When are independent contractors considered employees for superannuation purposes?
An independent contractor may be deemed to be an employee for superannuation purposes if the contract between the contractor and the principal is ‘principally for labour’.
Under section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGAA), a contract will be principally for labour if the contractor:
- is remunerated wholly or principally for their personal labour and skills;
- must perform the contractual work personally (there is no right of delegation); and
- is not paid to achieve a result.
However, there are certain professionals, such as medical and allied health practitioners, who are often engaged as contractors, who have not historically been paid superannuation (on account of an ATO ruling).
However, a recent trend in legal cases has led to a change in this position and the ‘principally for labour’ test being re-considered. As such, where independent contractors are paid for their own labour and skills, including medical and allied health practitioners, it is generally likely that superannuation will be payable.
Medical and allied health professionals engaged as contractors have historically not been paid superannuation contributions by principals or clinics. The long-standing position of the ATO was once that medical and allied health professionals operating as independent contractors, particularly under fee-splitting arrangements, were not entitled to superannuation.
However, this long-standing position shifted as a result of the matter of Moffet v Dental Corporation Pty Ltd  FCA 344 (Moffet).
In the Moffet case, individuals engaged in these professions were considered likely to be entitled to superannuation. This meant that many contractual arrangements that had been traditionally seen as sitting outside the compulsory superannuation system needed to be reconsidered.
Following Moffet, and a general trend in legal cases consistent with its decision, the ATO has now withdrawn its previous ruling.
More recently, the Full Federal Court’s decision in Jamsek v ZG Operations Australia Pty Ltd (No 3)  FCAFC 48 (Jamsek) has provided further clarity on when superannuation applies to contractors.