Free checker, five questions
They have an ABN. Do I still owe them super?
Often, yes. Having an ABN does not make somebody a contractor for super, and the amount you pay them does not matter either. Answer five questions about the arrangement and find out where you stand before the ATO tells you.
Why this catches so many trade businesses
The rule that bites is section 12(3) of the Superannuation Guarantee (Administration) Act. It says that a person who works under a contract that is wholly or principally for their labour is an employee for super purposes, whatever you call them.
The ATO puts it about as plainly as it can: independent contractors paid mainly for their labour are eligible for super guarantee, you work it out on the labour component of their invoice, and this applies even if they quote an ABN and regardless of how much they earn.
That is the trap. “Get an ABN and invoice me” is normal in trades, and it settles nothing. The obligation is not decided by the ABN, the invoice, or what the arrangement is called. It is decided by what the contract is actually for.
The checker
Answer for one worker and one arrangement. If you engage several people on different terms, run it again for each.
This checker needs JavaScript. If nothing happens when you click, the same test is written out under “How the test actually works” below.
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How the test actually works
The Full Federal Court in Moffet set out three elements, and the ATO adopts them in Taxation Ruling TR 2023/4. All three must be satisfied before section 12(3) applies:
- There must be a contract. It does not have to be written.
- The contract must be wholly or principally for the labour of a person. Principally means chiefly or mainly, and labour includes mental effort, not just physical work.
- The person must work under that contract, which is a matter of personal exertion.
A contract is not wholly or principally for someone’s labour where any one of these is true:
- The contract lets them delegate, subcontract or assign the work to somebody else. It is the existence of that right that matters, not whether they ever use it, and it will not help if the right is a sham or legally incapable of being exercised.
- The contract is for a result, and they are paid for producing that result rather than for their time.
- The contract is principally for something other than their labour, for example the supply of major plant or equipment.
One more filter that decides a great many cases and is routinely missed: section 12(3) only reaches a natural person contracting in their own capacity. Where the worker contracts through a company, a trust or a partnership, section 12(3) does not apply to that arrangement.
Note also that the test looks at the rights under the contract, rather than at how things happened to play out on a given job.
What it costs to get wrong
This is not a bookkeeping error that gets tidied up at year end. Unpaid super becomes the super guarantee charge, and the charge is deliberately worse than simply paying the super would have been.
It also compounds. A misclassified subbie is usually not one quarter, it is every quarter for as long as the arrangement has run, across every worker on the same terms. A four person crew engaged the same way is four liabilities, not one.
The super guarantee rate is 12%, and from 1 July 2026 contributions generally need to reach the fund within 7 business days of payday rather than quarterly, which shortens the window in which a mistake goes unnoticed.
The cheerful part: this is fixable, and it is dramatically cheaper to fix before the ATO raises it than after.
Questions we get asked
They gave me an ABN, does that not settle it?
No. The ATO says the obligation applies even if the worker quotes an ABN. An ABN tells you they are registered for business purposes. It says nothing about what your particular contract with them is for.
They only do a few days a month.
There is no minimum. The ATO states it applies regardless of how much they earn. The old $450 a month threshold was removed some years ago.
They supply their own tools.
Helps, but on its own it rarely decides anything. Hand tools that any tradesperson owns are different from bringing an excavator to the job. The scale matters.
What if their invoice includes materials?
Then you are looking at whether the contract is principally for labour. If it genuinely is, super is worked out on the labour component of the invoice rather than the whole amount.
They would rather not have super paid.
It is not something either of you can agree away. If section 12(3) applies then the obligation is yours, and an agreement to the contrary does not remove it.
I think I have got this wrong for a few years.
Ring us. Voluntary disclosure is treated very differently from being found, and the first thing to do is work out the actual size of it rather than assume the worst.
Want someone to look at the actual arrangement?
Bring the contract, or tell us how it works if there is no contract. We will tell you where you stand, and if there is a problem, what it will cost to put right.
Level 1, 561 Olive Street, Albury NSW 2640. Registered Tax Agent 20651000.
Read this before you rely on the answer
This is general information, not advice about your arrangement. It walks through the section 12(3) test on the answers you gave. It has not read your contract, your invoices or your job records, and any of those can change the result.
Worker classification is not a tick box exercise. The ATO decides it on the whole of the relationship and the terms of the actual contract. A checker cannot weigh those the way a person reading your paperwork can, and borderline arrangements are common in trades.
The ATO’s ruling is not binding on the Commissioner for super. TR 2023/4 says so itself: to the extent it explains the meaning of employee for section 12 of the Superannuation Guarantee (Administration) Act, it is not binding, although acting in accordance with it counts in your favour if the Commissioner later takes a different view. That is a real reason to get an arrangement checked rather than to rely on any general guidance, this page included.
Super is only one of the consequences. The same arrangement can also raise PAYG withholding, payroll tax, workers compensation premiums, and Fair Work obligations including sham contracting. Those have their own tests and their own regulators, and this checker does not look at any of them.
Some workers are caught by other provisions entirely. Performers, artists, musicians and sportspeople are dealt with under section 12(8), and company directors under section 12(2), without needing to get to the labour test at all.
Sources: section 12 of the Superannuation Guarantee (Administration) Act 1992, Taxation Ruling TR 2023/4, and the ATO’s guidance on working out if you have to pay super, checked 3 September 2026. Practical Compliance Guideline PCG 2023/2 sets out how the ATO approaches compliance risk on classification.
Ring 02 6041 1687 and we will go through the actual arrangement with you.