Superannuation Obligations for Residential Builders

What it is

The Superannuation Guarantee is a compulsory employer contribution to a complying super fund on behalf of each eligible employee. The scheme is set up under the Superannuation Guarantee (Administration) Act 1992 (Cth) and administered by the Australian Taxation Office.

For residential builders the obligation reaches further than the payroll system. Subcontractors paid principally for their labour can be deemed employees for super purposes even when they invoice under an ABN, and the cost of getting that classification wrong sits inside the Super Guarantee Charge regime.

The current rate

From 1 July 2025 the minimum Super Guarantee rate is 12% of an eligible worker''s Ordinary Time Earnings. The rate stepped up by 0.5% each year from 9.5% in 2020 to its current 12% figure, and 12% is the legislated final step.

Ordinary Time Earnings includes salary and wages for ordinary hours, paid leave taken during ordinary hours, commissions, shift loadings and most allowances. It excludes overtime, reimbursement of expenses, and lump sum payments on termination for unused leave.

Who is an eligible employee

The 28% withholding-tax age threshold and the old $450 monthly minimum earnings threshold are gone. Since 1 July 2022 the $450 floor has been removed, so super is payable on every dollar of OTE for employees aged 18 or over, and for employees under 18 who work more than 30 hours in a week.

Contractors deemed employees: section 12(3)

Section 12(3) of the SGAA extends the meaning of employee to anyone working under a contract that is wholly or principally for the labour of the person. Three conditions need to be met for the deeming to bite:

• the worker is a natural person, not a company or trust
• the contract is wholly or principally for their labour, meaning more than half the contract value is for their personal work rather than supply of goods, materials or use of tools
• the worker does not have a right to delegate the work, or if they do, they do not actually exercise it

The ATO''s view, set out in Superannuation Guarantee Ruling SGR 2005/1, is that the focus is on the substance of the bargain. A bricklayer paid by the hour, performing the work personally and supplying only hand tools is likely a deemed employee for super even with an ABN, a business name and a written contractor agreement. A bricklayer who quotes a fixed price per square metre, supplies the bricks and mortar, and engages helpers to assist is more likely outside the deeming.

The 12% rate is calculated on the labour component of the contract value, not the materials. If a written quote separates labour and materials clearly, the labour figure is used. If the quote is a single lump sum, the ATO will accept a reasonable apportionment.

Quarterly deadlines and the Super Guarantee Charge

Until 30 June 2026 super contributions must reach the employee''s fund by 28 days after the end of each quarter. The quarters end 30 September, 31 December, 31 March and 30 June, with payment due 28 October, 28 January, 28 April and 28 July respectively.

If contributions are late or short, the employer is liable for the Super Guarantee Charge. The SGC is not deductible and is calculated as the unpaid amount plus interest at 10% per annum plus an administration component of $20 per employee per quarter. The SGC is paid to the ATO and remitted to the fund.

Payday Super from 1 July 2026

From 1 July 2026 the system shifts to Payday Super. Employers will be required to pay super at the same time as salary and wages, with a maximum of seven business days between the pay event and the contribution being received by the fund. The 12% rate continues but the calculation base moves from Ordinary Time Earnings to a new concept of qualifying earnings, and a new Super Guarantee Charge regime applies for late payment.

Builders running fortnightly or weekly pay cycles need to be ready for the operational change before 1 July 2026. The ATO has published transition guidance and Single Touch Payroll software providers are updating their systems to match the cadence.

Choice of fund and stapled super

Employees can choose their own super fund. Where they do not make a choice, the employer must ask the ATO for the worker''s "stapled" fund using ATO online services before opening a default account. Defaulting an employee into the employer''s chosen fund without checking the stapled fund register is a breach of the SGAA.