Superannuation for contractors has been a blackhole in the accounting compliance world for as long as I have been an accountant.
Over the last few years we have seen the ATO put a lot more focus and resources in overseeing compliance in this area and they are no longer accepting ignorance as a defence.
For the majority of small to medium sized businesses I speak to, they generally have little to no understanding about what this means.
Most businesses understanding is that if they engage a sole trader contractor to do some work, the business just needs to pay the invoice amount and they are clear of any further tax compliance.
But in reality, a large portion of sole trader contractors in the music and entertainment industry are actually classified as employees in the eyes of the tax office and may be subject to superannuation obligations.
To work out if a contractor may indeed be classified as a employee for superannuation purposes, the ATO has released an online tool.
If you determine that the contractor is indeed an employee for superannuation purposes, its important to communicate this with the contractor and ensure that their fee has been negotiated correctly. Say their standard day rate is $300 + GST, you would clarify with the contractor that it will include superannuation. You would then be required to withhold 10% of their payment for superannuation which you would then pay through to their nominated superannuation fund on a quarterly basis. And no you cant pay the contractor directly if they say “ill look after my own super payment”.
This can be a complex area so feel free to reach out to our business management team on firstname.lastname@example.org if you need any support.