CASE 3/2014

Members:
Nicholson J

Tribunal:
Administrative Appeals Tribunal, Perth

MEDIA NEUTRAL CITATION: [2014] AATA 319

Decision date: 22 May 2014

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Nicholson J

1. The applicant seeks review of an objection decision made by the respondent disallowing the applicant's objection to assessments of a Superannuation Guarantee Charge ("SGC") in respect of the applicant's employment of certain workers ("the workers") in the quarterly periods from 30 September 2009 to 30 September 2011 ("the relevant period"). It is not in dispute that the applicant carried on the business of a plumbing services sub-contractor and for that purpose engaged the workers, being persons being qualified to engage in plumbing in Western Australia in accordance with how they were licensed.

SUPERANNUATION LEGISLATION

2. The Superannuation Guarantee Charge Act 1992 (Cth) provides for the imposition on the occurrence of any superannuation guarantee shortfall of an employer for a quarter. This is calculated in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth) ("the SGA Act").

3. The SGA s 12 relevantly provides:

• (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.
  • …

4. The primary issues are whether the workers were employees of the applicant:

• (a) within the ordinary meaning in accordance with subsection 12(1) of the SGA Act; and/or
• (b) within the extended definition in subsection 12(3) of the SGA Act because they worked under a contract that was wholly or principally for their labour.

PLUMBING TRADE LEGISLATION

5. The Water Services Licensing (Plumbing Licensing and Plumbing Standards) Regulations 2000 (the Plumbing Regulations) address this aspect:

• (a) Clauses 2 and 3 in Schedule 3 of the Plumbing Regulations require that a Licensed Plumbing Contractor have greater experience or greater qualifications than a Licensed Tradesperson;
• (b) Regulation 9(1) requires that a person must only carry out plumbing work in accordance with his or her licence:

  A person must not carry out plumbing work of any kind or in any circumstances except in accordance with a licence or permit that authorises the person to carry out plumbing work of that kind or in those circumstances.

  Penalty: $5000

• (c) Regulation 10 similarly prohibits a person from employing or otherwise engaging a person to do plumbing work contrary to regulation 9(1).
• (d) Regulation 12(1)(b) permits a Licensed Plumbing Contractor to:

  … exercise general direction and control over the carrying out of authorised work by the holder of a tradesperson's licence or a tradesperson's licence (drainage plumbing)

• (e) Regulation 13(1) permits a Licensed Tradesperson to:

  • (a) carry out plumbing work; and
  • (b) supervise the carrying out of plumbing work by an apprentice, under the general direction and control of a licensed plumbing contractor.'

BURDEN OF PROOF

6. The respondent relies upon section 14ZZK of the Taxation Administration Act 1953 ("the TAA") and puts the applicant to proof of all facts on which it seeks to rely to discharge its burden in establishing that the assessments the subject of this proceeding are excessive.

The applicant accepts this standard in making its submissions.

7. In the respondent's submissions reference is made to what was said by Bromberg J in
On Call Interpreters and Translators Agency Pty Ltd v FC of T (No 3) [2011] FCA 366 at [221]-[222]:

It was for On Call to adduce sufficient evidence to discharge its onus. In relation to each of the panel interpreters utilised by On Call during the relevant period, it was necessary for On Call to establish that the person was not an employee …but was instead an independent contractor. In the application of the totality test, that onus called upon On Call to establish that each relevant interpreter owned and operated a business.

8. In its submissions the applicant relies upon its evidence and submissions to meet this requirement.

9. I have doubts that the discharge of the onus always requires a case to be made in respect of each of workers involved. That would preclude the possibility that inferences may be drawn which would enable the onus to be discharged. Here the question is whether the evidence brought by the applicant discharges the onus.

VALIDITY OF ASSESSMENTS

10. In his submissions the respondent states it is understood that the applicant contends that the deemed SGC assessments were invalid for three reasons:

• (a) First, the SGC statement filings by the applicant were marked "Without Prejudice" and that they failed to comply in full with subsection 33(2) of the SGA Act; and
• (b) Second, the requirement, the "amount of each such shortfall" (as provided in 33(2)(c) of the SGA Act) was not satisfied because the amounts were prepared by the respondent and not the applicant; and
• (c) Third, because the employer's nominal interest component for the quarter and the employer's administration component (as required by subsection 33(2)(d) and (e)) were not included in the statement as filed.

11. In the applicant's submissions no reference is made to the issues in par (b) and (c) of 10 above. I therefore do not address those matters.

12. The respondent contends that the words "without prejudice" are of no effect outside an offer of settlement in the course of litigation:
Gregory v Philip Morris Ltd [1988] FCA 100 at p 147 per Wilcox and Ryan JJ. See also
K and K Real Estate Pty Ltd v Adellos Pty Ltd [2010] NSWCA 301 per Young J at paragraph 65.

