Super Contributions for Yoga Teachers

Note: Laws surrounding the payment of super to contractors in Australia, and workplace relations in general, are complex and the views expressed in this interview are for general information purposes only.

A Short History of Super

Superannuation is designed to support Australians in building a secure financial future, offering a supplement to the government’s age pension system. Employers contribute a portion of their workers’ wages into super funds, fostering a financial nest egg over time. The current mandatory contribution rate sits at 11.5%, a significant addition that helps ensure a more comfortable retirement.

The concept of superannuation was introduced in response to Australia’s aging population and the growing pressure on government-funded pensions. The conversation around superannuation took shape in the 1980s when the Australian Council of Trade Unions (ACTU) began advocating for a national super scheme. Back then, the construction industry witnessed many workers shifted to contractor status under the assumption of equal pay rates, only for some to discover later that they were responsible for their own tax payments. This led to widespread frustration and a drive for greater transparency.

Super Reform and the Impacts for Studios and Teachers

In the year 2000, the introduction of GST and the creation of ABNs brought about significant changes aimed at streamlining income tracking for sole traders.

More recently, the Australian Taxation Office (ATO) updated the superannuation regulations in July 2022, requiring employers to pay super contributions even for workers earning less than $450 a month. This change may affect many yoga teachers and studios, as previously, eligibility for super was not often a point of concern for teachers working on a hobby or part-time basis.

This shift in regulation offers studios and teachers a timely opportunity to reassess working arrangements and super obligations.

Determining Employee or Contractor Status

Yoga Australia has published a comprehensive resource to help our members clarify employment classifications. Many yoga teachers fit common employee criteria, such as:

  • Following a set schedule and expectation of ongoing work
  • Using equipment supplied by the studio (such as mats and blocks)
  • Receiving a specified fee for services, without bearing financial risk
  • Being paid regularly

It’s worth noting that the ATO states: “If you pay independent contractors mainly for their labour, they are employees for superannuation guarantee (SG) purposes.” This suggests that even those deemed contractors may be considered employees for super purposes if their work primarily involves labor.

We spoke to Jennifer Tutty, Founder and Managing Principal of Studio Legal, an Australian law firm providing legal services to clients in the creative and wellness industries including fitness, pilates and yoga. First and foremost, Jennifer reiterated that the laws surrounding the payment of super to contractors in Australia are complex and any comments made in this interview are for general information purposes only. Jennifer had this to say:

“There is a lot of confusion around whether yoga studios should be paying super to yoga teachers hired as contractors. When assessing this, yoga studios should firstly be asking, is a teacher actually an independent contractor at law or should they be hired as a part time or casual employee? 

It’s critical to know that just because a studio enters into a contractor agreement with a teacher (even at the teacher’s request), the arrangement is not necessarily a lawful contractor arrangement.”

Exploring the Grey Area: Employee or Contractor?

There are indeed grey areas, and we acknowledge the different operational realities across yoga studios. For example:

  • A teacher working for multiple studios or on a flexible, ad-hoc schedule may appear more as a contractor than an employee, as their “expectation of continuing work” is lower.
  • Contracts between studios and teachers often reflect mutual preferences for contracting arrangements. This flexibility can be beneficial, provided both parties are clear on the terms.

A key distinction often lies in the degree of control. Contractors generally retain control over how they perform their work. For example, some studios require adherence to specific sequences or teaching protocols, which could resemble employment characteristics. By contrast, a teacher given full freedom over the class structure and content may appear to be a genuine contractor.

Consider the example of a yoga teacher who operates independently, teaching at a local park. They may set up a weekly class, manage their own permits, advertise the class, and supply mats. They bear the business risk, as attendance directly impacts income. This teacher, operating as a sole trader, might pay their own super as part of planning for their financial future.

Here is Jennifer from Studio Legal again:

“When deciding if and when to pay super to a contractor, yoga studios should always look at the individual facts of the teaching engagement. My general rule of thumb is however, if the teacher is a sole trader, is paid a fee to personally teach yoga classes for the studio and does not have a genuine right to delegate their duties and engage other teachers to assist them to perform their teaching services, it’s likely super is payable. It’s helpful to know that if a yoga teacher operates a company in relation to their business, the yoga studio is not required to pay super to the company on behalf of the yoga teacher (this is up to the yoga teacher’s company).

As there are significant penalties for businesses and directors for breaching super laws, we always recommend yoga studios err on the side of caution and pay super to contractors ‘if in doubt’.”

Good Faith, Reputation, and the Path Forward

At the heart of this conversation is a shared commitment to fairness and clarity. Superannuation should support each individual’s financial security, whether contributions come from employers or through self-funding. With changes in the regulatory landscape, studio owners and teachers alike have the chance to approach these discussions with good faith, working together to establish arrangements that respect each party’s responsibilities and intentions.

Yoga is rooted in unity and respect. By engaging in these sometimes challenging conversations, we uphold the spirit of yoga, balancing practicalities with care for all involved. The journey may not always be straightforward, but the intent to nurture positive relationships will ensure a sustainable and fulfilling path for the yoga community.

In the coming weeks, Yoga Australia will be formally announcing its new legal industry partnership with Studio Legal. As part of this, Studio Legal will be offering a range of ready to go, and customised legal products, exclusively created for Yoga Australia members and available at special member rates. On offer will be contractor vs employee legal assessments, super compliance advice, contractor and employment agreement templates, membership T&Cs, liability waivers, trade marks and more. More details coming soon.