Why the ABN Test Doesn't Work for Super
Many Melbourne service businesses have a simple mental model: if someone has an ABN and invoices them, that person is responsible for their own super. This mental model is wrong, and the cost of that misunderstanding is significant.
There are two different tests. The first is the common law employment test — which looks at the totality of the relationship to determine whether someone is a common law employee or an independent contractor. The second is the SGC results test in the Superannuation Guarantee (Administration) Act. These tests are not the same, and a worker can be classified as an independent contractor under the common law test but still be owed super under the SGC results test.
The SGC results test asks one question: is the contract with this person wholly or principally for their personal labour and skills? If yes, super is owed. The ABN, the invoice, the signed agreement — none of these change the answer.
The SGC Results Test: What It Actually Tests
Section 12(3) of the Superannuation Guarantee (Administration) Act 1992 states that a person is an employee for SGC purposes if they work under a contract that is wholly or principally for the labour of the individual.
"Principally for labour" means more than 50% of the value of the contract is for the personal services of the individual, rather than for a specific result. A contractor engaged to write ongoing social media content is providing principally their labour. A contractor engaged to deliver and install a specific piece of equipment is providing principally a result. The difference matters — and most ongoing professional service contractors fall on the labour side.
In practice, this captures most ongoing contractors: copywriters, designers, therapists in private practice, consultants on retainer, IT support on a monthly arrangement. All principally providing personal labour, week after week. Super is owed.
The 2024 High Court Decisions and What Changed
CFMMEU v Personnel Contracting Pty Ltd and ZG Operations Australia Pty Ltd v Jamsek confirmed that written agreements are not determinative. Courts look at the totality of the relationship. Factors examined:
- Control — does the business control how (not just what) the work is performed?
- Integration — does the worker use the business's email, systems, premises, or attend team meetings?
- Ability to subcontract — can the person genuinely delegate the work, or must they perform it personally?
- Tools and equipment — does the business provide the tools, licences, and equipment?
- Multiple engagements — does the worker serve multiple clients, or work exclusively for one?
A designer who works 40 hours per week exclusively for one agency, using the agency's Adobe licence and Slack account, taking direction from the creative director on method and presentation, and who has never declined a brief — is not a genuine contractor regardless of what the agreement says. Arrangements structured before 2024 around written contracts alone may no longer pass this test.
What Happens When Super Isn't Paid: The SGC Charge
When super contributions are not paid by the due date (28 days after each quarter end), the Superannuation Guarantee Charge applies. It is materially worse than paying late:
- Broader calculation base — calculated on total salary and wages (all remuneration), not just OTE
- Administration fee — $20 per employee per quarter
- Nominal interest — 10% per annum from the start of the quarter
- Non-deductible — the SGC charge is not tax-deductible; super paid on time is deductible
For a contractor misclassified for three years, the SGC charge can be substantially larger than the underlying super amount. A business that should have been paying $12,000/year in super to a contractor will owe three years of contributions plus 10% interest plus administration fees, all non-deductible. Total exposure can easily reach $45,000–$50,000 for what looks like a routine contract engagement.
| Factor | Points toward employee / super owed | Points toward genuine contractor |
|---|---|---|
| Nature of work | Principally personal labour, ongoing | Specific deliverable result |
| Control | Business controls how work is performed | Worker controls method and manner |
| Integration | Uses business systems, email, premises | Operates independently from own premises |
| Ability to subcontract | Must perform work personally | Can genuinely subcontract or delegate |
| Tools & equipment | Business provides tools, software, licences | Worker provides own equipment |
| Multiple clients | Works exclusively or primarily for one client | Serves multiple clients independently |
| SGC results test | Super owed if principally for labour | Super may not be owed if for a result |
A Practical Checklist for Melbourne Service Businesses
For each ongoing contractor, answer these questions:
- Is the contract principally for this person's personal labour? (Not for a deliverable result?)
- Does this person work exclusively or primarily for my business?
- Do I control how (not just what) the work is performed?
- Do I provide the tools, software, or systems they use?
- Must they personally perform the work with no genuine ability to subcontract?
- Are they integrated into my team's systems and communication?
If you answered yes to question 1, super is owed regardless of the other factors. If you answered yes to three or more of questions 2–6, the arrangement carries employment reclassification risk for income tax, payroll tax, and Workcover as well as super. The time to review is now — not when an ATO audit notice arrives.
Not sure where your contractor arrangements stand?
True Tally works with Melbourne service businesses to review contractor and payroll arrangements, set up Xero correctly for super and payroll compliance, and flag risks before they become ATO liabilities.
Book a Free Compliance ReviewWatch: Subcontractor vs Employee — What Melbourne Businesses Need to Know
Read the video transcript
Hi, I'm Tiffany from True Tally Bookkeeping. If your Melbourne business uses contractors — in health, agencies, law, trades, consulting — this video is important. I'm going to explain the superannuation obligations for subcontractors, and why having an ABN and a signed contractor agreement is not enough protection.
Most business owners believe this: if someone has an ABN and invoices me, they look after their own super. That belief is partially correct and partially not — and the part that's wrong can be very expensive.
There are two different tests. The first is the common law employment test. The second is the SGC results test in the Superannuation Guarantee Administration Act. These tests are separate. A person can be an independent contractor under common law but still be owed super under the SGC results test.
The SGC results test asks one question: is the contract with this person wholly or principally for their personal labour? If yes, super is owed. It doesn't matter if they have an ABN. It doesn't matter if they invoice you. Most ongoing professional service contractors fall into this category: ongoing copywriters, designers, consultants on retainer, therapists in private practice, IT support on a monthly arrangement. Super is owed.
The 2024 High Court decisions — CFMMEU v Personnel Contracting and ZG Operations v Jamsek — confirmed that a written contractor agreement cannot override the reality of the working relationship. The courts look at the totality: who controls how the work is done, whether the person is integrated into your operations, whether they use your tools, whether they can genuinely subcontract, and whether they work for multiple clients.
And when super isn't paid on time, the SGC charge applies — 10% nominal interest, a broader calculation base, a $20 admin fee per quarter, and critically, it's not tax-deductible. For three years of missed contributions to one contractor, the total liability can easily reach $40,000 to $50,000.
Review your arrangements now. Is the contract principally for their personal labour? Do they work exclusively for you? Do you control how the work is done? Do you provide their tools? If yes to any of these, get advice. True Tally can help — book a free call at calendly.com/truetally or call 0468 159 950.
Xero-certified bookkeeper and Registered BAS Agent, working with service businesses, agencies and allied health practices across Melbourne and Victoria. Last updated July 2026.