SE Frost SM

Administrative Appeals Tribunal, Sydney


Decision date: 16 December 2011

SE Frost (Senior Member)

Introduction and background

1. The superannuation guarantee charge (SGC, or the charge) is imposed on employers who do not provide a prescribed minimum level of superannuation to their employees.

2. The Commissioner says that Natalie Newton (Ms Newton, or the taxpayer) was an employer during the period July to December 2000. He says that she failed to provide sufficient superannuation support for her employees. As a result, he says, she must pay the SGC.

3. Ms Newton disagrees. She says she was not an employer at all. She says that her workers were independent contractors. She says she is not liable to pay the SGC.

4. At first instance I decided that Ms Newton was not liable to pay the charge[1] Natalie Newton (trading as Combined Care for the Elderly) and Commissioner of Taxation [2010] AATA 725; see also Care Provider and Commissioner of Taxation [2010] AATA 475 . This was not because her workers were independent contractors, but because I took the view that they were "paid to do work wholly or principally of a domestic or private nature". That is the language of one of the exemptions from the SGC liability.

5. The Federal Court disagreed with my interpretation of the particular SGC exemption. Emmett J allowed the Commissioner's appeal against my earlier decision and remitted the matter to the Tribunal for further consideration and determination according to law[2] Commissioner of Taxation v Newton 2010 ATC ¶20–234; [2010] FCA 1440 . An appeal by the taxpayer to the Full Court against His Honour's judgment was commenced but discontinued.

6. On the basis of the material before me, which includes Ms Newton's further correspondence dated 6 and 19 October 2011 (to which the Commissioner considered it unnecessary to respond), I am not satisfied that Ms Newton was not an employer for the purposes of the SGC legislation. My reasons follow.

THe relevant legislation

7. Resolution of the dispute turns on three legislative provisions: s 12(1) and s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA), and s 14ZZK of the Taxation Administration Act 1953 (TAA).

8. Section 12 of the SGAA is headed "Interpretation: employee, employer". Subsections (1) and (3) provide as follows:

  • "(1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):
    • (a) expand the meaning of those terms; and
    • (b) make particular provision to avoid doubt as to the status of certain persons.


  • (3) If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract."

9. Section 14ZZK(b)(i) of the TAA provides that Ms Newton has the burden of proving that the Commissioner's assessment of her SGC liability is excessive.

The facts

10. The relevant facts are as follows, as set out in Care Provider [2010] AATA 475:

  • "[1] From July to December 2000 the taxpayer owned a business that provided what are described as community support services. Typically the clients of the business were disabled, infirm, elderly or otherwise in need of physical assistance in their homes. The services provided to them included cooking, cleaning, shopping, showering, dressing and general household duties. The services were not physically or personally provided by the taxpayer, but by workers on whom the taxpayer could call when a client placed a request for assistance.


  • [15] ... The business of the taxpayer is accurately described as that of an "intermediary". It receives calls from members of the community when they require assistance in the home. The taxpayer will consult its list of workers, determine which of the workers is appropriate for the assignment, and then offer the assignment to that worker. If the worker accepts the offer, then the worker attends the home of the "client" and performs the required work. If the worker declines the offer, then the taxpayer offers the assignment to alternative workers, one at a time, until someone accepts.
  • [16] The work that is undertaken is performed at the client's premises, with one exception - when the worker goes shopping for the client. The tasks include cooking, cleaning, showering, dressing and sometimes lawnmowing. Apart from the lawnmowers (where the workers will use their own), the equipment and materials required to perform the tasks (such as cleaning materials, brooms, vacuum cleaners, cooking equipment) are generally provided by the client rather than the worker. However, if the client does not have, say, a vacuum cleaner then the worker will provide one."

The taxpayer's relationship with the workers

11. The taxpayer conducted the business, under the name Combined Care for the Elderly, for only a six-month period, from July to December 2000 (the Relevant Period). Before (and possibly also after) the Relevant Period, the business was conducted, under the same business name, not by the taxpayer but by the taxpayer's father or by one or more companies in which members of the family had an interest. Many of the workers were originally engaged by one of those alternative business operators prior to the Relevant Period, but the terms of the arrangement with the earlier operator continued unchanged when Ms Newton took over the operation of the business.

12. The terms under which the workers were typically engaged (the Engagement Terms) were provided to the Commissioner in response to questionnaires sent to the workers; one example, at T13 pp 389 to 391 of the s 37 documents, was in the following terms (original emphasis):


  • 1. Not offer financial advice (e.g. how to invest money etc.)
  • 2. Always listen in an active way to Clients and follow up with Combined Care as soon as possible with any concerns. Do not give personal advice or discuss your religion with the Client.
  • 3. Do not accept gifts unless they are of minimal value. This includes such gifts as Property or Title to a Client's home.
  • 4. To dress in a respectable and suitable manner.
  • 5. Strictly DO NOT VISIT Clients privately (after or outside of hours booked by Combined Care, with or without our authority). Do not give Clients your phone number. Any breach of these requirements by yourself will incur legal proceedings against you by our Agency.
  • 6. Do not accept any private work from Clients of Combined Care for the Elderly. This rule applies not only while you are working with our agency but also when you have finished working for the agency. Any Carer who does will be in breach of this contract.
  • 7. Do not discuss with the Client what the Agency pays you or the rates the Agency charges Clients. This is the Agency's policy.

