Written by Principal, Jennifer Tutty, and Alyce Evans
Are you an agency or brand? Do you use or wish to use talent and influencers in your marketing campaigns? Are you across the laws regarding hiring, paying super to and withholding tax for talent and influencers?
Chances are no, and we completely get it.
Trying to navigate the wave of new laws and regulations regarding social media and influencers, as well as how these apply to your business can be tricky terrain. To learn more about these new laws and regulations, check out our previous blogs, ‘#Ad: The New Rules of Social Media Advertising that Influencers Need to Know’ and ‘What is the TGA Code and What Does it Mean for Brands and Social Media Influencers?’.
In this blog we focus on the ‘serious stuff’. Welcome to your crash course on:
– Employment Law: How to hire talent or influencers while complying with employment laws.
– Super: Whether you have to pay super to talent and influencers.
– Tax: Whether you have to withhold tax on payments to talent and influencers.
Employment Law: How to Hire Talent and Influencers while Complying with Employment Laws
If you are looking to hire a talent or an influencer on a campaign, it is important to consider whether to hire them as an employee or contractor. If you get it wrong, you could be engaging in what is known as ‘sham contracting’.
Question: Should the talent / influencer be hired as an employee or a contractor?
So which one are they? When classifying someone as an employee or contractor, it is important to remember the following:
1. Look beyond any title or registration to avoid ‘sham contracting’
If you hire talent or an influencer as an employee when they should be a contractor, you could be engaging in ‘sham contracting’, which is an offence under the Fair Work Act 2009 (Cth) (Fair Work Act).
Just because a person is using an ABN or you call them a freelancer, talent or contractor, does not necessarily mean that they are a ‘contractor’ at law. Similarly, if a person contracts via a company, this does not necessarily mean that they are a contractor.
2. Consider how the talent or influencer will perform the role, and whether they operate their own separate enterprise
When determining whether you can hire a talent or an influencer as a contractor, remember the more the talent or influencer has authority to exercise control over how, where and when the work will be performed, the more likely they are to be a contractor.
Further, in order to hire talent or an influencer as a contractor, the talent or influencer should be running their own independent enterprise to you, as opposed to working for and under the control of your business.
3. If you are hiring talent or an influencer as a ‘contractor’, it is essential that they sign a clearly drafted contractor agreement
The High Court of Australia recently held that where the parties have recorded their working relationship in a well drafted and complete contract, whether the relationship is an employment relationship or an independent contracting relationship depends only on the rights and obligations of the parties under the contract and not on the parties’ conduct or their other dealings.
The exception to this is where the contract is ineffective at law or a ‘sham contract’ (see above).
Therefore, it is essential when hiring talent or influencers as contractors, that the talent or influencer signs a well drafted, comprehensive contractor agreement. This agreement must clearly outline the terms of their genuine contractor arrangement.
Tip: The ATO also has a great tool, which can help you to classify whether the talent or influencer you wish to hire should be classified as an employee or contractor. You should use this tool each time before making your decision. Find the ATO tool here.
Super: Do You Have to Pay Super to a Talent or Influencer?
The second key thing to consider is whether you are required to pay superannuation (super) to the talent or influencer.
Employees vs. Contractors
Once again, the distinction between whether someone is an employee and a contractor is relevant to super payments.
If you hire a talent or influencer as an employee, in most instances the law requires you to pay superannuation to that employee if you pay them $450 or more (before tax) in salary or wages in a calendar month. Salary or wages includes any overtime. It doesn’t matter if the employee is full time, part time or a casual, super will be payable. Superannuation is currently set at 10% of the wage (as of April 2022).
In addition to paying super to employees, you may also be required to pay super to contractors. This is something that is actually quite misunderstood amongst the creative industries. Contractors paid ‘mainly for their labour’ will be considered employees for superannuation guarantee purposes. This is the case even if the contractor quotes an Australian Business Number (ABN).
Question: When do you have to pay super to contractors?
You will have to pay super to your contractors if they fall under the General Test or one of the Specified Occupations below.
At law, you must make super contributions to your contractors if you pay them:
– Under a verbal or written contract that is wholly or principally for their labour – that is, more than half the dollar value of the contract is for their labour;
– For their personal labour and skills – which may include physical labour, mental effort or artistic effort – and not to achieve a result; and
– To perform the contract work personally – that is, they must not delegate.
In certain occupations, you have to pay super for both contractors and employees regardless of whether the above test is met. These include:
– Sportspersons, artists or entertainers paid to perform, present or participate in any music, play, dance, entertainment, sport, display or promotional activity, or similar activity.
– Persons paid to provide services to support those who perform, play sport or promote these activities.
– Persons paid to perform services related to the making of a film, tape, disc, television or radio broadcast.
