Announcements
If you haven't been able to get your JobKeeper enrolment in, no need to worry. You can call us until 5 June and we can help you get it submitted.

ATO Community

Superannuation for contractors

Highlighted

Newbie

Views 457

Replies 4

Hello,

My wife and I run a small entertainment agency (partnership) and we book a range of performers for our clients. The performer/s are booked to turn up at event and perform a show etc. The performer/s set their own prices, provide everything they need for their act and carry their own insurance. In short they are fully autonomous and are free to accept or refuse any performance opportunities; all we do is recommend the entertainers and handle the booking and payment side. All of our performers work for; and are promoted by other agencies. Our performers also advertise their own services and receive direct bookings. We are not primary source of income for any of our entertainers.

 

The ATO Super guarantee eligibility tool classifies our performers as contractors (not employees) but it is easy for us to pay them more than $450 in a calendar month as often just one show can be worth more than that. Entertainers are generally well paid!

Our performers have their own ABN and invoice us for their services, after they have provided their performance. The performer is paid after they have successfully completed their performance.

We have recently been told that even contractors may require superannuation payments if they are paid more than $450/month for their labour (which includes artists, dancers etc). But it also says that they aren’t owed superannuation if they are “paid to achieve a result” which is what I would have thought they were doing when they are booked to perform a show at an event. This is a little unclear.

We work on behalf of our performer/s and charge a 15% agents commission on their services; which is displayed clearly and distinctly to both our performers and our clients. There is no way that we could then pay the 9.5% out of our commission to the performers as superannuation (we would only make 5.5%)…it wouldn’t be worth running the business anymore. If we were to charge an extra 9.5% on top of the performer/s fees to cover superannuation we would no longer be competitive in the industry and none of our clients would book with us. Our clients usually make one off bookings and don’t expect to have to pay a performer superannuation. Our clients are constantly changing.

So my questions is…do we need to pay superannuation to our performers/contractors and if so, how can we do so in a viable manor?

No other entertainment agency that we are aware of pay superannuation to performers/contractors, but we are trying to do the right thing.

Any help or advice is very much appreciated.

Regards,

David

 

1 ACCEPTED SOLUTION

Accepted Solutions
Highlighted

Best answer

ATO Certified

Devotee

Replies 1

Hi @VeryConfused 

 

There isn't really a 'one size fits all' answer to whether a worker is an employee or contractor because workers perform so many different kinds of services in so many different ways that it isn't possible to throw a blanket over everyone.

 

You mentioned being "paid to achieve a result", but I'd suspect this isn't really relevant for performers. I mean, you can either finish building a house or not finish building a house so you can tell if a building contractor has achieved the result you're paying them to achieve, but what's the "result" of performing a show (i.e. is there an expectation about the level of entertainment a client is expecting to enjoy that can be said to be achieved/not achieved?) This isn't about whether the show was performed for the period of time the client paid for, it's about the client's expectations being met.

 

Another common factor in determining whether someone is an employee or contractor - and is linked to the concept of achieving a result - is whether they must personally perform the service or whether they could subcontract the work to someone else. Going back to the building example, if you contact someone to build your house, you don't care who builds it, so you'd be happy to allow the builder to subcontract the work to someone else as long as it's built to the standard you've been promised for the price you've agreed to pay... but I suspect that when a performer is hired it's because the client expects that particular performer and won't accept a substitute.

 

With this in mind, 'achieving a result' is probably not really relevant to determining whether performers are workers or contractors, so other factors will end up having more weight.

 

I'd say the key determinant in your situation is independence, which is a key characteristic of a contractor/business operator, not an employee (employees are generally told what to do, when to do it and how to do it; whereas contractors are asked if they'll do it, when they'll do it and how they'll do it). From your description of the situation it seems to indicate the performers are completely independent of you so you can't say, "You're booked at this time, you must be there or else your're fired". Sure, you could refuse to book them in the future if they let you down, but then this is just a reflection of their business reputation, the same way you can choose to stop going to a particular cafe if they constantly burn your coffee.

 

I think this example of a contractor relationship on the ATO website seems to be applicable in your case:

 


Example

A hotel offers a range of services to its guests, including in-room massage. The hotel enters into an agreement with a massage therapist to perform the massages for their guests.

 

If a guest requests a massage, the massage therapist uses their own table, oils and so on to provide the massage in the guest's room.

 

The client may either pay the massage therapist directly or add the cost to their room account, in which case, the hotel takes out a service fee before passing on the net amount to the massage therapist.

 

The hotel vetted the massage therapist before allowing them to conduct their business on their premises, but as specified in their agreement takes no responsibility for any negative outcome for the guest or massage therapist.

The massage therapist does massages at other hotels and can also visit clients in their own homes. They are free to refuse work the hotel offers.

 

The massage therapist is operating independently of the hotel as the massage therapist:

  • is operating their own business, independently of the hotel
  • performs services as specified in their agreement and is free to accept or refuse additional work.

Ultimately, if you're really not confident in your decision or the outcome of using the ATO employee or contractor decision tool, you could request an early engagement discussion to talk about getting specific advice about this question to put your mind at ease.

 

Hope this helps.

 

JF

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

4 REPLIES 4
Highlighted

Best answer

ATO Certified

Devotee

Replies 1

Hi @VeryConfused 

 

There isn't really a 'one size fits all' answer to whether a worker is an employee or contractor because workers perform so many different kinds of services in so many different ways that it isn't possible to throw a blanket over everyone.