In summary: Please remember that while on the job:-

No Smoking!

No Eating!

No Drinking Alcohol!

No Visiting Clients Privately!

No Private work with Combined Care Clients!


  • 1. Choose whether to work with a particular Client.
  • 2. Expect courteous treatment from Client and family.
  • 3. Be given sufficient background information in order to understand the Client's situation.
  • 4. Be paid fortnightly at the agreed rate.

I ... [name of worker] ... agree to abide by the rules set out above and understand that no private work is to be undertaken by me with Combined Care clients or I will be held liable to reimburse for damages to Combined Care for the Elderly.

I certify that all of the information I have given is true. I also accept that if I have given any false information, I shall be liable to dismissal by any employer. I acknowledge that I am an independent practitioner/contractor and that the agency will act as my agent only and is not my employer.

I acknowledge that although the agency will use it's [sic] best endeavours, the agency is under no obligation to place or continue to place me with employers, and that all such placements are subject to control and dismissal by the employer. I agree that the agency will not be liable for any changes on the part of the employer."

13. At ST1 p 7 of the supplementary s 37 documents filed in August 2009 is a document, on the letterhead of Combined Care for the Elderly and described as a "Statement of Duties - Community Support Worker". The following duties are listed (original emphasis):

  • "1. To maintain the comfort, dignity and emotional well being of the Client by assisting with daily tasks as directed by Combined Care and the Client.
  • 2. To remain with the Client for the agreed time.
  • 3. To notify Combined Care if unable to work as arranged before 9:00am on the day.
  • 4. To notify Combined Care and in writing as early as possible when taking leave.
  • 5. To report to Combined Care any changes in the health or emotional well being of the Client or Carer.
  • 6. To maintain a record of your visits to a Client in the Communication Book provided at the Clients residence.
  • 7. To respect Client's rights, privacy and confidentiality at all times.
  • 8. To provide regular feedback.
  • 9. To complete timesheet, signed by the Client for time worked. Time sheet to reach office by first post Monday of pay week."

The taxpayer's attack on the assessment

14. Some of the taxpayer's complaint about the assessment related simply to the mathematical calculation of the liability. It was claimed that some of the workers, even if they were classed as employees, had not earned enough money to require any superannuation contribution to be made for them: see, for example, s 27(2) of the SGAA. There was further resistance on the basis that superannuation contributions had in fact been made in respect of some of the workers: these were office staff who, the taxpayer conceded, were employees. Eventually the Commissioner accepted that some reduction to the original assessment was necessary; the amount now in dispute is summarised in Attachment A to the Commissioner's letter to the Tribunal dated 29 September 2011, as follows:

Total Shortfall: $5,223.84
Nominal Interest: $586.79
Administration: $350.00
Total SGC: $6,160.63
Part 7 Penalty Percentage: 10%
Part 7 Penalty: $616.06

15. That Attachment also lists the names of the ten workers whose earnings contribute to the calculation of the total shortfall.

16. To understand the basis of the taxpayer's attack on the remaining amount, it is convenient to set out the "Reasons for Application" that accompanied Ms Newton's application to the Tribunal for review of the objection decision (T1 p 3):

  • "1. The Objection made by the applicant should be allowed.
  • 2. NO Superannuation Guarantee Levy is payable as the Individual[s] identified as Employees were Independent Contractors.
  • 3. The following reasons are put to the Tribunal to explain why Individuals are considered as Independent Contractors.
    • a. The Client provides all necessary materials and tools for the Contractor to carry out work.
    • b. Contractor free to delegate work to others.
    • c. Contractor has freedom to carry out work with permission of Client.
    • d. Contractors are free to provide services to general public and other Businesses.
    • e. Contractor is f[r]ee to accept or reject work offered.
    • f. Contractor signs agreement before commencement of Contract.
    • g. Contractor provides services as Labour Hire Agreement.
    • h. Contractor signs Labour Hire Agreement.
    • i. Contract[or] has freedom to manage work tasks and is obliged to produce a result.
    • j. Place of work varies from Client to Client.
    • k. Parties' action and contractual description both indicate an independent relationship.
    • l. The Parties signed an Agreement that I was not their Employer and that they were Independent Contractors.
    • m. At no time was contract work guaranteed.
    • n. The Contractor was appointed on a Job-by-Job basis.
    • o. Independent Contractors claimed Tax deductions for expenses incurred."

