Edited version of administratively binding advice

Authorisation Number: 1012240597239

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Advice

Subject: Status of employment

Question 1:

Are the workers considered to be common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

Advice:

No. Refer to 'why we have made this decision'

Question 2:

Are the workers employees by virtue of subsection 12(3) of the SGAA?

Advice:

No. Refer to 'why we have made this decision'

This advice applies for the following period:

1 July 2011 - 30 June 2013

Relevant facts and circumstances

Your 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 ATO advice.

In mid June 2012 the Commissioner received a request for advice with respect of superannuation guarantee and workers who are engaged on a panel. The request included the following information:

· The principal has selected a panel of members (the workers) who play a role in assisting the principal to meet its obligations.

· The workers are external to the organisation and will generally be working from written briefs that identify the specific areas for consideration and questions for response.

· The workers will provide advice as individuals on specific, identified elements of the principal's regulatory reviews. They will have appropriate qualifications, combined with relevant professional expertise.

· The principal makes no guarantees to any worker about the volume of work they can expect to receive.

· The workers are engaged under a contract and are paid a daily rate of pay which is specified in the contract. This daily rate is developed using set rates for labour and travel (where applicable) and is paid on completion of the assignment.

· The worker may be an individual, a partnership, company or trust. All workers are encouraged to have an Australian Business Number (ABN).

· The workers only activity will be to provide advice to the principal on areas of specialisation and this will be the only result of their engagement.

· The principal does not have any control over the advice given by the workers.

· The principal anticipates that the workers will not subcontract the assignments to another party, but this would be possible with the prior agreement of the principal.

· The workers will usually be engaged in other activities, or be employees of other organisations during the period of their engagement with the principal.

· The workers will be expected to hold their own insurance.

· The principal does not currently have any intention to provide the workers with any employee benefits.

In June 2012 we wrote to the principal to acknowledge the request and request the completion of a Principal / Payer questionnaire.

In July 2012 we received a response from the principal which included the Principal / Payer questionnaire.

The information from the questionnaire is summarised below:

The type of work completed by the workers is to provide expert advice.

Each assignment will be different, but will contain one or more of the following tasks:

· Reading confidential application material;

· Responding to questions set by the principal;

· Travel to attend a site visit for the purpose of inspecting facilities and/or participate in interviews;

· Teleconference (or in rare cases, meeting) with other workers to moderate responses to the set questions.

· Workers who are currently on the interim panel for 2012 were approached directly for an expression of interest process as they formed an existing pool of contractors.

From 2013 the panel will be formed from an open and transparent application process.

The workers are engaged under a written agreement. The current process is for a new contract to be signed for each assignment. From 2013 the workers will be engaged under contract which will be offered for a period of 3 years with an option to extend for a further 2 years if agreed.

The rate of pay is set by the principal and cannot be negotiated by the workers.

The principal has the right to terminate the contract with the workers.

The principal does not provide any training to the workers. The principal will provide guidance around the required assignment, which will be secondary to the workers own experience.

The workers set their own hours or days of work within an agreed time frame which is negotiated as part of the contract.

The workers are not required to attend meetings within the organisation or with clients but if moderated discussion is required a teleconference or meeting may be arranged at an agreed location.

The workers are not entitled to paid breaks. They are paid a daily rate.

The principal does not schedule the jobs or tasks to be carried out by the workers. Rather the workers are offered an assignment which details the amount of work required (in days), any travel required and the period in which the assignment must be completed.

The principal does not direct where the jobs or tasks are to be performed. The workers are able to complete their assignment at any convenient location which will usually be their home or usual place of employment.

The principal does not supervise the workers. Rather the principal could accept or reject the work of the workers.

The workers can refuse to do a particular task or job.

The workers are not required to seek the Principals permission to take time off or to provide any prior notice. There is no requirement for a worker to complete any particular assignment.

The workers can provide their services to other individuals or businesses. Most (if not all) workers will be in other full-time or regular employment and may be called upon to provide advice on their areas of expertise. The principal does not impede this independence.

The workers generally work independently. They may on occasion be required to discuss their advice in a group for the purposes of moderating that advice; and if they are required to attend a site visit, they will be accompanied by an authorised officer of the principal.

The workers do not provide any training or supervision of other workers or employees of the principal.

The workers are not required to have or wear any item identifying the principal and it is unlikely that they had their own name badge promoting their services.

The principal does not advertise on any of the tools or equipment used by the workers.

The principal is unable to confirm if the workers advertise their services or business on any assets, tools or equipment that they used but believe that this is unlikely.