13. The documents filed were not an offer of settlement but rather the applicant merely complying with an obligation to file a document with the respondent as required by law. In this respect, the respondent submits that the words "without prejudice" are of no effect, and in particular, the words do not render the SGC statements as not satisfying s 33 of the SGA Act.

14. The respondent further contends that it is well established that a valid assessment can be raised where there is a substantial compliance with a taxation law form. Section 41 of the SGA Act provides that the validity of an assessment is not affected because any provision of the Act has not been complied with. Section 41 of the SGA Act replicates section 75 of the Income Tax Assessment Act 1936 (Cth).

15. Courts have determined on numerous occasions that assessments are valid provided they are not tentative or provisional and do not evidence corruption or conscious maladministration of the assessment process. See also
FC of T v Futuris Corporation Ltd [2008] HCA 32 at 60.

16. The respondent further submits that it is a fundamental core aspect of the operation of the self-assessment system that taxpayers who file a form with the Commissioner are inviting him to make a valid assessment. For reasons of public policy, the Commonwealth taxation system works so that if a taxpayer chooses not to comply with their filing obligations of the self-assessment system, then that taxpayer subjects himself or herself to the risk of (a) default assessment by the Commissioner and (b) criminal prosecution under the Taxation Administration Act (which may result in a court order to comply with the relevant filing obligation). It would be a systematic problem if taxpayers were able to avoid the potential downsides of failing to comply with the self-assessment system but at the same time be able to successfully argue that their filings were not valid-assessments. It would be allowing taxpayers to "have their cake and eat it too".

17. It is therefore submitted that there were substantial compliance with the completed "Superannuation Guarantee Charge Statement" forms and that the deemed SGC assessments were valid.

18. The applicant submits the respondent has only addressed the meaning of "without prejudice" without addressing the applicant's statement on the SG shortfall calculation statements that 'no admission of liability is made in respect of any amounts herein.' The applicant states the importance of this point is that an assessment under s 35 requires "self-assessment" by the taxpayer of the matters required under s 33, as confirmed by the discussion in Practice Statement PS LA 2007/10.

19. The applicant does not carry these submissions further. Nor does the applicant address why it would wish to open up the prospect of default assessments in the event the point was upheld.

20. In my view the applicant fails to discharge the onus of proof upon it on this issue. Because neither submission is made out, I do not consider I can uphold either of the grounds of objection to the validity of the assessment.

ADMISSIBILITY OF FURTHER DOCUMENTS

21. The applicant's submissions on this issue appear to be contradictory. They begin by seeking certain unidentified documents should be treated as admissible. They conclude by seeking admissibility should only occur on compliance with certain conditions.

22. The applicant submits that the respondent sought to tender various documents at the hearing, but then proceeded to withdraw them. The applicant is not in a position to identify which documents were involved: however the respondent should be able to do so. Despite the applicant's submissions, the respondent has failed or declined to identify them in his response.

23. The applicant requests the Tribunal to treat as admissible any documents that were either:

• • tendered by the respondent and then withdrawn; or
• • documents subsequent to T30 that the respondent has marked and purported to be "section 37 documents".

24. The documents marked T31 - T34 were attached as 'further evidence' to the respondent's Statement of Facts, Issues and Contentions that was filed and served on 16 December 2013. The applicant's Application for Review of Decision was made on 3 July 2013.

25. The applicant submits that the documents do not represent section 37 (as modified by section 14ZZF of the Taxation Administration Act 1953) documents as they were not "in the Commissioner's possession or under the Commissioner's control" as at the date of the applicant making Application for Review, as is required under subparagraph 14ZZF(1)(a)(v) of the TAA 1953.

26. The applicant further submits that the documents are not admissible as evidence without the corroboration or verification of a witness.

27. The applicant contends that there are some restrictions on the respondent submitting further documents, although it is unclear which documents exactly the applicant is referring to.

28. However, nothing in section 37 of the AAT Act limits the production of documents by the respondent prior to or during a hearing.

29. The respondent has provided the documents by way of further supplementary 37 documents because he considers they are relevant to the review of the objection decision under review, as required by section 14ZZF of the TAA.

30. Further, the respondent notes that the authorities indicate two propositions which support the production of the additional documents or the tendering of those documents in evidence, and in fact suggest their lodgement with the Tribunal is prudent:

• (a) First, the authorities indicate that the respondent, where practicable to do so, should disclose documents coming into its possession after the creation of the section 37 documents. The Federal Court in
  Schiffer V Pattison [2001] FCA 1094, noted at paragraph [52] and [79], "Further this does not mean that a decision-maker need not disclose to the Tribunal information that he or she subsequently considers relevant to the Tribunal's review… Proceedings before the Tribunal are not adversarial. The parties are expected to inform it as best they can of the relevant facts." Section 33(1AA) of the AAT Act also provides support for this approach.
• (b) Second, the authorities indicate that where the respondent is contemplating putting a document to the applicant's witness in cross-examination, the respondent in the ordinary course would be prudent, in the ordinary course, to make early disclosure of that document. See
  Australian Postal Commission v Hayes [1989] FCA 176 at [27].

