When Engaging an Employee

Australia's Superannuation Guarantee (SG) law requires employers to provide enough superannuation support for their employees.  Employers pay superannuation for their employees into a complying superannuation fund.  Employers need to calculate an amount equal to 11.5% of base earnings (excludes overtime), pay the amount into the employees' superannuation fund every quarter; keep a record of all contributions made, and when and how you reported superannuation contributions to your employees.  For superannuation purposes the definition of an employee is broad, and in some cases requires payment of a contractor's superannuation.

Generally, you must pay Superannuation Guarantee for an employee who is:

• between 18 and 69 years old (inclusive) and is paid $450 or more (before tax) in salary of wages in a month
• employed full time, part time, casual, or on a contract (if the contract is wholly or principally for their labour)

Employees who are under 18 years old must meet these conditions and work at least 30 hours per week to be entitled to SG contributions.  You must also pay contributions for employees who are temporary residents of Australia.

Some employee's are not eligible for superannuation even if they meet the above conditions, for example, employees you pay to do domestic or private work for no more than 30 hours per week.

When Engaging an Independent Contractor (Sole Trader)

• There is an obligation to pay super if the contractor is selling their personal services – contractor deemed as employee under Superannuation law
• There is an exemption if the contractor is engaged to provide services of a domestic and personal nature to the person paying and they work under 30 hours per week
• If the contractor is engaged for more than 30 hours per week and is selling their own personal services then the employer is required to pay super into their super fund quarterly. 

On this page Super for independent contractors it states paying an additional amount equal to the SG rate to the independent contractor on top of their usual pay does not count as a super contribution. To avoid the super guarantee charge, you must make the SG contribution to the independent contractor's super fund each quarter.

Info about how to pay super contributions follow link