ATO gives guidance on who is an employee for superannuation guarantee

The Australian Taxation Office’s Taxation Ruling TR 2023/4, which came into full effect on 6 December 2023, has brought significant changes to how employers and businesses must assess their superannuation guarantee (SG) obligations. Whether you engage workers as employees or independent contractors, this ruling may fundamentally change how you determine super contributions in the future.

What Is TR 2023/4?

TR 2023/4 replaces the long-standing SGR 2005/1 and provides updated guidance on determining whether a worker is an “employee” for superannuation purposes under the Superannuation Guarantee (Administration) Act 1992 (SGAA).

The ruling consolidates recent High Court decisions—most notably CFMMEU v Personnel Contracting and ZG Operations v Jamsek—and introduces a sharper focus on the written contract between the parties.

Key Updates in TR 2023/4

• Written contract is key: The ATO now evaluates employment relationships based on the terms of the contract, rather than the actual working relationship over time—unless the contract is a sham, unenforceable, or has been varied. This approach aligns with recent High Court rulings and gives greater weight to the legal form of the relationship.
• Extending the definition of “employee”: The ruling reinforces the broad interpretation of “employee” by also referencing the deemed employee provisions under section 12 of the SGAA, including:
  • Labour-only contractors (s 12(3))
  • Artists, sportspeople, musicians, and entertainers (s 12(8))
  • Company directors and officeholders (s 12(1) & s 12(2))

This means that even if someone is not an employee at common law, they may still be an “employee” for super purposes under one of the statutory extensions.

• Independent contractors: Many independent contractors will fall under section 12(3) of the SGAA if they’re:
  • Engaged principally for their labour (i.e., not supplying materials or substantial equipment),
  • Paid for personal services, and
  • Not able to delegate their work to others.

In such cases, super must be paid even if the contractor has an ABN and submits invoices.

• Practical Compliance Guide (PCG 2023/2): In conjunction with TR 2023/4, the ATO released PCG 2023/2, which outlines how businesses can self-assess their risk and determine whether a worker classification is compliant. It encourages businesses to:
• Have documented contracts,
• Apply the common law test, and
• Maintain evidence of their classification process.

Biggest impact – Independent Contractors

This is where the biggest impact lies. Employers must now:

• Review all independent contractor agreements to determine if the relationship is “wholly or principally for labour,” and
• Pay super where the contractor satisfies the deemed employee test.

It may apply retrospectively

Although TR 2023/4 applies from December 2023, the ATO has indicated it will apply the ruling prospectively in most cases. However, employers who should have been applying the extended definition under s 12(3) may face retrospective SG liabilities if they failed to comply.

Final Takeaway

TR 2023/4 shifts the burden onto employers to get classifications right, with superannuation now applying more broadly to many contractor arrangements. Businesses that fail to respond to this change risk being caught out by future audits, penalties, and back-payments.

The lines between employee and contractor are blurrier than ever—especially when it comes to superannuation obligations. TR 2023/4 sends a clear message: if someone is working for your business and being paid for their labour (with little else), they’re probably entitled to super, regardless of what you call the arrangement.

How can FC Lawyers help?

At FC Lawyers, our experienced business and corporate team can assist with advising on, drafting contracts, and litigating matters concerning employment and other related matters.

Contact our team today to discuss any of the above or any other legal needs.