The workers provide invoices at the completion of each assignment. The invoice includes the daily rate as agreed as part of the contract and reimbursement of any expenses on the provision of receipts. The principal provides guidance on the elements that must be included in a tax invoice.

The fees are set by the principal and to date the rate of pay has not changed. The daily rate will be reviewed in due course.

The workers payment is dependant upon the completion of each assignment.

Upon receipt of the advice from the workers, staff of the principal will check the advice to ensure it meets the requirements set out in the contract prior to payment.

The workers are paid directly into their bank accounts.

The workers receive a travel allowance which is provided upon provision of receipts.

The principal does not deduct amounts from the workers for income tax, superannuation or any other deduction.

The workers are provided with a contract which specifies that they are required to complete the assignment. They are not able to subcontract the assignment without the written agreement of the principal.

If a worker is sick or goes on holidays the principal would arrange for their work to be done whilst they were absent. If a worker was unable to meet the deadline agreed to in their contract they could vary the contract or terminate the contract and offer the assignment to another worker which would be arranged by the principal.

The worker can not organise their work or tasks to be completed by an employee of the principal, but could arrange for another person engaged by the worker (subcontract the assignment) with the written consent of the principal.

The workers are required to obtain and maintain insurances. The principal is unable to advise if any claims have been made under any insurance policies.

The workers are required to guarantee their work.

If the worker makes a mistake, they will have to correct the work in their own time.

The principal does not provide the worker with any assets, equipment or tools to complete their assignments.

The principal does not reimburse the worker for their assets, equipment or tools. It is expected that the workers will make use of their own equipment, such as a computer and printer as required.

The principal supplies all documentation required to complete the assignment. If the worker identifies that they require additional information to complete their assignment, they will liaise with an employee of the principal to obtain this information.

The workers are not required to wear protective gear.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 Subsection 12(1)

Superannuation Guarantee Administration Act 1992 Subsection 12(3).

Reasons for decision

Why we have made this decision

Summary

The Commissioner has determined the individuals engaged on the principal's panel are not employees for the purposes of the SGAA under either the common law definition or the expanded definition as set out in subsection 12(3) of the SGAA and therefore you did not have an obligation to pay superannuation contributions on behalf of the workers.

Detailed reasoning

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

While the term 'employee' which is defined in section 12 of the SGAA, includes common law employees, it also extends to include workers who are engaged under a contract wholly or principally for their labour. This employment relationship is often referred to as a 'contract of service'. This relationship is distinguished in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? from a 'contract for service which is typically a contractor and principal type of relationship and does not attract an SGC liability.

Therefore, it is necessary to consider not only whether there is a common law relationship of employer/employee between the parties, but also, if the common law test is not met or is inconclusive, whether the expanded definition of 'employee' in subsection 12(3) of the SGAA applies. If a worker is not an employee under subsections 12(1) or 12(3) of the SGAA, their status is described as an independent contractor and there is no SG obligation.

The task of defining the characteristics of the contract of service - the employment relationship - has been the subject of much judicial consideration. As a result, some general tests have been developed by the courts to assist in the determination of the nature of the relationship. However, defining the contractual relationship between the employer and employee can be difficult and will depend on the facts of each case.

Accordingly it is necessary to determine the true nature of the whole relationship between the principal and the workers, as to whether there was a common law employer and employee relationship, or whether the workers meet the expanded definition of employee under subsection 12(3) of the SGAA.

Question 1: Common law employee

Are the workers considered to be common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

The relationship between an employer and employee is a contractual one. It is often referred to as a contract of service. Such a relationship is typically contrasted with the independent contractor relationship that is referred to as a contract for services. An independent contractor typically contracts to produce the contracted result in return for an agreed payment, whereas an employee contracts to provide their labour (typically to enable the employer to achieve a result).

The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts. As a result, a substantial and well-established body of case law has developed on the issue. Consideration should be given to the various indicators identified in judicial decisions. No list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor.

In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors we have considered are discussed below.

1. Terms of engagement

The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. For this test, we must determine the nature of the contract between the parties. We will consider whether the contract is written or verbal and whether the terms and conditions are express or implied. These factors are important in characterising the relationship between the parties.

It might be argued that the parties' intention in forming a contract is not subjective, but an objective one; that is, the task is not to discover the intention of the parties involved but to decide what each could reasonably conclude from the actions of the other. In the observation made by Isaacs J in Curtis v. The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17:

Where parties enter into a bargain with one another whereby certain rights and obligations are created, they cannot by a mere consensual label alter the inherent character of the relations they have actually called into existence. Many cases have arisen where Courts have disregarded such labels, because in law they were wrong, and have looked beneath them to the real substance.

