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Do You Know When You Need To Be Paying Super?

Do You Know When You Need To Be Paying Super?

Most business owners know that if you pay an employee $450 or more (before tax) within a calendar month, then you are required to pay Super Guarantee (SG) on top of their wages. But what about domestic workers or contractors? Do the SG contributions apply equally to them and do you know when you should and shouldn’t be paying SG?

When don’t I have to pay super?

First things first, let’s go over when you are not required to pay super. The following employees are not eligible for super, and in turn, you are not required to pay it.

  • Non-resident employees, you pay for work they do outside of Australia
  • Some foreign executives who hold certain visas or entry permits
  • Employees paid under the Community Development Employment Program
  • Members of the army, naval or air force reserves; for work carried out in that role
  • Employees temporarily working in Australia who are covered by a bilateral super You must keep a copy of the employee’s certificate of coverage to verify the exemption.
  • If you are a non-resident employer, you do not have to pay resident employees for work they do outside of Australia

Read our success stories: SMSFs and Retirement Planning

Contractors and super

Contractors who receive payments for their services are still considered employees for Superannuation Guarantee purposes. Even if the contractor quotes an ABN and invoices you for their work, they are still considered an employee, and you are required to pay super.

You must make super contributions for these individuals if you pay them:

  • Under a verbal or written contract that is wholly or principally for their labour – that is, more than half the dollar value of the contract is for their labour
  • For their labour and skills – which may include physical labour, mental effort or artistic effort – and not to achieve a result
  • To perform the contract work personally – that is, they must not delegate.
  • The only time a contractor is not considered an employee, and you are not required to pay super, is when the contract is between yourself and someone other than the person providing the labour e.g. a company, trust or partnership.

So if you have a contract with another company to complete a job, even if the job is entirely completed by one contract worker, you pay that company for the result, and the worker is not an employee of yours. Thus you would not be required to pay super towards for this worker.

Read our success stories: SMSFs and Tax-Free Income

Domestic workers and super

If you hire someone for domestic or private work for 30 hours or more per week and pay them $450 or more (before tax) in a calendar month, then you are required to pay Super for them. For taxation purposes “Domestic or private” means work relating to your home, household affairs or personally to you. The work must not be related to your business.

Read our success stories: SMSF Property Investment

Employees you have to pay super for

You are required to pay super no matter if your employee is:

  • Full-time, part-time or casual
  • Receiving a super pension or annuity while still working – including those who qualify for the transition-to-retirement measure
  • A temporary resident – when they leave Australia, they can claim the payments you made through a ‘departing Australia superannuation payment.’
  • A company director
  • A family member working in your business – provided they are eligible for SG.

Are you a business owner and not sure about if you are required to pay Superannuation Guarantee for your employees? Save on the confusion by giving the experts at Quarles a call today.

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