31. Again the applicant has stated an argument but not shown the respondent's argument to be incorrect. I do not consider that the point has been made out.

32. Further, the admission or non-admission of the documents arose in the hearing and was dealt with on the basis of submissions there made or open to be made.

EVIDENCE

33. Witnesses and companies are referred to by names which are not their real name.

34. The applicant called two witnesses. The first was Mr Ashley, a director of the proprietary company ("Chester Pty Ltd" described as "Chester") which is the trustee of the XVQY family trust, a subcontractor to Enterprise Pty Ltd ("Enterprise") the principal subcontractor. The applicant acts through Chester, the trustee of the XVQY family trust. The applicant's second witness was Mr Buckley, a licensed plumbing contractor who had previously been a licensed tradesperson.

35. The respondent did not call any witnesses. As the respondent's submissions will be addressed later in these reasons, I have not summarised the effect of the respondent's cross-examination.

Evidence in chief of the director of the trustee of the applicant

36. Mr Ashley testified that the business of the applicant was predominantly a maintenance business.

37. He said that he was a licensed plumbing contractor and that, by virtue of his licence, the applicant carries out the business of the applicant through Chester. It does so at an address in an industrial suburb.

38. He further stated that the applicant contracts through Enterprise which has a contract to Domain Pty Ltd ("Domain") which represents the government housing authority. This means that its business is government maintenance plumbing. He regarded the housing authority as the principal which is represented by Domain which in turn contracts with Enterprise which subcontracts with on behalf of the applicant trust. He and another are the directors of Enterprise. These entities are therefore as follows: GOVERNMENT HOUSING AUTHORITY - DOMAIN - ENTERPRISE - CHESTER atf XVQY FAMILY TRUST (THE APPLICANT). These arrangements commenced from 1 July 2010. Prior to that there was a different government authority and Domain did not have a role. Also, instead of Enterprise there was a partnership between Mr Ashley and the person now the other director of Enterprise. It is not submitted that this difference in structure for the first part of the relevant period has any materiality to the resolution of the application.

39. Mr Ashley testified that he and the other director of Enterprise divide the work up between them and at present share the local city area both as to area and work type. Moneys earned come to Enterprise and are then divided in accordance with the work allocation.

40. Underneath Mr Ashley were a number of sub-contractors whom he engaged. He had some on wages and some apprentices. Wages personnel got paid on an hourly rate. Other contractors were paid on a piece rate. When a contractor declines to go to work in a location he designates, he uses the personnel on wages to get the work done. There are probably 100 jobs roughly arising each day.

41. Mr Ashley stated that the system worked as follows. When a tenant of government housing has a problem he or she would contact a call centre in the authority. It would take the details and issue a job order. That would then be sent to Enterprise. It would be passed down the line to an appropriate worker. Workers would be likely to get 10-15 such jobs in a day. Their work included clarifying the nature of the problem.

42. Mr Ashley testified that he predominantly spent his time on the apprentices, who needed the most training and supervision.

43. There were nine persons (workers) whom the respondent has treated as employees. They are all either licensed contractors or licensed tradespersons.

44. The workers are not engaged under a written contract. Verbal agreements are reached.

45. There is a schedule of rates published by the applicant applicable to the work. The worker will get his section of profit minus the materials that are taken out and then there is the profit left over for Enterprise. There is no hourly rate: each item has a price. This means that the harder a worker carries out work the more revenue they can create for themselves and Enterprise.

46. The workers can decide for whom they wish to work. It happens regularly that workers will decline to accept work from Enterprise on the basis that they have their own jobs to do.

47. If a job goes wrong or has not been done correctly it is usually given to the worker who had the job to rectify at their own cost.

48. All the workers know that they are supposed to pay their own superannuation. Likewise that they are not entitled to leave payments.

49. Because Mr Ashley did not visit sites, the discretion on the sites rested with the people attending the site. Rarely do they call for advice.

50. A tenant of a government house would not know any name in the chain apart from that of the authority. The workers do not have any signage, do not wear a uniform or have a business card.

51. Jobs were received by Enterprise from Domain on behalf of the housing authority by email or in urgent cases by a phone call. If there was a worker in a particular area, the job may be offered to him. He could accept or reject the invitation. In the event of refusal, Enterprise would move on to the next person available.