Therefore, simply defining someone as a contractor does not necessarily lead to the conclusion that the individual is providing services as part of an operation of their own independent business. In Hollis v. Vabu Pty Ltd (2001) 207 CLR 21 (Hollis v. Vabu Pty Ltd) it was noted that although no payments of annual leave or sick leave were given, and no superannuation deductions were made by Vabu in respect of the bicycle couriers, the relationship between the parties was found not merely from these contractual terms. The system which was operated under and the work practices imposed by Vabu went to establishing 'the totality of the relationship' between the parties and it is this which is to be considered

In your case you engage the workers to provide advice to enable you to meet your regulatory requirements. You have created a panel of members (workers) from an existing pool. In the future you will be advertising for members to join the panel and will be conducting an open and transparent selection process.

Currently, the workers are provided a contract for each assignment and the information they will need to provide is a response to the questions set by you by way of written advice. They will review the information that you provide to them and provide expert advice on the issues you have identified.

In the future, you will be entering into written contracts which will be for a period of 3 years, with an extension of 2 years being possible if agreed to by both parties.

You do not make any guarantees in respect to the volume of work that may be offered to any one worker. The workers are paid a daily rate which does not vary depending on the amount time that is spent on each assignment. Rather at the start of the assignment you will identify the amount of days you expect the assignment to take and the worker is paid on this basis.

Workers will provide an invoice upon the completion of each assignment and whilst you don't require that the workers provide an ABN, it is preferable that they do. If they do not provide an ABN, this may impact on the tax that you could withhold.

Overall, we are satisfied that the terms of engagement test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors.

2. Control

The extent to which the employer has the right to control the manner in which the work is performed is the classic test for determining the nature of a working relationship. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it.

The mere fact that a contract may specify in detail how the contracted services are to be performed does not necessarily imply an employment relationship. A high degree of direction and control is common in contracts for services because the payer has the right to specify in the contract how the services are to be performed. Similarly, the right to supervise how the work is to be performed does not constitute a contract of service where the essence is one of independent contractor.

Paragraphs 36 and 37 of SGR 2005/1 provide that while control is important, it is not the sole indicator of whether or not a relationship is one of employment. The approach of the Courts has been to regard it as one of a number of indicia which must be considered in determination of that question.

Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb ((1986) 160 CLR 16 at 36) (Stevens v. Brodribb), where they state:

In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee.

In your case you provided the workers with guidance on the assignments. This guidance is secondary to their own expertise and related to the process rather than the content.

The workers are instructed by you on what information is to be reviewed for them to form their opinion and they were required to complete the advice based on a template that you provide. You do not have any control on the content of the advice.

The workers can choose a convenient location to complete the work, which would normally be their home or regular place of employment. The workers choose their own hours or days of work within the contract period. The contract period is advised prior to a worker accepting the assignment.

The workers have the right to refuse the offer of an assignment.

Under the General Conditions of Contract you have provided, you are able to terminate a contract with a worker if they are unable to deliver the report within the contract period. You are also able to terminate or reduce the scope of an assignment by notifying the worker in writing.

Overall, we are satisfied that the control test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors.

3. Integration

Another significant factor in establishing the nature of a contractual relationship at common law is to determine whether the worker's services are an integral part of the employer's business (under a contract of service as an employee) or providing services as an individual carrying on his or her own business (under a contract for services as an independent contractor). This is known as the 'integration' test.

If the worker's services are an integral and essential part of the employer's business that engages them, they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business, they are an independent contractor.

It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer. The worker needs to be running their own business or enterprise and have independence in the conduct of their operations.

In Montreal v. Montreal Locomotive Works [1947] 1 DLR 161, Lord Wright said:

...it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior.

Similarly, in Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans [1952] 1 TLR 101 Denning LJ said:

...under a contract of service, a man is employed as part of the business, and his work is done as a integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it.

The professional skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills.

This was highlighted in Hollis v. Vabu Pty Ltd at paragraph 48, where the court said in relation to bicycle couriers hired by Vabu:

The couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any 'goodwill' as a bicycle courier…

Consideration may also be given to whether the worker could be expected to generate goodwill in their own right. If the benefits from the creation of goodwill flow to the worker then this would indicate that they are an independent contractor. Alternatively, if goodwill flows to the principal, this suggests an employer/employee relationship.

It is therefore necessary to consider whether the worker is providing services as part of the principal's business (under a contract of service as an employee) or providing services as part of their own business (under a contract for services as an independent contractor).

Application of the common law to your case:

In your case the workers are engaged to provide advice to assist you to meet your obligations. Most, if not all of the workers are in other full-time or regular employment.

