If you run a small business — whether it’s a café, gym, festival, or you’re a tradie hiring subcontractors — you might be surprised to learn that you could be legally required to pay superannuation (Super Guarantee or SG) to people you don’t consider traditional employees.
That’s because the SG rules use a much broader definition of “employee” than common law. If someone is providing labour — even under an ABN or a contractor agreement — you may still be required to pay them super. And if you’re not, the ATO can come knocking, with no time limit on how far back they can go.
Super Catch-Ups: Why Gyms, Venues, and Events Are in the Spotlight
The ATO has recently taken action in industries where contractors are common — particularly fitness, entertainment, and hospitality. Music festivals, gyms, and event venues have been targeted for unpaid SG for workers like:
- Instructors
- Performers
- Technical crew (e.g. lighting, sound)
- Hospitality contractors
The reason? These industries often rely on sole traders, and while the business may believe they’re engaging independent contractors, under SG rules, many of these individuals qualify as employees for super purposes.
What About Tradies?
Yes, this applies to many construction and trade businesses too.
If you hire someone on an ABN and their work is mainly their personal labour (e.g., not supplying materials or using their own crew), then you may owe them super.
Here’s a common example: A sole trader labourer works on your site. They:
- Use your tools or equipment
- Take instruction from you or your site manager
- Don’t employ their own team
- Are paid by the hour or per day
Even if their contract says they’re responsible for their own super, the ATO may still classify them as an employee for SG purposes. That means you could be liable for the unpaid super.
See more from the ATO on contractors and SG
Who Is (and Isn’t) Entitled to Super?
SG Is Generally Not Required If:
- The worker is under 18 and works less than 30 hours a week
- They’re a private/domestic worker (like a nanny) working less than 30 hours a week
- They’re a non-resident working entirely overseas
- The contract is with a company, trust, or partnership — not an individual
- They’re covered by a bilateral social security agreement and you’re applying for a certificate of coverage
However, the exception to this is when the individual is working under a contract that is “wholly or principally for their labour.” In this case, SG may still apply, even if the person is a contractor.
The Broader Definition of “Employee”
The Super Guarantee (Administration) Act expands the definition of an employee beyond what most small business owners would expect.
According to section 12 of the Act, this includes:
- Company directors who are paid for their duties
- Contractors paid for their labour
- Performers and entertainers paid to perform, present, or support performances
- Sportspeople, or individuals involved in promotional or artistic activities
For example, if a music festival contracts a solo musician directly (not through an agency), they may be responsible for that artist’s SG. If the artist in turn hires a drummer to accompany them, they may be responsible for the drummer’s super.
The Gym Instructor Example
Here’s a typical scenario seen in fitness:
- A gym hires an instructor under an ABN
- They’re paid per class
- They use the gym’s equipment and systems
- They wear the gym’s uniform
- The gym controls scheduling and branding
- There’s a written agreement calling them a contractor
Despite the agreement, if the contract is mostly for their labour — and they’re operating as part of the gym’s business rather than their own — SG is likely to be payable. The ATO focuses on the practical relationship, not just what’s written in the contract.
Myths and Facts on contractors
What About Directors and Consultants?
SG also applies to:
- Company directors paid for their services
- Consultants or contractors providing personal labour (i.e., not outcomes or deliverables)
Even if a director invoice is paid through a company or ABN, if it’s essentially for personal labour, SG might still be required.
Understanding “In Connection With”
Another area often misunderstood is when someone is hired in connection with a performance or promotional activity. This could include:
- Videographers
- Editors
- Crew members
- Event support staff
If they are not running their own business and are paid as individuals, SG may apply. This reinforces the importance of understanding the true nature of the working arrangement.
What Should You Do?
- Review every person you pay — including ABN holders.
- Ask yourself: Is the contract mostly for labour? Can they delegate the work? Are they running a business or working in mine?
- Use the ATO’s SG eligibility tool to assess grey areas.
- If still unsure, seek a private ruling from the ATO or get a legal assessment.
- Keep documentation to support your position.
The Cost of Getting It Wrong
If you haven’t been paying super to someone who qualifies as an employee under SG rules, you may be liable for:
- Backdated super payments
- The Superannuation Guarantee Charge (SGC)
- Interest
- Penalties
- Possible director penalties (for company directors)
And critically, there is no time limit on how far back the ATO can go to recover unpaid super.
For small business owners, the assumption that ABN holders or “contractors” don’t need super payments is risky and often wrong. Whether you run a gym, venue, construction business, or any operation using freelancers and contractors, the rules have shifted — and the ATO is actively enforcing them.
Take the time now to review your working arrangements and protect your business from costly mistakes.
Need help reviewing your super obligations? Contact us for a confidential review tailored to your business needs.