52. The jobs are done as the worker sees fit. Workers may delegate all or part of the job. How they choose to finish a job is up to them. They have been instructed that they can complete the job as they see fit.

53. Workers have public liability insurance. In addition, workers choose to have Workcover to protect their earnings.

54. As to provision of materials, there is a massive discount on bulk buying available to the applicant. So the applicant purchases materials likely to be required by workers and charges each worker for the materials used by him. This is applicable to items such as pipes, tap wear, tap fittings and washers.

55. Workers would provide all their tools. They have drain machines, drain cleaning equipment, oxy acetylene, and gas.

56. Mr Ashley was not aware of Domain ever requesting Enterprise to provide it with a list of sub-contractors.

Evidence in chief of a worker, "Mr Buckley"

57. Mr Buckley said that he was a sole trader in the relevant period. He verified an extract from the ABN Register relating to his business. Further he identified a business name he had registered. This ceased on 1 July 2012 when he changed from being a sole trader to being a company as trustee. From that date he also cancelled his registration for GST. He testified that from August 2013 he became a licensed plumbing contractor having previously been a licensed tradesperson throughout the relevant period.

58. He said that as between he and Mr Ashley he had an agreement on how they would operate. In his view he acted as a contractor, not an employee. The applicant was not his only source of work; he would look for other work and had done work for other builders. He did not advertise but had business cards which he gave to his private clients. He relied on word of mouth from his clients.

59. The general process by which he operated in the relevant period was to go in the morning to the office of the applicant. He took an assignment list for the jobs of the day and worked out how he would operate on them. There were not any set times or any instructions on how to act- he and other workers just went along by their own accord. It suited him to visit the office in the morning because he lived about 100 metres from it. It also gave him the opportunity to collect any materials he required and to deliver tax invoices with respect to the previous days jobs. He was paid weekly.

60. When out on the jobs he would knock on the door of the tenant. He did not wear a uniform or badge. He would call in advance and arrange a convenient time to call or leave a card to achieve that objective.

61. If the job turns out not to be simple he would call Domain, explain the position and get authority to go ahead. He had undergone induction with Domain. It pretty much addressed all the occupational health and safety issues. He considered that Domain had passed the risks down to him.

62. He considered that he was able to pass on any of his work which did not require expertise to anybody else. For example, recruiting a labourer to assist in digging a soak well. He would pay such a person.

63. Mr Buckley accepted that he had taken out insurance during the relevant period and this covered public and products liability. The applicant did not take out any insurance on his behalf.

64. He also identified photographs of his present vehicle with tools and equipment. In the relevant period he had a similar older vehicle. The items shown were oxy and acetylene leads, drain rods, a little stick and a drain machine. Materials supplied by the applicant at his cost included kitchen sink waste traps and tap ware fittings. He valued his own tools and equipment at around ten/fifteen thousand dollars.

65. Mr Buckley was referred to tax invoices before the Tribunal and confirmed these were delivered in the name of his firm to Enterprise. Each coded job number had a price. He was happy with the prices.

66. When a job was not completed or another fault has occurred he had to undertake the repair job out of his own time.

Documents in evidence

The Contract with Domain

67. It is convenient to set out a short description of the contract between Domain and Enterprise. It was described as the Housing Maintenance Services Agreement- short form. In cl 4.4 the principal subcontractor (Enterprise) was made subject to performance standards, namely to ensure it as adequate number of suitably trained, qualified and experienced staff and facilities and equipment; to ensure its personnel complied with the law and co-operated with contractors on site; also with mandatory safety rules; complied with the agreement and other codes; exercised professional degree of care skill and diligence and in accordance with industry practice; took adequate measures to control noise on site; and adhere to written instructions of Domain.

68. The contract provided in cl 4.6 certain required and prohibited actions. These included the need for erection of guard rails, warning signs and lighting and a prohibition on smoking on site. Other provisions related to payment as between Domain and Enterprise (Cl 8) and safety requirements (cl 10). Subcontracting (cl 11) is made subject to consent of Domain and to supply of a copy of a subcontract to Domain upon request. Clause 16 imposed insurance obligations on Enterprise which, by cl 16.6, also gave Domain certain warranties.

69. Attached as a schedule to the Domain contract was a document giving subcontract particulars. It identifies 'service types subcontractor will perform.' Plumbing is listed specifying subareas of gas supply, general plumbing and drainage, hot water, gas heaters, gas hot water systems and gas stoves.

The Schedule of Rates

70. The schedule was headed "Zone Maintenance Contracts - Schedule Standard Licensed Plumbing and Drainage Repairs." It contained eight sections, namely : pedestals, pans and cisterns; wash troughs, sinks baths and basins; water service and fittings; drainage; hot water systems; solid fuel hot water system; roof plumbing and miscellaneous. Prices are set out against the items listed in these categories.

