Do You Have to Pay Independent Contractors Superannuation?
When a business engages independent contractors to work in its business, it is important that it is aware of its obligations under the Superannuation Act 1976 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth) (the Administration Act).
Under the relevant legislation, if an employee works under a contract that is “wholly or principally” for the labour of the person, the business must pay that person superannuation.
The legal categorisation of a person as an employee or a contractor was discussed in the decisions in CFMMEU v Personnel Contracting [2022] HCA 1 and ZG Operations v Jamsek [2022] HCA 2. To work out whether a person is an employee or independent contractor, consideration must be given to the totality of the relationship between the parties. Some of the factors which may determine whether the person is an employee or a contractor include:
- The degree of control the business has over the contractor’s work;
- Whether the arrangement is results-based;
- Whether the business requires the contractor to wear a uniform;
- How integrated the contractor is in the business; and
- Whether the contractor can delegate their work.
Recently, in Commissioner of Taxation v Hatfield Plumbing Pty Ltd (Trustee) [2025] FCA 182, his Honour, Logan J dismissed an appeal by the ATO to overrule the decision of a Tribunal to set-aside a superannuation liability imposed by the ATO on Hatfield Plumbing.
The ATO’s appeal from the decision of the Tribunal was dismissed on the basis that an employee of Hatfield, Mr Hargreaves, had been engaged by Hatfield to produce a result and not for the provision of labour. His Honour did so on the basis primarily, that Mr Hargreaves was contracted to attend to various plumbing and drainage jobs rather than for the provision of indeterminate labour. The other matters ordinarily considered in categorising a person as an employee or a contractor were also highly persuasive.
The decision in Hatfield is a somewhat, controversial one and is currently on appeal. At present, the concept of “wholly or principally” for a person’s labour exists in circumstances where:
- The business provides payment for the contractor’s personal labour and skills;
- The contractor performs their work personally and cannot delegate the work; and
- The business make payments for each hour of work, rather than to complete a specific project.
The Hatfield Plumbing decision highlights the complexity and nuance involved in determining whether superannuation must be paid to independent contractors. While the case ultimately turned on specific contractual terms and the nature of the work performed, it underscores that businesses cannot rely solely on labels like “contractor” or “employee” when assessing their obligations.
Given that a contractor may still be entitled to superannuation even if they are not classified as an employee under the Fair Work Act, it is critical for businesses – particularly in the construction industry – to review their contractor arrangements carefully. Failing to meet independent contractors superannuation obligations can expose businesses to penalties, audits, and costly disputes.
If you’re unsure about your obligations or how recent decisions like Hatfield may affect your business, seeking tailored legal advice is essential.
How We Can Help
If your business requires legal advice, reach out to the team at Rostron Carlyle Lawyers for a confidential discussion regarding CFMEU updates, your position, or book a consultation here.
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