Superannuation and VA Contracts: What You Need to Know

Recently, one of our VAs shared a troubling experience.

One of her clients had become aware that due to the changes to the Superannuation Guarantee rules, they were now liable to make superannuation contributions on behalf of the VA – in other words, the VA (who operates legally as an independent contractor) was deemed to be an employee for superannuation purposes.

It’s not something we love to hear, but it happens, and ultimately, it’s not our responsibility to enforce the law.  But, here’s where the story gets concerning… and it’s all centred around the client’s actions.

Instead of doing the right thing and paying the super as a separate payment directly to the VAs nominated superannuation fund (an amount that is supposed to be in addition to her agreed hourly rate) this client asked the VA to drop her rate so that they could cover the superannuation liability without being out of pocket.

And not knowing any better, the VA agreed… not because she thought it was right (she knew it seemed off), but because she didn’t feel confident enough to push back.  The result is that she’s now being paid less than she was originally contracted for, and it has nothing to do with poor performance, or any mutual agreement to reduce hours or scope, but simply because a client decided that the VAs worth should be discounted to meet their out of pocket legal obligation.

I want to make this crystal clear: THIS IS NOT OKAY, and here’s why:

Let’s go to the source:

Under Australian law, a contractor may still be entitled to superannuation if the working relationship meets specific criteria… and, yes, that’s even if they operate under an ABN and invoice as a business.

According to the Australian Taxation Office (ATO):

“You must make super contributions for a contractor if you pay them mainly for their labour. This is the case even if they quote an ABN.”

Source: ATO – Super for employers: Super for contractors

This is known as the ‘deemed employee’ rule. It means that if:

• The contract is mainly for the individual’s labour, and

• The individual personally does the work, and

• They’re paid for their time (not a specific result or outcome),

…then the contractor is effectively treated as an employee for superannuation purposes.

Most importantly (and this is critical) if superannuation is required under this rule, it must be paid on top of the contractor’s rate, not absorbed into it (see example from the ATOs website below)

Source: ATO – Super for employers: Super for contractors

Based on this information, there is absolutely no legal basis for asking a contractor to reduce their rate to help a client meet their obligations. The ATO is clear: if the test is met, the client pays super separately.

And if you’re a VA, this stuff REALLY matters!!!

If you’re a Virtual Assistant running your own business, this kind of situation might feel like a grey area, but it’s pretty darn simple… so stop overcomplicating things… and for the love all things good in the world, please stop asking people for their opinion on platforms like Facebook.  GO TO THE SOURCE (i.e. the ATO website in this example).  It’s not difficult to find these answers:

• If a client is legally required to pay super, that is their responsibility.

• If you agreed to an hourly rate or a service package, your income should not be reduced to help them meet a compliance requirement.

• If they’re asking you to take a cut, you are effectively subsidising their legal liability, and that’s not how professional relationships work.

So, what can VAs do in these situations?

I’m all about empowering individuals with the correct information at every turn… and armed with the right knowledge, this is where the empowerment piece kicks in. You should never need to be confrontational or burn bridges, but it is very important that you understand enough so that you can confidently protect your value and your business.

Here’s what we suggest you focus on:

1. Know the Facts – It’s important to fully understand your rights and responsibilities. If you're working under a contract where you’re effectively exchanging time for money, your client may be liable for super, and if that’s the case, then it must be paid in addition to your fees.

2. Stand Your Ground - If there is ever a suggestion that you need to lower your rate in order to accommodate your client’s legal obligations, you are well within your rights to say something along the lines of:

“Thanks for raising that. If super is applicable, I understand it needs to be paid on top of my agreed rate, in line with the current ATO policy" and don’t be afraid to provide them with a link to the Source like this one - https://www.ato.gov.au/businesses-and-organisations/super-for-employers/work-out-if-you-have-to-pay-super/super-for-independent-contractors#ato-Supercontributionsforindependentcontractors.

3. Structure Your Services Professionally – If it’s at all possible, our recommendation is to shift your pricing model to outcome-based packages that clarify scope, deliverables and value, and reduce the risk of being treated like an employee in relation to the Superannuation Guarantee conversation.

4. Make Sure Your Contract Protects You – We spent a lot of time and effort making sure we were able to supply our network with legally binding contracts in light of the changes to the Superannuation Guarantee laws. If you don't have a current contract that mentions the Superannuation Guarantee information as part of its general terms, you may want to consider purchasing our contract which is available from our website and comes with a video explainer from our lawyer - www.vainstitute.com/templates

At VA Institute, this is something we spend a lot of time discussing in our networks and on various webinars.  We think it’s very important to have a basic understanding of the law when it comes to topics like this because it’s not just about compliance… ultimately, it’s about elevating your positioning and building a sustainable business.

It’s important to remember that when you are running a VA business, you are not an employee in disguise. When you’re truly invested in operating professionally, delivering solid outcomes, and running a business with integrity that’s founded on excellence, you should never be put into  a position where you’re pressured into absorbing someone else’s financial responsibility.

Because you are not a junior staffer, you’re not a temp, and you’re definitely not a line item to be trimmed back.

You are a professional, and your rate is your rate.

If a client can’t respect that, they’re not the right client.

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Has this raised questions or concerns for you? Please reach out to us via yourfuture@vainstitute.com. We're happy to provide support and / or refer you on to an expert who can assist you with answering questions regarding business legislation and tax law.