Under the superannuation guarantee law, most employers must pay super contributions (in addition to gross salary and wages) into a complying superannuation fund or retirement savings account so that their eligible employees can enjoy the benefits of super in their retirement.
At common law, an employee is a person who performs work under the control of another in exchange for payment for services that he or she provides.
However, the definition of an employee for superannuation guarantee law purposes is more expansive, and includes any individual who receives payment in the form of salary or wages in return for their labour or services. This definition may include individuals who would be classified as contractors at common law. Generally speaking, you have to pay super for an employee if they’re between 18 and 69 years old (inclusive) and you pay them $450 or more (before tax) in salary or wages in a month. It doesn’t matter whether the employee is full time, part time or casual. Employees who are under 18 years old must meet the above conditions and work at least 30 hours per week to be entitled to superannuation guarantee.
This issue was recently addressed in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3)  FCA 366. On Call Interpreters and Translators Agency Pty Ltd (On Call) engaged interpreters to provide services to hospitals, welfare agencies’, and educational, health and legal services providers. On Call classified many of their translators and interpreters as contractors and not employees and thus did not pay their superannuation contributions. However, the ATO argued that the relevant translators and interpreters were employees within the extended meaning for superannuation guarantee purposes. The court found in favour of the ATO, and directed On Call to meet their superannuation guarantee obligations.
The correct classification of an individual as an employee for superannuation guarantee law is critical. This is because employers are liable to provide the minimum level of superannuation guarantee for their employees. A failure to do so will result in employers being liable to a non-deductible superannuation guarantee charge. Additionally, employers may also be liable for other penalties and charges depending on their circumstances, for example failing to keep proper records, or making false or misleading statements to the ATO.
At elringtons, we can advise employers of their superannuation guarantee law obligations. We can also assist employees who think they may not be receiving their full super entitlements. For more information, please contact:
|Matthew Bridger | e: firstname.lastname@example.org | p: 02 6206 1300|