Superannuation is one of those areas where a lot of Australian startup founders assume they know the rules – and then discover they’ve been getting it wrong. The employee obligations are reasonably well understood. The contractor rules are where things get genuinely complicated, and where the ATO tends to find problems.

Getting this wrong isn’t just an administrative hassle. It can result in the Superannuation Guarantee Charge, penalties, interest and – if the ATO determines it’s been ongoing – a liability that goes back years.

Super for employees – the baseline

If someone is your employee, you’re required to pay superannuation guarantee contributions on their ordinary time earnings. The current rate is 11.5% for the 2024-25 financial year, rising to 12% from 1 July 2025.

Contributions must be paid to a complying super fund by the quarterly due dates – 28 October, 28 January, 28 April and 28 July. As discussed earlier, late payments attract the Superannuation Guarantee Charge, which is calculated differently to regular contributions and is not tax-deductible. Missing a deadline is always more expensive than meeting it.

This applies to all employees – full-time, part-time and casual – regardless of how much they earn per week or month. The old $450 per month earnings threshold was removed in July 2022, so there’s no minimum earnings threshold anymore.

Where it gets complicated – contractors

Here’s where a lot of founders get caught out. The assumption is simple: if someone has an ABN and you’re paying them as a contractor, they look after their own super. That’s often true. But not always.

The ATO applies what’s called the “results test” to determine whether someone is genuinely a contractor for super purposes. But there’s an overriding rule that catches many working arrangements: if a person is engaged under a contract that is wholly or principally for their labour, they are entitled to super contributions from the engaging business – regardless of whether they have an ABN or operate through a sole trader structure.

In plain terms: if the contract is mainly about the person doing the work themselves (rather than delivering a specific outcome or product), they’re likely entitled to super even if they’re technically a contractor.

What does “wholly or principally for labour” actually mean?

The ATO looks at a few things. Does the person provide the services personally, or can they subcontract the work to someone else? Is the contract structured around time and effort, or around a deliverable? Does the business control how and when the work is done?

If the person must do the work themselves, is paid mainly for their time and operates under the direction of the business, the ATO is likely to view them as a worker entitled to super – regardless of what the contract says or whether they have an ABN.

This catches a huge number of arrangements that startups commonly use: developers engaged on an ongoing hourly basis, marketing contractors who work regular hours, designers embedded in the team week to week. If they’re providing their personal labour on an ongoing basis under your direction, the contractor label may not be enough to exempt you from super obligations.

The consequences of getting it wrong

If you’ve been paying contractors without contributing super when you were required to, the liability doesn’t disappear. The ATO can audit back four years and require you to pay the Superannuation Guarantee Charge on all missed contributions, plus interest and administration penalties. In serious cases, additional penalties apply on top.

Beyond the financial cost, unpaid super is increasingly something sophisticated investors and acquirers look for in due diligence. A historic super liability you weren’t aware of can create complications at exactly the wrong moment.

How to protect yourself

The most important thing is to assess each working arrangement individually rather than assuming ABN equals no super obligation. Look at how the work is actually structured – not just what the contract says. When in doubt, paying super on contractor payments is far cheaper than the SGC liability if you get it wrong.

If you have existing contractors and you’re unsure about your obligations, now is the time to review those arrangements – not when the ATO comes knocking.

Not sure where your obligations sit?