The superannuation guarantee (SG) rules in Australia are comprehensive, covering a wide range of workers beyond traditional employees. These rules extend to directors, contractors, entertainers, sportspeople, and other workers in specific circumstances. Employers are mandated to pay SG to those defined as employees under SG regulations. However, the broad interpretation of “employee” has recently sparked debates concerning the rights of performers, gym instructors, and others not typically viewed as employees.
For business owners and employers, it’s vital to clarify any ambiguity regarding workers’ rights to SG. This may involve an initial assessment, consultation with an employment lawyer, or seeking an Australian Taxation Office (ATO) private ruling tailored to your workplace. A significant concern for employers is the absence of a strict time limit for recovering unpaid SG obligations. Theoretically, the ATO can retrospectively claim unpaid superannuation for workers classified as employees under SG rules. A key aspect of the SG system is ensuring employees and deemed employees receive appropriate contributions for their retirement. The SG laws, along with the director penalty regime, ensure full payment of SG owed to employees.
Who Is Exempt from Super Guarantee?
SG is not required for:
- Workers under 18 who work less than 30 hours a week.
- Private and domestic workers working less than 30 hours weekly.
- Non-resident employees working outside Australia.
- Employees temporarily in Australia under specific agreements.
- Certain foreign executives with specific visas.
Generally, SG is not payable on contracts with companies, trusts, or partnerships. For Australian employees working temporarily overseas in countries with bilateral social security agreements, such as the U.S., SG should continue, and a certificate of coverage should be obtained to avoid dual contributions.
The SG’s Expanded Definition of an Employee
Section 12 of the SG rules expands the employee definition beyond common law, including:
- Remunerated company directors.
- Contractors primarily engaged for their labor.
- Certain state and Commonwealth contractors.
- Individuals paid for performing in artistic or sports activities, including related services or productions.
Are Contractors Entitled to SG?
Holding an Australian Business Number (ABN) does not exempt contractors from SG. If a contract mainly involves personal labor and skills, SG is likely due. The ATO stipulates that SG should be paid if:
- The contract primarily involves labor.
- Payment is for personal skills, not dependent on results.
- Work cannot be delegated.
A recent ATO ruling notes that using significant capital (like a truck) might argue against a labor-focused contract, but outcomes depend on specific details.
SG for Directors and Performers
Directors compensated for their duties are entitled to SG. For entertainers and sportspeople, SG is generally not payable if they work through a company, trust, or partnership. However, individual performers are considered employees under SG rules when paid for creative activities or associated services. Responsibility for SG payments lies with the entity paying for the individual’s labor, such as a festival operator contracting a performer.
Understanding who qualifies as an employee for SG purposes is crucial for determining SG responsibilities.
Gym Instructors and SG
Gym instructors may be considered deemed employees under SG rules. For instance, a sole trader instructor with an ABN might still be an employee if:
- Their contract specifies they are independent and responsible for their own SG.
- Payment is per class or session, covering labor.
- They use the gym’s facilities, wear its uniform, and follow its training methods.
If a gym hasn’t been paying SG to such instructors, it may owe SG from when the employment relationship began.
If you’re concerned about your SG obligations, please contact us for an initial review.
