Edited version of administratively binding advice

Authorisation number: 1052389248797

Date of advice: 30 April 2025

Advice

Subject: Status of worker - superannuation guarantee

Question

Is the Worker an employee of the payer under the expanded definition in subsection 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes.

This advice applies for the following periods:

Quarter ending December 20YY

Quarter ending March 20YY

Quarter ending June 20YY

The scheme commenced on:

14 October 20YY

Relevant facts and circumstances

The Applicant is a company (the Company) which creates electronic media.

The Worker was engaged by the Company to provide programming and art support for a electronic media. The scope of the required services is noted as 'Deliver technical artistic services to the company' and 'Any other services and /or Deliverables as requested by the Company'.

These services are to be delivered up to maximum of XXX hours.

In practice, the task of the technical artist was to design and implement a graphical feature inside an electronic media.

Due to the feature being technically complex, the Worker was unable to guarantee that their work would match the target outcome. Therefore, it was agreed that the Worker would conduct research and experimentation to make an attempt to deliver the target feature. There is no guarantee of success.

You provided a copy of an invoice from the Worker which showed they are paid by an hourly rate of $XX.

The Worker is required to perform the artwork themselves, and cannot delegate the work to someone else.

The Worker agrees not to commence any work until further hours have been requested and agreed in writing by the Company.

Relevant legislative provisions

Superannuation Guarantee Administrations Act 1992, subsection 12(3).

Other references

The Taxation Ruling TR 2023/4 Income Tax and Superannuation guarantee: who is an employee?

Reasons for decision

The SGAA requires that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the Superannuation Guarantee Charge (SGC).

Subsection 12(3) of the SGAA was intended to extend the scope of superannuation beyond traditional employment relationships to take into account some independent contractors who principally provide their own labour to meet obligations under a contract.

The Taxation Ruling TR 2023/4 Income Tax and Superannuation guarantee: who is an employee? provides guidance on the meaning of employee under section 12 of SGAA.

For a worker to be an employee under subsection 12(3) of the SGAA, three elements must be satisfied:

1)          there must be a contract (written of otherwise);

2)          which is wholly or principally for the labour of a person; and

3)          that person works under that contract.

For the purpose of determining if a contract is wholly or principally for the labour of a person, it is useful to identify whether the terms of the contractual relationship indicate that:

•                     the individual is remunerated (either wholly or principally) for their personal labour and skills

•                     the individual must perform the contractual work personally (that is, where there is no right to delegate, or only a limited right), and

•                     the individual is not contracted to achieve a result.

First element - must be a contract

Paragraph 96 of TR 2023/4 explains what a contract is:

96. This first element of subsection 12(3) (that is, that there is a contract) requires:

....a bilateral exchange of promises of labour and payment between two sides of the contract. On one side of the contract, a promise to provide labour and on the other side of the contract, a promise to make payment.

This case, the Worker signed a contract with the Company on DD MM YYYY to provide services of a Technical Artist for the electronic media provisionally to design and implement a graphical feature inside a electronic media. The Worker is required to do research and experimentation to make an attempt to deliver the target feature.

The 1st element under subsection 12(3) of SGAA is satisfied.

Second element - Wholly or principally for the person's labour

The words 'wholly' and 'principally' take on their ordinary meaning. The Macquarie Dictionary defines the word 'wholly' to mean 'entirely; totally; altogether; quite.' To the extent that a contract is partly for labour and partly for something else (for example, the supply of goods, materials or hire of plant or machinery), it will only meet the provision if it is 'principally' for labour. The word 'principally' is defined by the Macquarie Dictionary as 'chiefly; mainly.'

A person's labour can include mental and artistic effort, as well as physical toll.

When a contract contains a right which allows a worker to delegate, subcontract or assign their work to another, whether subject to the consent of the engaging entity or not, the contract will not be wholly or principally for the labour of the worker.

Paragraph 59 and 60 of TR 2023/4 outlines what a 'result' contract is:

59. Where the substance of a contract is to achieve a specified result, there is a strong (but not conclusive) indication that the contract is one for services. The reference to a 'result' in this context is the performance of a service by one party for another where the first-mentioned party is free to employ their own means (such as third-party labour, plant, and equipment) to achieve the contractually specified outcome. Satisfactory completion of the specified services is the 'result' for which the parties have bargained.

60. The way in which a worker is remunerated for their services, and the process through which the parties determine this remuneration, can help to identify whether a worker is being engaged to serve in an engaging entity's business or has merely contracted with that business to produce a specified result

The Worker is remunerated for their labour to provide services of a Technical Artist for the electronic media provisionally entitled "XXXX" owned/controlled by the Company. The Worker is given with a 'target visual' - an overview of expectations regarding how the final product will look and interface with other systems of the media. They cannot commence any work until further hours have been requested and agreed by the Company in writing. This means that there are restrictions for the Worker to progress to the next stage of the artwork development. The Worker has no control how quickly they finish the work.

The Worker is paid hourly rate, this indicates that the Worker is not contracted for a result. The Worker is required to perform the services personally, they cannot delegate the work to other person without the Company's consent. The contract does not contain a right to delegate the work to another person.

Based on the above, the Worker provides wholly and principally for labour when performing their duties under the contract, and is not contracted to achieve a result. The 2nd element under subsection 12(3) of the SGAA is satisfied.

Third element - Person works under the contract

The word 'work' in subsection 12(3) of the SGAA takes on its ordinary meaning. The Macquarie Dictionary defines 'work' as a verb to mean 'to do work, or labour; exert oneself.' Where a person has provided the agreed services in accordance with the contract, the person has worked under the contract.

Where a person has a right to delegation and has in fact delegated their work to someone else, it is less likely that the person has worked under the contract.

The Worker in this case has to perform the work by themselves and no delegation right to ask someone to do the work for them. Therefore, the 3rd element is satisfied under subsection 12(3) of SGAA.

Conclusion as to subsection 12(3) of the SGAA

We find that the Worker is an employee under subsection 12(3) of the SGAA, the Company has an obligation to pay superannuation guarantee (SG). When the Company had missed the SG by the due date, the Company has to lodge a Superannuation Guarantee Statement to avoid penalties