WHETHER WORKERS WERE IN A RELATIONSHIP OF EMPLOYMENT

71. The respondent submitted that the evidence disclosed eight 'critical nuances' on the manner in which the applicant organised its business to execute its responsibilities under the subcontract.

72. The first is that Mr Buckley would arrive first thing in the morning to take materials for the day where he would also be allocated a list of jobs to do at various departmental housing sites. A job order existed for each job and further jobs may be allocated during the course of the day whilst a worker was travelling or on site. I agree with the submissions for the applicant that it was a matter of convenience for the worker Mr Buckley when he called into the applicant's premises, other forms of communication being open for allocated assignments; also that the taking of materials was not known until jobs had first been allocated and was dependent upon what materials the worker carried in his vehicle.

73. The second is that materials were generally provided from the stores of the applicant. The evidence shows this was dependent upon what materials were required for a particular job and there were advantages in cost and convenience in purchasing these from the applicant who included the costs of materials in the calculations of the rates payable to the subcontractors.

74. The third is that the volume of work was at the very least capable of taking up a large portion of a day. This does not appear to have materiality and fails to recognize that assignments arise through tenant reporting of problems that are neither predictable nor regular.

75. The fourth is that only pre-approved workers could attend housing worksites. They were required to obtain a police clearance and to undergo an induction by Domain. It meant that a worker could only delegate to a worker who was likewise cleared. These requirements abrogated the independence of the work and amounted to the exercise of control and integration of the workers into the applicant's business. However, the requirements referred to applied by law at all levels of the supply chain and so it does not follow that they amount to integration of the workers into the applicant's business.

76. The fifth is that doing the work required detailed knowledge by the workers of the schedule and detailed knowledge of when a particular job would require calling Domain to obtain permission to do further work. This does not have any adverse consequences for the applicant. Further it does not acknowledge that the obtaining of the permission support the independence, flexibility and discretion provided to the workers.

77. The sixth is that the remuneration of workers was based on the schedule. The capacity of workers to approach Domain and extend the scope of work supports the independence, flexibility and discretion of the workers.

78. The seventh is that invoices and job orders needed to be returned to the applicant by the worker either at the end of the day or first thing the next day. The applicant submits and I agree that there is nothing adverse in this for the applicant.

79. The eighth is that there was no scope for a tenant to contact the worker to rectify a job. The involvement of Domain in this is said to be 'a further example of indirect supervision of the workers.' The purpose of the requirement of reference is one applying at all levels of the chain of supply based on the requirements of the governmental housing authority. It is not something which appears to be designed only for direct or indirect supervision of the workers.

Common law indicia of employment relationship

Other employers and part-time employment

80. The respondent submits that the applicant did not demonstrate that the workers were doing work for other Licensed Plumbing Contractors and it was therefore open to be inferred that if direct clients existed they were minimal and peripheral: On Call per Bromberg J at [240]. I accept that the applicant did not adduce sufficient evidence to show that the only worker appearing to give evidence was obtaining work from other sources. I do not accept the submission for the applicant that it is relevant that the circumstances of the Licensed Tradespersons can be readily distinguished from the interpreters in On Call, because the issue is one of principle and not dependent on those circumstances. I will refer to On Call where I consider that its statement of principle has relevance to resolution of this application. I agree with the respondent that although workers may be full time, part time or casual does not assist the applicant's case.

Control

81. The respondent submits that the level of control should be assessed from the terms of the subcontract and the plumbing regulations. He states that the control of the workers was everything they did, namely:

• (a) They could not work on housing sites before obtaining a police clearance and undergoing an induction by Domain;
• (b) They checked in with the applicant to get jobs and, where necessary, materials;
• (c) The applicant required them to conduct the jobs in order to meet the requirements of the subcontract with Domain;
• (d) The workers who were Licensed Tradespersons worked under the applicant where Mr Ashley was the responsible Licensed Plumbing Contractor;
• (e) The workers were in substance under the supervision of the applicant because of the process whereby any mistakes would be reported to the government authority and then back to the applicant by Domain.

82. Further, the respondent submits that the applicant has not produced sufficient evidence to distinguish its purported coordination of workers from active control of the workers:
Cf Hollis v Vabu (2001) 207 CLR 21 at [44]-[45], [57]. The respondent says that the applicant did not present evidence showing it was not merely marshalling and directing labour in order to perform the applicant's obligations under the subcontract. Additionally that the applicant was unable to present evidence that the workers activities did not 'effectively perform' the applicant's operations on the outside world; that is, that the applicant did not exercise so much control to effectuate the provision of services in accordance with what the applicant desired to achieve: cf On Call at [261]. Even if the applicant was able to satisfy the Tribunal that it did not exercise 'actual control' of the workers, the respondent submits that the emphasis in the control test has shifted from the actual exercise of control to the right to exercise it so far as there is scope for it even if it be only in incidental or collateral matters:
Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561 at 571 cited in Hollis at [44].

