Super guarantee rules catch up
with venues and gyms

Employers need to pay compulsory superannuation guarantee (SG) to those considered employees under the definition in the SG rules. However, the SG definition of an employee is broad, and just how far this definition extends has sparked debate lately about the rights of performers, gym instructors, and others who are not typically considered employees.

For employers and business owners, it is crucial that if there is any uncertainty about workers’ rights to SG, your position is confirmed. This might be an initial assessment of the position by us, confirmed by an employment lawyer, or clarified by applying for an ATO private ruling covering your specific workplace arrangements. One of the things that employers find most alarming is that there is no tangible time limit on the recovery of outstanding SG obligations. In theory, the ATO can go back as far as it determines necessary to recover unpaid superannuation contributions for workers classified as employees for SG purposes. One of the SG system’s key features is ensuring that appropriate contributions are being made for employees and deemed employees to support them adequately in their retirement. The SG laws and complementary director penalty regime ensure that every cent owed to an employee for SG is paid.

Who is not paid super guarantee?

Super guarantee does not need to be paid to:

• Under 18s who do not work more than 30 hours a week.
• Private and domestic workers who do not work more than 30 hours a week.
• Non-resident employees who perform work outside of Australia.
• Employees temporarily working in Australia covered by an agreement.
• Some foreign executives who hold certain visas or entry permits.

Generally, SG is not payable if you have entered into a contract with a company, trust or partnership.

Suppose you have Australian employees working outside of Australia temporarily in a country with a bilateral social security agreement, such as the United States. In that case, you should continue paying SG and apply for a certificate of coverage to avoid paying super (or the equivalent) in the country where the employee is temporarily located.

SG’s broader definition of an employee

A section of the SG rules, section 12, 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;
• Specific 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 will not prevent SG from applying. Where the arrangement looks like a contract for providing an individual’s labour and skills, they will likely meet the definition of an employee, and SG will be payable.

The SG rules state that 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 typically be paid if the person were an employee. However, for SG purposes, it does not matter what the contract says; if the person is deemed 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 owned by the worker (such as a truck), this will help argue that the contract is not mainly for the worker’s labour but 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 no 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 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 television or radio broadcast.

Whoever pays the individual for their labour is generally responsible for paying 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, and 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, the festival will likely 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, such as producers, videographers, editors, etc. If the person meets the definition of an employee under the SG rules, then SG is likely payable.

Is a gym instructor a sportsperson?

A gym instructor may be captured under the definition of a deemed employee under the SG rules. Whether the gym is liable to pay the instructor, SG, really depends on the facts of the individual arrangement.

Let’s look at the example of a gym instructor operating as a sole trader under an ABN.

• A contract between the instructor and the gym states that the instructor is an independent contractor and is responsible for their own SG payments and other employment obligations.
• The instructor is paid per class and per training session with clients, covering their time and labour.
• The instructor utilises the equipment of the gym and its scheduling system.
• The instructor wears the uniform of the gym.
• The gym trains the instructor on how to deliver the gym services.

Employee? Most likely because the ATO places a heavy significance on whether an individual is working to build their own business or someone else’s. If the instructor “works under a contract that is wholly or principally for the labour of the person,” then this also brings them into the SG net.

If the employer, the gym, had not been paying SG, is it exposed to SG payments for the instructor since the employment relationship began.

Concerned about your workplace SG liability? Please get in touch with us for an initial review.