As you can imagine, the above occupation list will catch quite a few influencers and talent working on promotional campaigns for your business.
Tip: When hiring a talent or contractor to work on a campaign, you can also use the super guarantee eligibility test on the ATO’s website here. At the end of the test, the calculator will provide a decision on whether you need to pay super.
Question: Do you have to pay super to a talent / influencer if they are contracting through a company?
An individual who performs work through an entity (company or trust) will not be considered an employee for superannuation purposes. Therefore, if you contract with a talent or influencer via their corporate entity, you will not have to pay super to the company as well. The company will be responsible for ensuring the talent or influencer is paid super.
Making superannuation payments
If you are required to pay super to workers in your business (including talent and influencers), you will need to set your business up to pay super into your eligible employees’ and contractors’ superannuation funds each quarter. If they haven’t nominated one, you can pay into a default fund nominated by you.
Tax: Do You Have to Withhold and Pay PAYG for a Talent or Influencer?
The Pay As You Go (PAYG) tax instalments is a system run by the ATO for making regular payments towards a person’s expected income tax liability.
Application of PAYG to talent and influencers
When you hire talent or influencers to work on a campaign as an employee, you will be required to withhold PAYG, just like any other employee. You will be required to remit this to the ATO monthly or quarterly.
Usually, you do not have withhold PAYG from contractor fees, however there are some special rules for certain occupations.
Notably, when hiring talent and influencers as contractors for campaigns, you must withhold PAYG payments to ‘performing artists‘ who are both:
1. Australian residents; and
2. Engaged under a contract to perform in a promotional activity that is:
– conducted for an audience;
– intended to be communicated to an audience by print, electronic or social media;
– for a film or tape; or
– for a television or radio broadcast.
Question: Who are ‘performing artists’ for withholding PAYG purposes?
When assessing whether you need to withhold PAYG tax on contractor fees paid to a talent or an influencer, you should note that a ‘performing artist’ is defined as:
– A singer.
– A dancer.
– An actor (including extras).
– A model.
– A musician or comedian, providing that they are endorsing or promoting goods or services, or appear in an advertisement.
– An individual who is no longer an active sportsperson but is engaged in promotional activities because of their sporting reputation.
– A similar individual who is engaged to use his or her intellectual, artistic, musical, physical or other personal skills.
Music groups and bands
A music group or band is usually a partnership for income tax purposes.
‘Performing Artists’ are not:
– Individuals engaged primarily because they are well known as currently active sportspersons.
– Make-up artists, stylists and photographers who may help produce the promotional activity but are not regarded as performing.
– Musicians and comedians who are performing but not endorsing or promoting goods.
Question: What is a ‘promotional activity’ for withholding PAYG purposes?
A ‘promotional activity’ is where a person:
– endorses or promotes goods or services; or
– appears or participates in an advertisement.
Promotional activities are communicated through things like free-to-air and pay television (for example, infomercials and home shopping), the internet, social media (think TikTok, Instagram, Twitch, Facebook, Twitter, etc.), cinema, outdoor advertising, such as billboards and television, digital media, sponsorship or personal appearances or point-of-sale material.
Therefore, it’s likely that if you hire talent and influencers to appear in campaigns to promote other businesses and brands, you will also be required to withhold PAYG from their payments.
We recommend you speak to your accountant to help you make this determination.
Question: How much PAYG do you have to withhold?
Unless there is a specific exception, you will need withhold 20% from all payments made to performing artists and pay this amount to the ATO when you otherwise pay your PAYG.
Please refer to this link from the ATO with more information about how to report and pay PAYG to performing artists.
Question: Do you have to pay GST on income subject to PAYG withholding?
A performing artist can only be registered for goods and services tax (GST) if they are conducting an enterprise. If a payment made to an artist is subject to withholding, the activity is not conducted as part of that artist’s enterprise.
Therefore, you are not required to pay GST on payments subject to PAYG withholding, and no input tax credits are available to an artist for GST incurred in connection with earning payments subject to PAYG withholding.
Question: Can you pay super and PAYG withholdings to the talent’s / influencer’s agent?
You will deal with a lot of influencers and talent through their agents. This raises the question: can you just leave it to the agent to sort out their tax and super?
If a talent is a performing artist and the agent is an ‘Intermediary’ as defined in the ATO’s ‘Superannuation Guarantee Ruling SGR 2005/2’, then the agent may receive the super and any other tax withholdings that may apply for any talent engagement. We suggest checking with agents whether they are intermediaries at law, and entitled to receive super and tax payments on behalf of the talent and influencers they represent, before making such payments to the agent.
Written by Principal, Jennifer Tutty, and Alyce Evans
Published: 26 April 2022
The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.