Oct 26, 2026 Andrew Low

Superannuation and Independent Contractors

For many employers, engaging independent contractors is a flexible way to access specialist skills and manage workforce demands. What’s even better – as they’re not employees, they also don’t need to be paid superannuation…right?

Wrong.

The Expanded Definition of Employee

A common misconception is that superannuation guarantee (SG) obligations apply only to employees, but in fact some independent contractors should be treated as employees for superannuation purposes, even if they hold an ABN and issue invoices.

Section 12 of the Superannuation Guarantee Administration Act (SGAA) provides that “employee” has its ordinary meaning but then expands that definition for specific circumstances. Importantly, section 12(3) states:

“If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.”

This means that a worker may be an independent contractor at common law, yet still be deemed an employee for SG purposes. Employers therefore need to look beyond job titles, ABNs and contractual labels when assessing their superannuation obligations.

When Must Super Be Paid to a Contractor?

The Australian Taxation Office generally considers a contractor to be entitled to SG contributions where the contract is principally for the individual’s labour and skills. Key indicators include:

• The contractor is engaged primarily for their personal labour or expertise.
• The contractor is required to perform the work personally and cannot freely delegate the work to others.
• Payment is made for the contractor’s time, effort or labour, rather than simply for delivering a specific result.

If these features are present, the contractor may be deemed an employee, creating an obligation for the engaging business to pay superannuation contributions.

A High Court decision in recent years has highlighted the importance of the legal rights and obligations arising from the contract between the parties, so it is imperative that the contract accurately represents the true arrangement, as the terms it contains are given significant weight when determining exposure to SG.

When Super May Not Be Required

Not all contractor arrangements attract SG obligations. Superannuation is generally less likely to be payable where:

• The contractor is engaged through a company, partnership or trust.
• The contract is for the achievement of a specified result rather than the provision of labour.
• The contractor has a genuine right to subcontract or delegate the work.
• A substantial portion of the contract relates to the provision of equipment, tools or materials rather than labour.

The ATO continues to focus on superannuation compliance, and with the recent changes to payday super and a number of high-profile cases in this space, the spotlight is truly back on the superannuation treatment of contractors.

If you’re unsure of whether you’re correctly paying superannuation to contractors, or even if you are a contractor yourself and have questions to your entitlement, please reach out to our team.