The short version is that you're likely to need to pay super if your contractors are paid for their labour (ie just turning up) and generally you would also include for payroll tax purposes.
Is the person doing the work an employee or contractor?
Over the last couple of years, the ATO has increasingly been tightening up the definition of employee vs contractor. This has been to ensure that companies don't think they can contract out to avoid their employee obligations. Regardless of whether the person doing the work has a contractor agreement (instead of an employment agreement), an ABN, or is registered for GST, they could still be deemed to be an employee.
You should use the ATO employee/contractor decision tool to help you work out if a contractor is an employee for super purposes
If your contractor is deemed to be an employee, all employee obligations would then apply.
Separately, if they are deemed to be a contractor, you could still be required to pay superannuation and/or payroll tax per below.
Paying superannuation for contractors
If you pay contractors mainly for their labour, they are employees for superannuation guarantee (SG) purposes. If your contractors are paid for an outcome (eg sales) you will not need to pay super.
If you enter into a contract with a company, trust or partnership, you do not have to pay super for the person they employ to do the work.
You will need to make super contributions for (individual / sole trader) contractors if you pay them:
- under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour) [this covers where contractors include both labour and materials]
- for their personal labour and skills (payment isn't dependent on achieving a specified result) [this means that contractors that are paid to deliver an outcome (eg sales) rather than for just turning up, they will not need to be paid super.
- to perform the contract work (work cannot be delegated to someone else) [ie it's a personally delivered service by the contractor themselves].
If you need further help, use the ATO superannuation guarantee eligibility decision tool to work out if they're entitled to super guarantee contributions
Paying payroll tax for contractors
While each state has different criteria for reporting contractors for payroll tax, broadly, you should expect to pay payroll tax for contractors.
Specifically, the exclusion above for super, whereby contractor costs are only eligible for the labour component is not generally allowed for payroll tax purposes - ie regardless of the basis for a contractor payment (ie labour or outcome based), it is likely you will need to include all their costs when doing your payroll tax lodgements.
See also our general Payroll Tax FAQ
- Super for contractors [ATO website]