The workers generally work independently of the principal, except in the potential situations that there may be a requirement to discuss their advice in a group for the purposes of moderating their advice or if they are required to attend a site visit, in which case they will be accompanied by an authorised officer of the principal.

The workers are not required to train or supervise the work of the principal's staff nor are they required to wear items identifying or promoting the principal.

Overall, we are satisfied that the integration test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors.

4. 'Results' test

Under a results based contract, payment is often made for a negotiated contract price, as opposed to an hourly rate. The meaning of the phrase 'producing a result' means the performance of a service by one party for another where the first mentioned party is free to employ their own means (that is, third party labour, plant and equipment) to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not to do work.

Satisfactory completion of the specified services is the result for which the parties have bargained. That is, a payment becomes payable when, and only when, the contractual conditions have been fulfilled.

Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is one for services. In World Book (Australia) Pty Ltd v. FC of T 92 ATC 4327 (World Book (Australia) Pty Ltd v. FC of T) Sheller JA said:

Undertaking the production of a given result has been considered to be a mark, if not the mark, of an independent contractor.

While the notion of 'payment for a result' is expected in a contract for services, it is not necessarily inconsistent with a contract of service. For example, the Full Court of the Supreme Court of South Australia in the decision of Commissioner of State Taxation v. Roy Morgan Research Centre Pty Ltd (2004) SASC 288 (Commissioner of State Taxation v. Roy Morgan Research Centre Pty Ltd), found that interviewers who were only paid on the completion of each assignment not on an hourly basis, were employees and not independent contractors. It was found that the workers were paid for their time spent and labour, and not to produce a result.

Having regard to the true essence of the contract, the manner in which payment is structured will not of itself exclude genuine result based contracts. For example, there are results based contracts where the contract price is based on an estimate of the time and labour cost that is necessary to complete the task, or may even be calculated on that basis, subject to reasonable completion times. Generally, where a worker submits quotes or issues invoices for each job to the principal, this would be consistent with operating their own business. Nonetheless, the issuing of invoices is not necessarily determinative of the nature of the relationship.

Accordingly, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties.

You have advised that the workers are provided with a contract prior to commencing an assignment. The contract establishes the expected number of days required for completion of the assignment, including site visit days if required. The workers are required to review information provided by you, then provide a written report, utilising a specified template, answering questions posed by you. The workers are remunerated on the basis of a daily fee which is set by you and is non-negotiable.

Upon completion of each assignment, the workers are required to submit the written report and an invoice for the number of days as specified in the contract and for any expenses occurred, such as travel.

This information suggests that the workers payments were dependent on the completion and submission of a written report.

Overall, we are satisfied that the results test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors.

5. Delegation

The power to delegate or subcontract (in the sense of the capacity to engage others to do the work) is a significant factor in deciding whether a worker is an employee or independent contractor. If a person is contractually required to personally perform the work, this is an indication that the person is an employee.

If the contract does not expressly require the worker to personally perform the services, an independent contractor has the capacity to delegate or subcontract all (or some) of the work to others. Where the worker delegates, they are responsible for remunerating that worker.

In the case of Neale (DFC of T) v. Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 425; 6 AITR 201 at 202, the High Court interpreted the words 'a contract which is wholly or substantially for the labour of the person to whom the payments are made' to decide that if a contract leaves a person completely free, if he or she chooses, to engage others to perform the work on his or her behalf means that the payments are not payments under a contract for labour. That is so even if the contractor actually does perform the work personally and had no intention of doing otherwise.

If the contract leaves the contractor free to do the work himself or 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. It is a payment made under a contract whereby the contractor has undertaken to produce a result...

When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker, rather the employee has merely substituted or shared the workload.

However, a clause in the contract may permit the worker to delegate the task to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site or who may not be suitably qualified.

In the case of Bowerman v. Sinclair Halvorsen Pty Ltd [1999] NSWIRComm 21, Bishop J said:

The fact that any substitute driver had to be approved by the company does not give the respondent [the principal] control over that delegation… the company surely had the right to be confident that any substitute driver was competent to do the job and maintain the "integrity" of the company as Mr Coomb put it.

Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). A person who has a right to delegate work (whether or not that right is exercised in practice) does not work under a contract wholly or principally for their labour. Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider.

The principal has advised that the workers do not have the right to subcontract the assignment without the written consent of the principal. If a worker is unable to meet the deadline outlined in their letter of offer, you could vary the contract to allow for greater flexibility in the contract deadline or terminate the contract and offer the assignment to another worker.

Overall, we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between you and the workers is one of employer and employee.

6. Risk

Generally speaking, employers are vicariously liable for negligence and injury caused by their employees. However a principal will not be liable for negligence or injury caused by an independent contractor.

