Should you be making super contributions for your independent contractors?

The two recent landmark High Court of Australia (HCA) decisions of Construction, Forestry, Maritime, Mining and Energy Union & Anor v Personnel Contracting Pty Ltd [2022] HCA 1 and ZG Operations & Anor v Jamsek & Ors [2022] HCA 2 (Jamsek Case) (see our previous article here), which considered the long-contested employee versus independent contractor question, also raises important questions about other obligations which may apply to independent contractors, including superannuation obligations.

It is a common misconception that employers do not have to pay superannuation for independent contractors. Employers are required to make superannuation contributions for any worker who is either an employee or satisfies the “deemed employee” test set out in the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act). A deemed employee includes a contractor that is engaged under a “contract wholly or principally for their labour”.

In the Jamsek Case, the HCA held that two truck drivers who worked nine-hour days for a company for almost 40 years under a partnership arrangement were independent contractors. Although the HCA did not make a ruling on whether the truck drivers were “deemed employees” for superannuation purposes, the HCA recognised the arguments put forward by the truck drivers in relation to superannuation, notably that they were not required to be a party to the contract to be a person that “works” under a contract for their labour.

The HCA has remitted to the Full Court the question of whether the two truck drivers were employees under the expanded definition in the SGA Act.

The ATO is also in the process of reviewing its current determinations and rulings based on these two HCA cases. In the meantime, it is important to check whether your independent contractors are covered by the deemed employee test, as the ATO can impose substantial penalties where an employer fails to meet their superannuation obligations, as well as requiring back-payment of all contributions.