Tuesday, 24 October 2023

When Should Independent Contractors Receive Superannuation?

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 [2019] 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Following Moffet, and a general trend in legal cases consistent with its decision, the ATO has now withdrawn its previous ruling.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) [2023] FCAFC 48 (Jamsek) has provided further clarity on when superannuation applies to contractors.

Moffet v Dental Corporation Pty Ltd [2019] FCA 344

Moffet v Dental Corporation Pty Ltd [2019] FCA 344

Dr. Moffet was the owner and practicing dentist at a surgery trading as ‘Active Dental’. Dr Moffet sold the dental practice in November 2007 to Dental Corporation, however he continued working as a dentist at the practice on a contracting basis under both an acquisition agreement and a services agreement.

Following Dr Moffet’s resignation, the court was asked to determine whether Dr Moffet was contracted ‘wholly or principally for the labour of the person’ and therefore entitled to superannuation.

Moffet’s case established that the following three elements must be satisfied to determine whether a worker is entitled to superannuation:

    1. there is a contract;
    2. that the contract is wholly or principally for the labour of a person; and
    3. that the person must work under that contract (this means that there is an individual working under the contract, not a company; and that there is usually no right to delegate the work under the contract).

Importantly, this meant that, irrespective of whether the individual is considered a bona fide contractor under general law, it is more important to consider whether the individual is an employee for the purposes of superannuation in accordance with the trifold test outlined above.

The services agreement between Active Dental and Dr Moffet was seen to be a contract which was at least “principally” for the “labour” of Dr Moffet because its terms showed that its predominant purpose was to secure Dr Moffet’s provision of the relevant services.

The Court also held that the question of whether a contract is wholly or principally for the labour of the person should be determined by considering what benefit the ‘quasi-employer’ received.

The Court held that, in this case, Dental Corporation (as the ‘quasi-employer’) benefited from Dr Moffet’s personal service as a dentist and practice manager, as well as the promise that the practice would achieve a minimum cash flow. The court noted that whilst the latter benefit may not be said to be for labour, the two benefits could not be separated and as such the agreement was wholly or substantially for Dr Moffet’s labour. Dr Moffet was therefore entitled to superannuation.


Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48

Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48

Mr Jamsek began working for ZG Operations Australia Pty Ltd in 1977. From the commencement of his employment until about 1985 he was engaged as an employee of the company. Around this time, Mr Jamsek was informed that the company could no longer sustain his status as an employee, but extended the opportunity for him to be a contractor, which would include purchasing his own truck. Until this time, the delivery drivers were driving trucks provided by the company.

Mr Jamsek and another individual accepted the offer and on the advice of an accountant they set up partnerships with their wives, and entered into the new contracts on behalf of the partnership and purchased their own trucks.

The partnerships were responsible for the expenses relating to the trucks purchased. The company subsequently invoiced the partnership on an hourly basis rather than per day.

When considering whether Mr Jamsek was entitled to superannuation, the Court considered the elements that arose from Moffet:

  • Contract: the Court held this element was not satisfied as the contract was between the company and the partnership, not the individual person.
  • “For” the labour of the person: The Court said as the contractors were free to do the work themselves or employ someone else to do it for them, the contract was not wholly or principally for the labour of Mr Jamsek.

As the Court determined that the elements identified in Moffet had not been satisfied, Mr Jamsek was not entitled to superannuation and the case was dismissed.

This decision is notable given it involved a partnership, rather than a contractor personally performing the work themselves in an individual capacity, demonstrating that superannuation obligations are wider than originally thought.



The recent cases highlight that regardless of the terms of the independent contractor arrangement, it is essential to consider both the totality of the relationship and the reality of the situation when engaging an independent contractor, including medical and allied health practitioners, to determine whether the contract is principally for the labour (i.e. performance of personal exertion or activity) of the person.

Regardless of any contractual provision, if a principal engages an independent contractor for their labour and skills, (in other words, the contactor is required to personally perform the work), it is likely that superannuation will be payable.

For medical practices considering engaging medical professionals as independent contractors, given the likelihood that these workers will be engaged for their labour, this additional cost should be factored into any negotiation regarding the contractors’ hourly rate.

The law in this area continues to develop and therefore when dealing with the matter of independent contractors and superannuation, up-to-date legal advice should be sought.

Please note that this article does not constitute legal advice and covers general matters only. If you require legal advice on independent contractors and the payment of superannuation, please contact the HR Legal team.


This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.

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