Edited version of administratively binding advice

Authorisation Number: 1011576224931

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Superannuation: Superannuation Guarantee

Are undergraduate students or postgraduate students of the education facility on scholarships employees of the education facility for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

No. Please see our Reasons for Decision.

This ruling applies for the following period

1 July 2006 to 30 June 2010

The scheme commences on:

1 July 2006

Relevant facts and circumstances

This advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on Tax Office advice.

The education facility has administered scholarships for students to provide practical work place experience to students that is relevant to their studies

The scholarships are funded by external corporate 'donors' that provide both a project for the student to work on and contribute funds to the education facility.

Scholarships are offered under different conditions depending on whether the student is an undergraduate or postgraduate.

Undergraduate students are offered scholarships on the following basis:

· The donor proposes a suitable project for an undergraduate student. If the project is agreed, the education facility will nominate an academic supervisor for the project.

· The donor agrees to pay the education facility a specified amount per day (GST inclusive), upon invoice, for the duration the student works on the agreed project.

· The student conducts the work predominantly at the donor's place of business with some research and project related activity performed on the education facility's premises.

· The education facility pays the student a specified amount per day after the education facility has accounted for the GST charged to the donor. The payment is only made where the student submits a timesheet.

· The total amount paid to students varies as each placement varies depending on the project.

· The work conducted by the student may be an assessable part of their coursework in some circumstances, but it is not a mandatory part of their studies.

· The student is required to produce a final report which meets the donor's requirements.

· The agreement provides that 'both parties recognise, or acknowledge, that this project forms part of an overall educational program for the student generally'.

· No contract of employment has been entered into between the education facility and the student or the donor and the student.

Postgraduate students are offered scholarships on the following basis:

· The donor proposes a project suitable for a Masters student to undertake over a 12 month period. The project includes specific work outputs. If the project is agreed, the education facility will nominate an academic supervisor for the project.

· The donor has the final choice of student.

· The donor agrees to pay the education facility a specified sum.(GST inclusive).

· The education facility pays the student a portion of the sum over 12 months, in fortnightly scholarship payments. A portion is applied by the education facility as contribution to the student's tuition fees and the remainder covers the education facility's incidental costs associated with the project.

· The student is expected to work on the project at the donor's place of business for four days a week, although this is not outlined in the agreements.

· All Masters students are required to submit a thesis as part of their degree. Scholarship students use the project as a topic for their thesis, thus the project may form an assessable part of their study.

· In some cases, the student's work at the donor's place of business may count towards the student's mandatory work placement component of their course of study.

· The agreement provides that 'both parties recognise, or acknowledge, that this project forms part of an overall educational program for the student generally'.

· No contract of employment has been entered into between the education facility and the student or the donor and the student.

In both types of arrangements:

· It has previously been assumed that the student is neither an employee of the donor nor the education facility on the basis that the arrangement is a vocational placement and related to the studies of the student.

· The agreement between the education facility and the donor sets out the roles and responsibilities of the education facility and donor. Specifically:

o the donor is required to provide project supervision and guidance

o the donor is required to provide access to facilities and staff

o the donor must fund any project expenses

o the education facility is to recruit appropriate students and academic supervisors with respect to the project

o the education facility us to provide access to education facility resources as required

o the education facility is to provide academic supervision and guidance with respect to the project to develop the graduate's skills

o the education facility is to supervise project work completed on education facility premises and monitor the off campus progress

o the education facility must provide progress reports as required

o the education facility is required to provide insurance cover for the student

o the education facility is required to administer the scholarship and enrol the student.

· The agreement also provides that intellectual property and commercial rights in respect of the funded project remain with the donor.

· The student or education facility may cease participation in the project at any time, however the education facility must refund the donor any funds which have not yet been spent, and the student will cease to receive payments from the education facility.

· The student remains a student of the education facility subject to its statutes and regulations.

· It has been assumed that the student remains covered by the education facility's student insurance policy.

· The student signs the agreement between the donor and the education facility but has no obligations outlined in the agreement.

