SG’s broader definition of an employee
There is a section of the SG rules, section 12, that specifies who is deemed to be an employee for SG purposes. This section extends the definition of an employee beyond common law to cover:
· Company directors who are remunerated for performing duties;
· Contractors working under a contract wholly or principally for their labour;
· Certain state and Commonwealth government contracted workers; and
· Those paid to perform or present any music, play, dance, entertainment, sport or other similar promotional activity. This includes people who provide services in connection with these activities or people paid in relation to film, tape, disc or television.
Are contractors entitled to SG?
If your contractor holds an Australian Business Number (ABN), this of itself will not prevent SG from applying. Where the arrangement looks like it is a contract for the provision of an individual’s labour and skills, it is likely they will meet the definition of an employee and SG will be payable.
The SG rules state 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 definition is alarming to many employers as the rate paid to contractors, and often the terms of the agreement, factor in an uplift for super guarantee and other entitlements that would normally be paid if the person was an employee. But for SG purposes, it does not matter what the contract says, if the person is deemed to be an employee under the rules, they are entitled to SG and the employer is obligated to pay it.
The Australian Taxation Office (ATO) states that SG needs to be paid to 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)
· for their personal labour and skills (payment isn’t dependent on achieving a specified result)
· to perform the contract work (work cannot be delegated to someone else).
In a recent ruling, the ATO says that where the worker is required to use a substantial capital asset (such as a truck) this will help in arguing that the contract is not mainly for the labour of the worker, but this will always depend on the facts.
Are directors paid SG?
Yes. Directors (members of executive bodies of bodies corporate) should be paid SG if they are remunerated for performing duties for the company.
Entertainers, performers and sportspeople
Generally, if a performer operates through a company, trust, or partnership then there is not an employment relationship and SG is not payable.
However, individual artists, performers and sportspeople are captured as employees under the SG rules (section 12(8)) where they are paid to:
· perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills;
· provide services in connection with an activity referred to above;
· perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast.
Whoever is paying the individual for their labour, is generally responsible for the payment of that individual’s SG. For example, a music festival operator that contracts a sole trader to perform at a festival might be liable for SG for that performer. Likewise, if the sole trader contracts band members to perform with them at the festival, then the sole trader is responsible for the SG of the band members. If however, the music festival worked with an agency to supply the performers (the music festival pays the agency, the agency pays the performers), then the agency is likely to be responsible for the SG of the artists if there is a liability. If the agency only charges a booking fee and the festival pays the performers directly, then the festival is likely to be responsible for the performer’s SG.
You can see from this how important it is to determine who meets the definition of an employee for SG purposes, and if so, to understand the parties to the deemed employment relationship.
What’s a service “in connection to”
The definition of an employee for SG purposes captures workers who work with performers, for example individuals that are producers, videographers, editors, etc. If the person meets the definition of an employee under the SG rules, then it is likely SG is payable.
