Your super obligations to entertainers and musicians
Following recent High Court decisions, there has been increased discussion about potential obligations of hospitality venues to make superannuation payments to musicians.
This serves as an important reminder to be aware of your responsibilities as they relate to the payment of superannuation.
Background and general principles for superannuation obligations
The Superannuation Guarantee (Administration) Act 1992 (Cth) (Act) is the governing legislation for Australia’s superannuation obligations.
Section 12 of the Act defines an employee as:
“a person who is paid to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills is an employee of the person liable to make the payment.”
Our interpretation of this definition deems persons engaged to perform music as employees for the purposes of the Act, and would therefore be entitled to superannuation.
Recent High Court decisions have led to the ATO reviewing its advice and guidance about classifying workers (as an employee or independent contractor) for the purposes of superannuation. The ATO is in the process of reviewing its public advice and guidance products, and as such, its online tool (which would generally assist businesses to determine their superannuation obligations) is offline.
Seek professional advice
Superannuation is a complex area of law. The interpretation provided in this bulletin is general in nature and does not constitute legal advice.
It is also important to note that unpaid superannuation obligations can be backdated and for this reason, we strongly recommend you seek formal advice from a superannuation specialist.
To pay or not to pay
Determining whether you are obligated to pay superannuation to entertainers and musicians is based on how you engage them. There is no one size fits all approach, as it depends on the entertainer’s business relationship with the promoter or booking agent and the entertainer's business model (sole trader, individual, registered company, or partnership).
Generally speaking, businesses are required to pay superannuation to musicians or entertainers who are operating as individuals or sole traders. There is generally no obligation to pay superannuation to a company, as the company is required to meet its own superannuation obligations.
To help determine the business relationship, you can refer to:
- An invoice from the entertainer, booking agent or promoter; or
- A letter of engagement or contract
The following is general guidance on managing potential superannuation obligations:
- When engaging entertainers who are sole traders, ensure you have budgeted to pay super.
- If you choose to engage sole traders, request their super details as standard practice as part of a contract or letter of engagement.
- If individuals or sole traders do not provide their fund details because they claim to be self-employed, businesses should still pay superannuation into their nominated default fund. This will help mitigate any future claims.
As previously mentioned, the above information does not constitute formal legal advice. Please seek advice from a superannuation professional if you have any specific questions regarding your own situation.
Recent changes to the superannuation guarantee
Removal of the $450/month eligibility threshold
Up until 30 June 2022, if an employee was paid less than $450 (before tax) in a calendar month, you were not required to pay super contributions in addition to wages. This threshold has now been abolished, meaning you are required to pay employees superannuation, regardless of how much they earn each month.
Increase in rate
On 1 July 2022, the super guarantee (SG) rate increased from 10% to 10.5%. The SG rate is legislated to increase to 12% by 2025, with 0.5% incremental increases being made at the start of each financial year. This means on 1 July 2023 the SG rate will increase to 11%.