(I have added the sub-paragraph identifiers (a) to (o) for convenience.)

17. In the context of a dispute as to whether an individual is or is not an employee under the general law, and therefore under s 12(1) of the SGAA, some of those factors point neither one way nor the other. In my view, the matters in (d), (e), (f), (j), (m), (n) and (o) fall into that category. I deal with the remaining matters in turn.

(a) Provision of materials and tools by the client

18. This factor does not assist the taxpayer, although the position may have been different if the material and tools had been provided by the workers themselves.

(b) Freedom to delegate work to others

19. If established, the factor would point towards an individual not being an employee. But the proposition is not supported by the evidence: see in particular transcript of the hearing on 24 February 2010 from p 27 line 1 to p 34 line 20 where I asked Ms Newton's father, Mr George Lakajev (the operator of one of the predecessor businesses and a person who assisted in the conduct of his daughter's business) a number of questions about the issue of the delegation of work to others. I find on the basis of the answers provided that the workers were not, in fact, free to delegate work to others. If the circumstance ever arose that an appointed worker became unavailable to provide agreed services, then the allocation of the work to an alternative worker was subject to Ms Newton's approval (p 31, lines 12-29 of the transcript).

(c) Freedom to carry out work with permission of client

20. This means nothing more than that the actual detailed work to be undertaken in a given assignment would be determined by the client. It has nothing to say about the relationship between Ms Newton (who allocated the assignment) and the worker.

(g) and (h) Labour Hire Agreement

21. These factors point strongly in favour of a finding that the workers are employees: if not under s 12(1) of the SGAA then certainly under s 12(3).

(i) Freedom to manage work tasks and obliged to produce a result

22. The freedom to manage work tasks is dealt with in [20] above.

23. There is no evidence that the worker was obliged to produce a result; the strong indications are that what Ms Newton required of the workers was that they devote to her their labour during the period of any given assignment. There was never any requirement that they produce any "result" (other than, perhaps, and only inferentially, a satisfied client). If the proposition had been supported by the evidence, it would have pointed towards a finding that the workers were not employees:
World Book (Australia) Pty Ltd v Federal Commissioner of Taxation 92 ATC 4327; (1992) 27 NSWLR 377;
Neale v Atlas Products (Vic) Pty Ltd (1954) 94 CLR 419

(k) and (l) Action, contractual description and agreement indicate an independent relationship

24. The contractual description is that of an independent contractor, but that of itself establishes nothing. A chicken labelled a turkey is still a chicken.

25. Closely aligned to this contention is the focus that Mr Lakajev placed on statements made by six workers (including three of the ten whose earnings contributed to the SGC shortfall, as referred to in [15] above) in identical terms, as follows (ST1 pp 54 to 57, 59, 60 of the February 2010 supplementary s 37 documents):

"I hereby acknowledge the following:-

  • 1. I was not on Wages.
  • 2. I was an Independent Contractor on agreed rate not award rate.
  • 3. I was not entitled to any Employee related entitlements or Superannuation Guarantee Levy during the period of engagement.
  • 4. Tax Withheld under my instructions to provide me with a Tax Credit at the end of the Tax Year.
  • 5. I could refuse any Task offered.
  • 6. I could choose the time and location to perform the task.
  • 7. As an independent contractor I performed my task at all times unsupervised.
  • 8. I set my own hours and days to carry out the task.
  • 9. I was paid if and when I completed the task.
  • 10. I paid my own travel and other expenses if incurred."

26. Mr Lakajev, who also performed the role of Ms Newton's representative in the Tribunal proceedings, seemed to think that those statements - especially the ones at paragraphs 2 and 3 - effectively disposed of the dispute, for no better reason than that the workers said so.

27. What a taxpayer must do in a case like this is satisfy the Tribunal that the assessment is excessive: s 14ZZK(b)(i) of the TAA. That means Ms Newton must demonstrate that the workers were not employees within the ordinary meaning of the word (s 12(1) of the SGAA) or that they did not work under a contract that was "wholly or principally for the labour of the person" (s 12(3)). Mr Lakajev's unswerving focus on the "independent contractor" label and his failure, despite my encouragement, to address in any meaningful way the "contract for labour" issue results in Ms Newton's having failed to discharge the burden under s 14ZZK.

28. In any event, on the material before the Tribunal there are strong indications that the workers were employees pursuant to s 12(3) and probably also pursuant to s 12(1) of the SGAA. There is certainly insufficient material to support a finding the other way.


29. The objection decision needs to be varied to take account of the adjustments to which the Commissioner has agreed and as referred to in [14] of these reasons.


[1] Natalie Newton (trading as Combined Care for the Elderly) and Commissioner of Taxation [2010] AATA 725; see also Care Provider and Commissioner of Taxation [2010] AATA 475
[2] Commissioner of Taxation v Newton 2010 ATC ¶20–234; [2010] FCA 1440

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