 

You mentioned being "paid to achieve a result", but I'd suspect this isn't really relevant for performers. I mean, you can either finish building a house or not finish building a house so you can tell if a building contractor has achieved the result you're paying them to achieve, but what's the "result" of performing a show (i.e. is there an expectation about the level of entertainment a client is expecting to enjoy that can be said to be achieved/not achieved?) This isn't about whether the show was performed for the period of time the client paid for, it's about the client's expectations being met.

 

Another common factor in determining whether someone is an employee or contractor - and is linked to the concept of achieving a result - is whether they must personally perform the service or whether they could subcontract the work to someone else. Going back to the building example, if you contact someone to build your house, you don't care who builds it, so you'd be happy to allow the builder to subcontract the work to someone else as long as it's built to the standard you've been promised for the price you've agreed to pay... but I suspect that when a performer is hired it's because the client expects that particular performer and won't accept a substitute.

 

With this in mind, 'achieving a result' is probably not really relevant to determining whether performers are workers or contractors, so other factors will end up having more weight.

 

I'd say the key determinant in your situation is independence, which is a key characteristic of a contractor/business operator, not an employee (employees are generally told what to do, when to do it and how to do it; whereas contractors are asked if they'll do it, when they'll do it and how they'll do it). From your description of the situation it seems to indicate the performers are completely independent of you so you can't say, "You're booked at this time, you must be there or else your're fired". Sure, you could refuse to book them in the future if they let you down, but then this is just a reflection of their business reputation, the same way you can choose to stop going to a particular cafe if they constantly burn your coffee.

 

I think this example of a contractor relationship on the ATO website seems to be applicable in your case:

 


Example

A hotel offers a range of services to its guests, including in-room massage. The hotel enters into an agreement with a massage therapist to perform the massages for their guests.

 

If a guest requests a massage, the massage therapist uses their own table, oils and so on to provide the massage in the guest's room.

 

The client may either pay the massage therapist directly or add the cost to their room account, in which case, the hotel takes out a service fee before passing on the net amount to the massage therapist.

 

The hotel vetted the massage therapist before allowing them to conduct their business on their premises, but as specified in their agreement takes no responsibility for any negative outcome for the guest or massage therapist.

The massage therapist does massages at other hotels and can also visit clients in their own homes. They are free to refuse work the hotel offers.

 

The massage therapist is operating independently of the hotel as the massage therapist:

  • is operating their own business, independently of the hotel
  • performs services as specified in their agreement and is free to accept or refuse additional work.

Ultimately, if you're really not confident in your decision or the outcome of using the ATO employee or contractor decision tool, you could request an early engagement discussion to talk about getting specific advice about this question to put your mind at ease.

 

Hope this helps.

 

JF

 

This is my personal view; I’m an ATO employee who chooses to help out here in my own time.

Highlighted

Newbie

Replies 0

Hi JamesF

Thank you for your reply and volunteering your own time to help us and others like us, we really appreciate it!

Thank you for clarifying about the “paid to achieve a result” question I had. Your answer makes a lot of sense. You seem to have a good idea of how our business runs and how our performers work even though you are not in the entertainment industry!

The example of a contractor agreement from the ATO website that you provided is very similar to how we run. If the hotel accepted the payment for the massage therapist, then took out a booking fee and then passed on the net payment to the massage artist this would essentially be what we do. We accept the full payment for the performer, take out a 15% agent commission and then pass on the net to the performer.

So in the ATO example above would the massage artist still need to be paid superannuation by the hotel if it was passing on the payment etc?

 

ATO employee or contractor decision tool, defines our performers are contractors, not employees, that much is clear. But it says that even contractors can be “deemed as employees for superannuation purposes” and that is where it all gets messy and confusing. In your reply you defined them as ‘independent contractors’; does that classification change matters with reference to the SGAA? Is the obligation to pay them superannuation deferred or nullified? That answer is still not clear….that given our performers are contractors why they would still need to be paid superannuation; and how that would be feasible for us?

I am interested in the possibility of requesting an early engagement discussion, because this situation is definitely causing a lot of stress for my wife and I and we would like to put our minds at ease. But if we were to do so would this open us up to liability if the ATO decides we should have been paying superannuation to our contracted performers? We are worried that even though we were set up by an accountant and believed we were doing the right thing that by taking our questions to the ATO directly we may still be penalised. We don’t make very much money and had to go into saving last month to pay the bills. We have a small family and can’t afford any fees of any sort.

Any advice or help is most welcome.

Highlighted

ATO Certified

Community Support

Replies 1

Hi @VeryConfused

 

Welcome to our Community.

 

@JamesF has provided you with a comprehensive answer. It is also worth noting that whether they are paid $450 or more in a month is irrelevant if they are not considered to be an employee for super guarantee (SG) purposes.

 

On the working out if you have to pay super page on our website, it states:

 

'Generally, if you pay an employee $450 or more (before tax) in a calendar month, you have to pay super guarantee (SG) on top of their wages.'

 

In other words, if you have already used the employee/contractor decision tool and it has determined that the performers are considered to be contractors, the amount that they are paid doesn't come into it because they are not an employee.

 

Of course, as @JamesF has said, if you're still not confident feel free to make a request for some more formal advice.

 

Hope this helps.

 

Thanks,

 

ChrisR

Highlighted

Newbie

Replies 0

Thank you ChrisR too!