· The agreement provides that the education facility must ensure the fulfilment of educational requirements.

· The agreement provides that the donor undertakes not to withdraw materials and facilities committed to the project where it could jeopardise the student's educational program.

Taxpayer contentions

In your application, you made the following contentions in relation to the scheme. These contentions are set out below.

During the period in which scholarships have been offered by the education facility, the education facility has not included payments made to students paid in respect of scholarships as wages which are subject to Pay As You Go withholding or superannuation support. This has been on the understanding that an employment relationship does not exist, and was not intended to exist, between the education facility and the student. The amounts paid to students have been paid as a scholarship or stipend and not salary and wages.

It is the education facility's view that an employment relationship does not arise with respect to the postgraduate arrangements on the basis that the scholarship is primarily financial support for a full time student that is employed by neither the education facility nor the donor. The activities of the student form an important part of the course they are undertaking. The provision of the scholarship is primarily for the purpose of education and not as a result of an employment relationship.

The education facility also considers that the scholarships paid would not constitute salary and wages for the purposes of the SGAA and the Taxation Administration Act.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 section 12,

Superannuation Guarantee (Administration) Act 1992 subsection 12(1)

Superannuation Guarantee (Administration) Act 1992 subsection 12(3).

Summary

The Commissioner considers that there is no employer and employee relationship between the education facility and students who are offered scholarships. The students do not perform any work or services for the education facility under a contract of employment nor are they working under a contract wholly or principally for their labour.

Detailed reasoning

In ATO Interpretative Decision ATO ID 2005/53 the Commissioner considered whether an Australian education facility had an obligation under the SGAA to make superannuation contributions on 'industry based learning scholarships' paid by an entity to students.

The 'reasons for decision' as set out in ATO ID 2005/53 are as follows:

An obligation to make contributions under the SGAA arises when there is an employer-employee relationship within the meaning of the SGAA. The terms 'employer' and 'employee' are defined in section 12 of the SGAA. Relevantly, subsection 12(1) of the SGAA states that 'employer' and 'employee' have their ordinary meaning. At general law, the relationship between an employer and an employee is a contractual one, or otherwise known as a 'contract of employment'. Ordinarily, an employer is a person or entity that engages another to perform work or provide services or labour under the contract. The person who performs the work or provides the services or labour is otherwise known as the employee. The consideration or remuneration that the employee receives for working under such a contractual arrangement is generally referred to as 'salary or wages'. Subsection 12(3) of the SGAA extends the definition of employee to include a person who receives payment under a contract wholly or principally for labour.

In the circumstances of this case, the relevant students enrolled at the education facility are engaged in a course of study with the education facility on a full-time basis. Some of the students undertaking this course of study may be eligible for a scholarship. Each student awarded a scholarship must undertake a work placement of a certain duration with an organisation in the industry relevant to the student's coursework. The stipend of the scholarship is paid to the student by the education facility in his or her capacity as a student. There is no evidence that the students are engaged in employment with the education facility nor is it a condition of the scholarship that a student engages in employment with the education facility.

Having regard to these facts, it is considered that there is no employer/employee relationship between the education facility and students who are offered a scholarship. The awarding of the scholarship does not alter the status of the student into that of an employee of the education facility. The student is not performing any work or services for the education facility under a contract of employment nor are they working under a contract wholly or principally for their labour. The payments under the scholarship relate solely to the student's course of study and do not constitute salary or wages.

Accordingly, the education facility will not have an obligation under the SGAA to make superannuation guarantee contributions on the scholarship awarded to the students.

The Commissioner has reviewed the facts of your case and considers them sufficiently similar to the facts in ATO ID 2005/53 to apply his views in the same manner as he did for the ATO ID.

Accordingly, the Commissioner considers that there is no employer and employee relationship between the education facility and undergraduate and postgraduate students who are offered scholarships. The students do not perform any work or services for education facility under a contract of employment nor are they working under a contract wholly or principally for their labour.

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