Do you have employees? Yes, in such case you could have to make superannuation payments on their behalf!
In general, you must pay super guarantee (SG) on top of an employee’s earnings if you pay them $450 or more (before tax) in a calendar month.
In order to qualify, your employee must work more than 30 hours per week regardless of age or whether they are a domestic or private worker, such as a nanny.
Even if they provide an Australian business number, some contractors may still want you to pay super (ABN). (This will be covered in more detail in a later section of this pamphlet.)
You must pay super regardless of whether the worker:
- is casual, part-time, or full-time,
- who is still employed and receives a super pension or annuity, including those who are eligible for the transition to retirement measure,
- is a temporary residence; they may claim the visa when they depart Australia.
- payments you paid through a superannuation payment made before leaving Australia,
- is a director of a firm,
- is a member of your family who works for you, providing they qualify for SG.
Let’s examine some of the more prevalent worker categories.
Workers in the home
If you hire someone to perform domestic or private labor for you for 30 hours or more each week and pay them $450 or more (before taxes) in a calendar month, you are required to pay social security taxes on their behalf.
Work connected to you personally (not to a business of yours) or work pertaining to your home, household affairs, or family is referred to as “domestic or private.” An example of this might be a caregiver, housekeeper, or nanny.
Those who work do not qualify for super
Superannuation is not always necessary to be paid; in some cases, it is not even required. You are not required to pay SG for
- a non-resident worker whom you compensate for work performed outside of Australia,
- a few international executives with specific visas or entry permits,
- the Community Development Employment Program’s compensated employees,
- reservists from the military, navy, or air force for work performed in that capacity,
- Personnel who are on a temporary assignment in Australia and are covered by a bilateral super agreement. To verify the exemption, a copy of the employee’s certificate of coverage must be retained on file.
Employees based abroad
You must keep making superannuation payments for an Australian employee even if they are temporarily working abroad.
The other country may require you or your Employee also pays a superannuation (or similar) there. However, Australia has bilateral arrangements with several nations that exempt you from paying it there as long as you continue to make the employee’s mandatory super contributions in Australia. You must present a proof of coverage to the authorities in the other nation in order to be excluded from the super payment there. The ATO must be contacted to acquire this.
An Australian employee working in the US is an example:
Jack lives in Australia and works there for an Australian company. His employer arranges for him to spend a year working there. In the US
Jack’s employer and he must both make the required social security (which includes super) contributions. Jack’s employer must also continue to pay SG for Jack while he is in Australia.
Due to the agreement between Australia and the US, neither Jack nor his employer are subject to the US’s contribution requirements. To confirm that the US exemption is in effect, Jack’s company must acquire a certificate of coverage from the ATO. In Australia, Jack’s employer will keep making super contributions.
A US worker sent to Australia on a temporary basis would not be subject to Australia’s SG regulations because they and their company would only be required to pay payments under the US system.
2. Contractors
For the purpose of the superannuation guarantee, contractors who are paid primarily for their labor are considered employees. Even if the contractor provides an Australian Business Number, this is the situation (ABN).
If you pay them, you must make special contributions for them:
- under a verbal or written agreement that is entirely or primarily for their labor, meaning that more than half of the contract’s total value is for their labor,
- for their own work and abilities, which may include creative work, mental work, or physical labor, and not to produce a specific outcome.
- to physically carry out the contract work
– that is, they must not delegate.
You don’t pay that individual super if you enter into a contract with someone other than the person who will provide the labor, such as a firm, trust, or partnership.
Example: Harry’s Hobby Shop hires Pete’s Paints as a contractor, not an employee, to paint their new store. One painter from Pete’s Paints completed the entire job, but this does not imply that he or she is an employee of Harry’s Hobby Shop as the contract is between the two businesses.
To get a result, Harry’s Hobby Shop paid Pete’s Paints. The painter can be subject to SG responsibilities from Pete’s Paints.
- Example: David’s Caravan Park has a contract with Amanda, a free-lance administrative assistant, to answer phones and perform administrative tasks for 15 hours each week. This is an employee, not a contractor. The contract stipulates that Amanda must complete the work herself. Amanda bills David each week for the hours she works and has an ABN. For SG reasons, Amanda is seen as David’s employee since
- The only labor and talents covered by her contract are those that Amanda delivers,
- She handles the work herself,
- She is compensated for the hours that she works.
How much should contractors be paid in super?
You must contribute at least 9.50% of each employee’s regular hourly wage to superannuation (OTE).
The minimal super payment for a contractor employee must be calculated based on the labor portion of the contract.
It is not a super contribution if you pay your contractor an additional 9.50% compensation on top of their regular pay. You must contribute at least the minimum super guarantee contribution (9.50%) to your contractor employees’ super fund accounts each quarter in order to fulfill your super responsibilities to them.
- Self-employed people
Super guarantee (SG) payments for yourself are typically not required if you operate as a solo proprietor or are part of a partnership; they are optional.
Additionally, you can be qualified for the super co-contribution payment. This aids those with low to intermediate incomes who are qualified to save for retirement. Unless you have claimed your contribution as a tax deduction, the government will match your contribution up to a specified level if you are eligible and make personal super contributions.
Beware – Make sure your super fund has your tax file number (TFN).
Unless it does:
- an additional 34% of your super donations will be taxed,
- You may forfeit whatever super co-contribution you are entitled to since your fund won’t be able to receive personal donations from you,
- It will be more difficult to monitor your super.