83. The applicant submits that the respondent has failed or declined to give real meaning to the evidence in favour of the applicant, that was not disturbed on cross-examination.

84. The applicant also submits that the respondent has failed or declined to provide any evidence or authorities for his submissions concerning the effect and operation of the Plumbing Regulations.

85. With regard to the reliance by the respondent on the authorities of Hollis and of On Call, the applicant appeals generally to factual distinctions in those instances and those at issue in the present application. However, the respondent depends on citation of principle which do not support non-reliance on the authorities in that way.

86. The essential feature of the evidence on control was that the worker made the decision on how many jobs to accept; that is, how he would allocate the time of his day. Likewise, the manner in which the job was performed. Certainly Licensed Tradespersons could appropriately by law seek direction from Mr Ashley as the Licensed Plumbing Contractor. When a job required further attention it was referred to the worker who had done it and that worker was left to complete it as appropriate. This is not evidence that the power of supervision rested with the putative employer.

87. This is not an instance where the contract between the applicant and the worker contained specifications on how the contracted services are bound to be performed. The evidence was that there was an oral contract of engagement and that the applicant placed reliance on the qualifications of the person thereby engaged who was free to exercise their discretion, subject to law, in working for themselves. Unlike the couriers in Hollis, the employer did not give instructions or directions on the manner in which the work allocated was to be done.

88. I do not see in this control over the work of a worker (save as the law requires in relation to Licensed Tradespersons). The essential work of the workers was beyond the control of the applicant. In my view the evidence on control shows the workers to be independent in their work.

Representation of the business

89. The respondent relies on evidence of Mr Ashley that at the induction process workers were issued with ID cards. He says this would have given them the ability to represent themselves either as part of the applicant or as an agent of Domain or the housing authority. Yet he continues by stating that the evidence on the point was not drawn out and so remains open to interpretation. I agree with the applicant that the respondent's submission is not possible on the evidence as presented and cross-examined.

90. Reference by the respondent to the absence of workers' uniforms is not adverse to the applicant.

91. A submission by the respondent that the applicant had not presented any evidence to support a submission that Domain regarded the workers as carrying out their own business raises nothing adverse for the applicant. Domain was the customer of the applicant but not of the workers.

Integration

92. The respondent submits that in the case of the workers who were Licensed Tradespersons the best case of the applicant is that they could work for other Licensed Plumbing Contractors but they could not do work for the public because they could not hold themselves out as plumbers. Further, earlier submissions are said to have shown that the workers were very much a part of executing the business of the applicant; that is, executing the applicant's responsibilities under the subcontract. It is argued that the work carried out by the workers was a key and substantial part of the applicant's business: On Call at [272]. Reliance is also sought from Hollis at [47]-[48] where it was found that the couriers in that case were not running their own business or enterprise nor did they have independence in the conduct of their operations. It is said that a different conclusion may have been reached if the investment in capital equipment was more significant and greater skill and training was required to operate it.

93. I am unconvinced by the reference in this respect to Hollis. The evidence establishes that each of the workers had investment in capital equipment, being of the sort required for plumbing work of the type the worker was licensed to undertake. Further, each of the workers had satisfied the skill and training requirements to be licensed.

94. I agree with the applicant that it is not necessary for the workers to be shown to do work for the public in order for them to carry on a business. Nevertheless the question still is whether in not doing work for the public the worker's business is integrated into the work of the applicant. In my opinion it makes it more probable than not that their business could be considered as so integrated.

The results test

95. The respondent commences with the proposition that the workers were remunerated in accordance with doing set tasks as per the schedule of prices. The respondent submits that the applicant did not provide sufficient evidence to indicate that the workers could negotiate prices in any meaningful way. The respondent continues by submitting that payment by task for producing a result is a neutral factor. Further the respondent submits that the workers were being remunerated largely on their time and the applicant has not produced sufficient evidence to show that the rates paid under the schedule were not a proxy for the time estimated to be taken to do the work.

96. The applicant refutes the respondent's opening proposition and says that the workers determine the nature and extent of the work to be carried out in the exercise of their full and unfettered discretion provided by the applicant. It submits that the respondent's cross-examination did not disturb the applicant's evidence that the terms of the schedule could be varied by agreement between the applicant and the subcontractors. It also contests the respondent's submission concerning regarding this factor as a neutral one on the basis the respondent has not provided any authority for that principle which it says is contrary to established case law.