The higher the degree to which a worker is exposed to the risk of commercial loss (and the chance of commercial profit), the more they are likely to be regarded as being independent. Typically, a worker who derives piece rate payments and sustains large outgoings would be so exposed. The higher the proportion of the gross income of the worker which is required to be expended in deriving that income, and the more substantial the assets which the worker brings to the tasks, the more likely that the contract is for service, or a contract with an independent contractor.

As stated by McKenna J in Ready Mixed Concrete (South East) Limited v. Minister Pensions and National Insurance [1968] 2 QB 497 at 526:

…the owner of assets, the chance of profit and risk of loss in the business of carriage are his and not the company's.

Another consideration of risk is the liability for the cost of rectifying faulty work. That is, the key underlying consideration is whether the individual is exposed to commercial risk in terms of a liability to cover the cost of rectifying defective work. This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business.

Carrying their own insurance and indemnity policies is an indicator that a worker is engaged as an independent contractor.

In the Principal Questionnaire, you have advised that the workers are required to provide their own insurance.

In the event that the advice provided does not meet the requirements set in the contract, the worker is required to rectify the work at their own cost.

This information provides that the risk is borne by the worker.

Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between you and the workers is one of independent contractor.

7. Capital - Provision of tools and equipment and payment of business expenses.

A worker who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required for his work by the employer. Furthermore, the employer is often also responsible for the business expenses incurred by the worker, since the worker has been integrated into the employer's business.

Independent contractors carrying on their own business often provide and pay for their own assets, tools, equipment, maintenance costs and other expenses. Usually, they will have factored these costs in their overall fee or will seek separate payment for such expenses from the principal.

In Stevens v. Brodribb at 36-37, the High Court observed that working on one's own account (as an independent contractor) often involves:

The provision of him by his own place of work or of his equipment, the creation of him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion…

In your case, you do not provide the workers with any equipment or tools to complete their work, as the assignments relate to the provision of a written report based upon the information that you provide to the workers, the only equipment required is a computer on which to write the report. It is expected that the workers would make use of their own equipment such as computers and printers to complete the reports based on a template provided by the principal.

From the information provided it appears that neither the principal nor the workers had any significant capital expense involved in the provision of the advice.

You have advised that the workers usually complete their assignments at any convenient location which will usually be their home or usual place of work.

There is little indication that there is any capital expenditure incurred by either the principal or the workers in the provision of their advice. There are no tools required and the only equipment required is a computer and printer. There is no indication of business expenses being incurred by either party.

Overall, we are satisfied that the capital test in isolation is inconclusive.

Our conclusion regarding the common law definition of employee

With respect to the relationship between you and the workers, the facts and evidence provided points to the conclusion that the workers are not common law employees of the principal.

As the facts and evidence indicate that the workers are not your employees under common law, we are required to consider the expanded definition of employee under subsection 12(3) of the SGAA.

Question 2: Expanded definition of employee

Are the workers your employees by virtue of subsection 12(3) of the SGAA?

The expanded definition of employee within subsection 12(3) of the SGAA, which states:

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.

SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA.

Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that:

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

· the individual must perform the contractual work personally (there is no right to delegate); and

· the individual is not paid to achieve a result

The contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA.

Wholly or principally for labour

In this context, the word "principally" assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil.

A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour.

The workers are paid a daily rate in relation to their labour in the provision of the written report. As part of the contract they may paid for re-imbursement of expenses, such as accommodation, meals and incidentals, as well as vehicle costs. There is no indication that travel is required for every assignment, rather you have advised that the workers would usually work from their home or regular place of employment. This provides that the workers are paid principally for their labour.

Based on the available facts and evidence, we consider that the workers are paid primarily for their own labour and skills.

The individual must perform the duties themselves

As discussed earlier, we consider that the facts and evidence indicate that the workers do not have the right to delegate work to others.

Not paid to achieve a result

As discussed earlier, we consider that the facts and evidence indicate that the workers are paid for a result.

Our conclusion regarding the expanded definition of employee

Accordingly, as the workers do not satisfy all three components of the expanded definition under subsection 12(3) of the SGAA, they do not meet the expanded definition of employee as set out under subsection 12(3) of the SGAA.

Conclusion - overall

Upon considering all the available facts and evidence the Commissioner concludes that the working relationship between the principal and the members of the panel does not meet the definition of an employee for the purposes of the SGAA under either common law or the expanded definition provided under subsection 12(3) of the SGAA. Accordingly the principal does not have an obligation to pay superannuation contributions for the benefit of the members of the panel under the SGAA.

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