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Edited version of administratively binding advice
Authorisation Number: 1012462165402
Advice
Subject: Superannuation guarantee (SG) obligations
Question
Is there an obligation for a payer to provide SG support for a worker under the Superannuation Guarantee (Administration) Act 1992 (SGAA) where a company is interposed between the two parties?
Advice
No. Refer to 'why we have made this decision'
This advice applies for the following periods:
From 1 July 2012 - 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.
The ATO received an application for administratively binding advice (ABA) in respect to the employment relationship between a payer (the Principal) and a worker, where the worker invoices the Principal as a Pty Ltd company. The application provided the following information:
· The Principal engaged the services of the worker as a contractor through a verbal agreement
· The worker has an ABN and is registered for GST
· The worker provides invoices to the Principal under their company name
· The Principal pays the invoices quarterly.
· The Principal has not paid SG for the worker.
· The Principal has not withheld tax from the worker.
· The worker claims the Principal should pay SG to their nominated super fund.
· The ATO Employer/Contractor decision tool (based on the verbal agreement) indicates that the worker is an employee.
· The ATO Employer/Contractor decision tool (based on the fact that they are invoicing as a company) indicates that the worker is a contractor.
Invoices provided by the Principal showed the following information:
· Issued by a Pty Ltd company
· Invoices include amounts for services which are charged for on an hourly basis.
· GST is included in the invoices.
Relevant legislative provisions
Superannuation Guarantee Administration Act 1992 Section 12.
Reasons for decision
Summary
As there is no employment relationship between the Principal and the worker, the Principal does not have an obligation to provide SG support for the worker.
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 superannuation guarantee charge (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? (SGR 2005/1) from a 'contract for service which is typically a contractor and principal type of relationship and does not attract an SGC liability.
An employment relationship can only exist when there is a relationship between the employer and a person.
An employment relationship does not exist when there is a relationship between the employer and a company to provide the services of a person.
Application to your circumstances
You entered into a verbal agreement with the Worker in respect of the provision of services.
The invoices that you have provided indicate that they are issued to you from a company in respect of the services that are provided by the worker.
As the relationship is between the Principal and the Company in respect of the provision of the worker's services, there is no employment relationship between the Principal and the worker.
The employment relationship exists between the interposed Company and the worker.
Conclusion
As there is no employment relationship between the Principal and the worker, the Principal does not have an obligation to provide SG support for the Worker.
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