97. The respondent has relied upon what was said by Bromberg J in On Call at [277]:

"In my view, great care needs to be taken with the application of this indicator. Its basic premise is that employees are remunerated on a time-basis for result. Yet, there are many examples of employees being paid on a 'piece rate'…and of independent contractors…charging on a time-basis."

98. The respondent also relies upon the decisions in
Hollis and Roy Morgan [2010] FACFC 52 which so far as outcome is concerned may be distinguished on the facts from the present application.

99. The evidence of Mr Ashley and Mr Buckley was that the schedule applies to completion; that is, upon result. In the event of the job done having difficulties or new problems arising with it, the obligation was that of the relevant worker to return to the work and fix it. That is, the result was required: satisfactory completion of the specified services was the result for which the parties had bargained. Further, Mr Ashley's evidence that the rates are determined based on the rates payable to the applicant by Domain. I therefore agree with the applicant's submission that it was not necessary for it to call evidence to show the rates were not a proxy for estimated time.

Delegation

100. The respondent submits that the power to delegate is a significant factor in deciding whether a worker is an employee or an independent contractor:
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 26 per Mason J. As was said by Bromberg J in On Call at [284], the absence of delegation tends significantly against the conclusion that the work provided by panel interpreters was performed in and for their own businesses.

101. Here the respondent submits that the evidence was because of the police clearance and the induction requirements, delegation to third parties was as a matter of reality not possible. What the evidence shows to be possible was 'substitution'. The respondent submits that does not amount to delegation.

102. The applicant disputes that delegation was not possible. It states that Mr Buckley's evidence gave examples of where labour components could be and were delegated at residential (non-high-rise) sites. It submits that nothing in the evidence suggested that Mr Buckley could not delegate to another 'inducted' individual or enterprise as or when necessary or appropriate. It denies that any of the applicant's evidence or cross-examination made reference to circumstances of "substitution" rather than "delegation."

103. I accept that where a worker has organised a substitution or shared work load, there has not been a delegation. A delegation requires evidence of the worker as contractor continuing to be liable for payment to the other party to the contract. That evidence was given by Mr Ashley on behalf of the applicant. He testified that in a particular example he gave of delegation he had paid the contractor. I therefore accept that delegation of allotted work by the worker receiving the allocation was possible.

Risk and opportunity or profit

104. The respondent submits that the profit largely remained with the applicant. While acknowledging that the workers held their own insurance, he submits that the subcontract provides that risk remains with the applicant. He relies upon clause 16.6 of the subcontract which contains a warranty from the Enterprise to Domain that work has been carried out correctly. It is said that Mr Ashley acknowledged in evidence that the applicant had not recourse to a worker for making good on a guarantee if the problem with the work surfaced later and the worker did not do further work for him (if, for example, the worker went overseas). It is submitted that there was not any evidence of the workers generating profits in exchange for the taking of risk. Rather the only evidence showed that workers could increase their income by taking on more work.

105. These submissions appear to ignore the fact that the workers took out insurance precisely because the risk rested with each of them. They each had an obligation of rectification. Only in a rare circumstance such as a departure overseas would the risk revert to the applicant. I consider that the evidence shows that because the worker bore the commercial risk and responsibility for any poor workmanship or injury performed in the performance of work, he carried his own insurance policies. That is consistent with the worker being an independent contractor.

Work for others

106. The respondent submits that economic dependency upon the applicant can be an indicator of an employment relationship:
Re Porter: Re Transport Workers Union (1989) 34 IR 179 at [184]-[185]; On Call at [218]. Examination of par [218] provides a list of many factors relevant to the issue of "whose business is the economic activity being performed in and for?"

107. The respondent says that on his evidence Mr Buckley was responsible for most of his income during the period. Further, that the time to complete a job was variable and could extend up to three hours for one job.

108. The applicant refutes that there are any adverse consequences for the applicant in these submissions and that there is nothing in the evidence of the applicant to support the concept of "economic dependency".

109. Economic dependency is a relevant but not determinative factor on the authorities cited by Bromberg J in On Call. It is a further aspect of integration, In the case of Mr Buckley I have the impression that the major part of his income came from his work for the applicant rather than his work for others.

Provision of tools and equipment/business expenses

110. Where a worker is responsible for providing a significant amount of materials and incurring a significant amount of expenses, the worker may be more likely to be considered an independent contractor. The respondent states that the evidence was that the workers provided their own tools but made use of the materials provided by the applicant. Reference is then made to the evidence of Mr Buckley of what was contained in the back of his utility vehicle. It is submitted that the provision of tools, the relevance of which is said to have been lessened due to the ability of Mr Buckley to use the vehicle for personal use and the mix of his tools with the applicant's tools and materials, should be considered as only one factor in the overall set of considerations required to ascertain whether the workers were in a position of common law employment.

