As an employer, do you know the rules around superannuation for contractors or whether you need to lodge a taxable payments annual report (TPAR)? Our bookkeeping experts have compiled a short summary of what you need to know for the new financial year.
Normally contractors and subcontractors aren’t paid superannuation by their clients. However, where an individual contractor provides personal labour or skills to a company, then the contractor may be entitled to super contributions, on top of their fee and even if they have an Australian Business Number (ABN).
If a contractor is employed by a business on an ongoing basis and is paid mainly for their labour, then they could be considered an employee for super purposes. Use the ATO’s superannuation guarantee eligibility decision tool to determine if your contractors are eligible for super.
When to pay super for contractors
Since 1 July 2022, if you pay a contractor mainly for their labour, you’ll need to pay super regardless of how much you pay them.
You’ll be required to make super contributions for contractors if you pay them:
- Under a verbal or written contract that is mainly for their labour (more than half the dollar value of the contract is for their labour)
- For their personal labour and skills (payment isn’t dependent on achieving a specified result), and
- To perform the contract work (work cannot be delegated to someone else).
If you use an online accounting software, like Xero, or have engaged with a bookkeeper that uses Xero, you can create a pay run so that super is added to your contractor’s payslip automatically. It’s important that if you’re unsure about whether your contractors meet the employee requirements for super, you speak with an expert. The team at Carbon are here to answer any questions and to help you update your Xero.
Taxable payments annual report (TPAR)
What is TPAR lodgment?
Businesses and Government entities who make payments to contractors may be required to report these payments and lodge a taxable payments annual report by (TPAR) by 28 August 2023.
Contractors can include subcontractors, consultants and independent contractors. They can operate as sole traders (individuals), companies, partnerships or trusts.
Should your industry be reporting TPAR?
Not all businesses need to lodge a TPAR but if you hire a contractor from the below list and meet the income percentage minimum, you will need to.
Please note that this is just a brief list of the types of services. Get in touch with your bookkeeper for a full comprehensive list.
Building and construction services
|Architectural work, bricklaying, carpentry, engineering, plastering, plumbing, project management and more (contact us for the full list)||If either 50% or more of business income is from building and construction services, or 50% or more of business activity is from building and construction services.|
|Carpet, chimney, gutter, interior, park facilities, swimming pool||if 10% or more of a business income comes from cleaning services.|
Road freight services and courier services
|Furniture removal, log haulage, transportation of goods by road and more (for a full list, contact us)||If 10% or more of a business income is from road freight or courier services.|
Information technology (IT) services
|Computer programming, IT consulting, software installation, systems analysis, tech support||If 10% or more of a business income is IT services|
Security, investigation or surveillance services
|Alarm monitoring and response, bodyguards, burglary protection, crowd control, locksmiths, security guards||If 10% or more of a business income is security, investigation or surveillance services|
Source: Australian Taxation Office
When do I need to lodge?
If you’re lodging a TPAR, you must lodge by 28 August. Penalties apply for late lodgment so make sure you’re not leaving it to the last minute. Make sure you keep records of your contractors’ information for a hassle-free process.