What’s trending? Superannuation Guarantee obligations for workers in the entertainment or sports industry
25 August 2023
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Since COVID-19 shut borders across the world over three years ago, Australia is increasingly moving towards the centre of the world stage. The country has hosted the 2023 FIFA Women’s World Cup, and sporting fans are already eager for the 2032 Summer Olympics in Brisbane. Recently, international music stars Harry Styles, Ed Sheeran and Kylie Mingoue all performed on the same night in Melbourne and Sydney (and we await Taylor Swift), and a number of high-profile Hollywood actors including Cate Blanchett, Zac Efron and John Cena have been filming in Australia.
As our nation re-opens to artists, performers and sporting events, many are looking forward to the increased revenue and benefits that these events will bring. Organisations have also looked to take advantage of these major events to stage their own promotional activities, such as product launches, or by running associated social media campaigns. But have businesses fully considered the employment tax obligations that may arise - in particular, Superannuation Guarantee (SG) obligations?
Following recent case law on the ordinary meaning of an ‘employee’, and the extended definition of that term for SG purposes where one is engaged 'wholly or principally for labour', employers now have increased awareness and clarity on superannuation obligations in relation to contracting engagements more generally. Further, the Australian Taxation Office (ATO)’s end of year release of new regulatory guidance on the topic, including with respect to the processes and controls organisations should adopt, has also set clear governance expectations in relation to the procurement process.
However, we have observed that organisations are often unaware that there are further extended definitions of the term ‘employee’ under the Superannuation Guarantee (Administration) Act 1992 (SGAA), including in relation to contractors who “perform or present” in, or provide services “in connection” with, the entertainment and sports industries.
What are the parameters of section 12(8) of the SGAA?
Section 12(8) outlines that the following are ‘employees’ for SG purposes:
(a) 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;
(b) a person who is paid to provide services in connection with an activity referred to in paragraph (a) is an employee of the person liable to make the payment;
(c) a person who is paid to perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast is an employee of the person liable to make the payment.
As evidenced by the above, the parameters for constituting an ‘employee’ under section 12(8) of the SGAA are wide. They not only apply to a person who is paid to ‘perform or present’ in relevant activities, but also those who are paid ‘in connection with’ that activity.
The ATO’s current public guidance on this provision, Superannuation Guarantee Ruling - SGR 2005/1 - Superannuation Guarantee: who is an employee? (SGR 2005/1), provides some guidance on the breadth of the provisions. For example, the ruling notes that a person engaged to write a script for a play or a film, or a concert’s sound technician, is providing services ‘in connection with’ a relevant activity and, therefore, falls within the definition of an ‘employee’ under 12(8), despite not being an active participant within the particular activity.
The scope of the ‘in connection with’ phrase within section 12(8) demonstrates the breadth of the provisions, where superannuation entitlements are not simply limited to the artist or sportsperson - but also ‘backstage’ workers and support crew.
It is also worth noting that in recent years, the ways in which we consume media has changed drastically. Radio broadcasting and the use of discs are outdated, and more people are turning to podcasts and social media platforms as part of the ‘entertainment’ industry. Whilst subsection 12(8)(c) does not specifically reference these new platforms, we consider it likely that pertinent workers would still fall within the ambit of the provisions.
This is an area that organisations often look past, specifically for workers who are not immediately regarded as exclusively or specifically in the entertainment or sports industries. For example, many businesses will now look to develop podcasts or social media releases from an advertising perspective. Similarly, public events (such as ‘launches’) may have ‘guest’ presenters or ‘keynote speakers’, who are paid a once-off fee.
What do businesses need to consider?
Relevant employers should firstly consider the governance in place across their engagement lifecycle to ensure that the potential application of section 12(8) is considered. This is not just limited to businesses in the entertainment and sports industries, but also organisations who engage workers through platforms such as social media, podcasts, etc.
To that end, businesses should consider updating their contractor procurement process to ensure that an assessment of whether a worker qualifies as an employee under 12(8) occurs from the outset, and whether any potential exemption applies. In this regard, Australia has entered into bilateral social security agreements with a number of countries. These agreements address the issue of “double superannuation coverage”, which happens where a worker is in Australia temporarily and home country superannuation contributions, as well as SG contributions, are required.
Where superannuation applies, employers will need to ensure that SG fund details are collected from workers as part of the onboarding process, and also ensure that business systems are configured to allow for payments to be made to superannuation funds on a timely basis. It is important that contractual agreements clearly outline if the payment rate is inclusive or exclusive of superannuation. This may save organisations from an unforeseen additional 11 per cent liability on top of labour costs, which is particularly important for industries operating on small margins.
Further, given a number of applicable workers may only be temporary residents in Australia (particularly in relation to global events), consideration should be given to whether they are eligible for a Departing Australia Superannuation Payment. Subject to meeting the relevant criteria, if approved, the SG paid to their fund whilst in Australia can be paid to their designated bank account upon departure less a final withholding tax. Such a process may need to be considered as part of the end-to-end governance across procurement.
With the entertainment and sports industries recovering and, in fact, thriving post COVID-19, and the rapid increase in the use of podcasting and social media by organisations more generally, the definition of who is an ‘employee’ for SG purposes becomes important.
Should you wish to understand more about section 12(8) of the SGAA in your circumstances, or if you have any questions about your superannuation obligations more generally, please reach out to your PwC Employment Taxes advisor for assistance.