN,
- They signed a contract, or
- They’re not on your payroll.
If the ATO deems them an employee for SG purposes, you’re responsible for paying their super – and the contract won’t protect you from that liability.
✅ What to do next
If you’re unsure whether SG applies to any of your current contractors, we recommend a quick review to avoid potential issues down the track.
We can help you:
- Review your contractor arrangements,
- Identify SG obligations,
- Put processes in place to stay compliant going forward.
Let’s make sure you’re covered. Get in touch for an initial review of your contractor relationships.