111. The applicant challenges the respondents mixing of consideration of tools with materials. The applicant's evidence on tools was that the subcontractors provide their own tools and equipment, which are substantial. That was the case with Mr Buckley. I also accept the applicant's submission that the evidence does not support the argument that some of the equipment contained in the Mr Buckley's vehicle was actually with materials belonging to the applicant. When materials were acquired by a worker they became the property of the worker who was charged with meeting the cost of them.

112. Further I do not accept that the workers were required to make use of materials available from the applicant. Rather, the workers could choose to do so both because of the favourable cost and the convenience. This was indicative of the exercise by them of a discretion in favour of their business.

Summary

113. As Bromberg J stated on a specific issue in On Call at [220], the task to be undertaken is not be performed mechanically by checking off against a list of indicia and without recognising that different significance may attach to the same indicators in different cases. The critical task is to weigh the overall effect of the evidence on whether the worker concerned was in a relationship of employment or was an independent contractor.

114. Having regard in particular to the evidence in relation to control, to the non-representation of the employer by the worker, to the results character of the oral contract for engagement of the worker, to the capacity of a worker to delegate, to the assumption of risk by the worker and to the significant ownership by the worker of tools and equipment I conclude that the workers were not employees within the usual meaning of that word.

115. Although this conclusion is reached without evidence from more than one worker, I consider that the evidence of Mr Ashley adequately discharges the onus upon the applicant in respect of the position of the applicant (through its trustee) in relation to the workers generally.

Extended definition of employee in s 12(3)

116. As had been seen, s 12(3) of the SGA Act provides that a person who works under a contract that is wholly or principally for the labour of the person is an employee of the other party to the contract. The respondent refers to the decision in
Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 where the High Court considered s 221C of the Income Tax and Social Services Contribution Act 1936-1952, which required an employer to deduct tax instalments from the wages or salaries of employees. Section 221A defined "salary or wages" to include any payments made "under a contract which is wholly or substantially for the labour of the person to whom the payments are made." At 425 the Court said: "…if the contract leaves the contractor free to do the work himself or to employ other persons to carry it out the contractual remuneration when paid is not a payment made wholly or at all for the labour of the person to whom the payments are made."

117. The respondent's submissions continue by referring to the amendment in 1983 inserting s 221A(2)(b). This was considered by the New South Wales Court of Appeal in
World Book Australia Pty Ltd v Federal Commissioner of Taxation (1992) 27 NSWLR 377. There Meagher JA accepted that the amendment had been made to reverse the effect of Neale so that the existence of the right to delegate no longer prevented a contract from coming within the statutory definition. However, he decided that the language used did not effectuate that intention. In
Vabu Pty Ltd v Federal Commissioner of Taxation (1996) 33 ATR 537 the New South Wales Court of Appeal applied the principles set out in World Book to s12(3) of the SGA Act. The respondent submits that the principles established in Vabu should be followed as representing the current authority on the application of s 12(3).

118. The respondent therefore submits that the workers were remunerated wholly or principally for their personal labour and the evidence was that delegation was not practically possible. Therefore the workers were employees under the expanded definition in s 12(3).

119. The applicant submits that the respondent has failed or declined to follow his pronouncement in Taxation Ruling SGR 2005/1 and reconfirmed and maintained in his Decision Impact Statement dated 6 December 2011 following the decision in On Call.

120. The applicant refers to its submissions to refute the respondent's submissions concerning the application of this subsection.

121. Reference to each of the documents referred to in par 119 above discloses that the position adopted by the respondent's office following the decision of Bromberg J in On Call, while giving great weight to his views as obiter dicta, considered that the principles established by Vabu based on Neale and World Book represent current authority and so should be applied in considering the applicability of s 12(3). I agree and will approach the subsection on that basis.

122. In Vabu at 539 Meagher JA considered that the question to be asked on the basis of the above decisions was whether the worker was working for himself or is providing his labour in the service of another. He considered that as each courier there provided his own capital and faced the loss of that capital if the venture did not work out, it was clear that he was working for himself. That is the same for the worker here.

123. Sheller JA at 542 said that the contract in Vabu was one where the worker agreed to produce a result which he had contracted to deliver for the other party to the contract. Here reference to the invoices discloses that the jobs were identified by the place at which they arose, so that it was the result at that place which entitled them to be remunerated.

124. If the views of Bromberg J on s 12(3) subsequently are adopted so as to be authoritative, the fact that the evidence here shows delegation to be possible results in the conclusion being the same.

125. I therefore do not consider that the circumstances raised by this application can fall within s 12(3) of the SGA Act.

CONCLUSION

126. For the above reasons I consider that the objection decision should be set aside and a decision substituted that the workers were not employees for the purposes of the SGA Act.