Employees vs Contractors - Part 3
- Arnold Shields
- Jan 25, 2011
- 1 min read
Updated: Jun 16
There is a widespread misconception that employers do not need to pay superannuation guarantee contributions (SGC) for contractors.
However, according to the ATO, if the payments to contractors are principally for the labour of the contractors, the employers are still liable for the SGC. Contract for labour does not only include physical labour (i.e. construction working) but also includes mental effort (i.e. IT consulting)
The following two situations are not contract for labour according to the ATO.
If the contractor meets the delegation test as we have discussed in Part 1 of “Employees vs Contractors”, there is no SGC obligations for the employers.
If the contractors are engaged through an interposed entity (i.e. company, trust or partnership), there is no SGC obligations for the employers.
It should be noted that ATO’s position in point 2 has been challenged in High court, however, there is no decision impact statement released yet.
Disclaimer:
The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.
