A worker with an ABN is not automatically off your super books. If you pay someone mainly for their own labour, the law can treat them as your employee for super — even with an ABN, a written "contractor" agreement, and their own insurances. Here is the test, where it bites in construction, and how PSI fits in.
The "employee for super" test
Under the Superannuation Guarantee (Administration) Act, you must pay SG for a contractor where all three apply:
- The contract is mainly for their labour — more than 50% of its value is for their personal work, not materials, plant or a genuine lump-sum result.
- You are paying for their personal labour and skills — for time and effort, not a result independent of the hours worked.
- They must personally perform the work — they cannot genuinely delegate or send a substitute.
If all three are met, they are your employee for SG even if they invoice via an ABN, you have a signed "independent contractor" agreement, and they carry their own tax and insurances. (This is the same labour-test family as Employee vs Contractor & Sham Contracting.)
Example: a chippie engaged "on an ABN", paid hourly, told when to turn up, using mostly your tools, doing the work personally with no right to substitute → principally for labour → SG payable as if an employee. By contrast, engaging XYZ Carpentry Pty Ltd, which supplies labour and plant, usually means no SG (you are contracting a company, not an individual).
Where it bites in construction
SG risk on "contractors" is highest where they are embedded in your crew and paid like staff:
- Residential trades on labour-only or day rates with little or no own plant (carpenters, bricklayers, concreters, roofers, plasterers, tilers).
- On-hire and labour-hire passed through small intermediaries but working under your direction and roster.
- Site supervisors and leading hands on ABNs working full-time for one builder, using company systems.
- Electrical, plumbing and HVAC off-siders on set hours and close supervision, paid by the hour not the result.
- Civil labour and plant operators using your equipment, paid hourly.
Risk is lower where the subbie brings substantial own plant, genuine commercial risk, and is genuinely paid for a result (an excavation contractor supplying excavator and truck per job; crane-and-operator hire).
How PSI fits in (it is a different test)
Personal Services Income (PSI) is an income-tax framework, not an SG one: is the income your entity earns mainly a reward for one person's personal effort and skill, rather than a return on assets or employees? It is common in on-tools trades. You escape PSI treatment by passing the results test — met if, for at least 75% of your PSI in the year, you are:
- paid to produce a result (e.g. a fixed-price completed slab),
- providing the plant and equipment needed (not just hand tools), and
- liable to rectify defects at your own cost.
Pass and your income is treated as a personal services business (PSB), with normal entity rules. Fail, and the 80% rule kicks in: if 80% or more of your PSI comes from one client (and associates), you cannot self-assess as a PSB — you accept PSI treatment or seek a private ruling; below 80%, you may still qualify by passing another test (unrelated clients, employment, or business premises).
The link: PSI rules tax the contractor; they do not decide SG. But a contractor who fails the results test is usually the same "employee-like" worker (hourly, low risk, no delegation) who triggers SG under the Act. The two patterns travel together.
ATO enforcement
Unpaid super is a top ATO priority for 2025–26, and construction is consistently high-risk. There is no limitation period on unpaid SG — the ATO can raise historical liabilities, interest and penalties whenever non-compliance is detected, backed by STP and fund data-matching. "They have got an ABN" is not a defence; relying on it alone, with no genuine effort to classify correctly, attracts higher penalties.
Common mistakes
- Assuming an ABN ends your super obligation.
- Confusing PSI (income tax) with the SG employee test.
- Paying a labour-only "subbie" like staff and never paying SG.
- Ignoring that unpaid SG never goes away (no time limit).
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