Edited version of private advice

Authorisation Number: 1052372723198

Date of advice: 08 September 2025

Advice

Subject: Status of the Worker - contractor vs. employee

Question 1

Is the Worker, who is engaged by the Principal, an employee within the ordinary or common law meaning, for the purposes of subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer 1

No

Question 2

Is the Worker engaged by the Principal, an employee within the expanded definition of an employee under subsection 12(3) of the SGAA?

Answer 2

No

This advice applies for the following period:

1 September 20XX to 31 March 20XX

The scheme commenced on:

1 September 20XX

Relevant facts and circumstances

1. The Principal operates an Australian business, operating since 20XX.

2. The Principal engaged the Worker to review its corporate affairs needs.

3. The Worker is a corporate affairs consultant, specializing in a specific industry.

4. The Worker is an Australian resident for taxation purposes. They hold a currently registered individual ABN.

5. An Agreement was signed by the Principal and the Worker. The Agreement advises that the Worker will provide the services as an individual to fulfill a role within the Principal's business to strategically review the corporate affairs needs. The service provider is expected to have relevant industry experience.

6. There is no delegation clause in the Agreement.

7. The Principal clarified:

•                 The Worker has been engaged for a one-off project to achieve a specific defined outcome.

•                 To measure any result that the Worker may have achieved as part of his consultancy, the Principal will maintain ongoing communication with them. There are also a number of agreed milestones and parameters to achieve the outcome of the review for which the Worker has been engaged.

•                 The Worker is working remotely, on a short term basis, and has no contact with anyone within the organization other than the CEO of the Principal, whom they report to.

•                 The Worker issues an invoice which is paid by the Principal.

8. The Worker is able to decide how/has the flexibility in the manner they provides their service.

9. The Principal does not necessarily need to determine if the Worker has provided a suitable service; they are eligible to receive payment as their paid regardless, as per the Agreement.

10. The Principal advised that the Worker would identify as their representative, rather than as an independent contractor. They agreed a third party would perceive they would be working for the Principal.

11. Though the Agreement does not include a delegation clause, further clarification provided by the Principal confirmed that the Worker has the right to delegate.

12. The Principal would be responsible for expenses incurred by the Worker, who would incur the initial cost and invoice the Principal for re-imbursement.

13. The Principal provided a copy of an invoice sample issued by the Worker. The invoice was for consulting Services, issued to the Principal. Payment instructions with the Worker's bank account were provided.

Relevant legislative provisions

SGAA 1992 -subsection 12(1)

SGAA 1992 -subsection 12(3)

Reasons for decision

The law

1.     Under the SGAA, employers are required to make superannuation contributions into a complying superannuation fund or retirement savings account for the benefit of their eligible employees in accordance with minimum prescribed levels.

2.     The definition of 'employee' for the purposes of the SGAA is found in section 12, which is both a clarifying and extending provision.

3.     Subsection 12(1) of the SGAA states that 'employee' and 'employer' take on their ordinary or common law meaning.

4.     Where the relationship between the parties to a contract is not a common law employment relationship, or there is doubt in respect of the status of a person, the expanded meaning of 'employee' is contained in subsections 12(2) to 12(11). Of relevance here is subsection 12(3).

5.     The relationship between an employer and employee is a contractual one. When a business engages a worker, generally it will either be a relationship of employment, often referred to as a contract of service, or a principal/independent contractor relationship that is referred to as a contract for services.

6.     The leading case outlining the principles governing the ordinary meaning of 'employee' is Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contacting Pty Ltd[1] (Personnel Contracting). The majority of the High Court in Personnel Contracting confirmed that whether a worker is an employee of a putative employer is a question of fact to be determined by reference to an objective assessment of the totality of the relationship between the parties, having regard only to the legal rights and obligations with constitute that relationship.[2]

7.     As such, the totality of the relationship is derived from the rights and obligations created by the contract[3] between the parties, construed at the time they entered into it.[4] Where the parties have comprehensively committed the terms of their relationship to a written contract, and the contract has not been varied, challenged as a sham or subject to legal or equitable relief, then it is the legal rights and obligations in that contract alone that are relevant in this analysis.[5]

8. Evidence of subsequent conduct and work practices can only be considered in some instances, such as establishing the existence of a contract, identifying the contractual terms agreed to where the contract is wholly or partially oral, demonstrating that the contract has been varied or is a sham, and establishing evidence of other legal or equitable entitlements. [6]

9.     Where a contract is oral, evidence of the way the parties conducted themselves may be considered but only for the purposes of inferring what terms and conditions were verbally agreed to or necessarily implied into the contract. The relationship cannot be characterised based on the 'reality' of what took place over the duration of the performance of work.[7]

10.  The examination of the totality of the relationship must be considered through the focussing question of whether the worker is working in the business of the putative employer, having regard to the various employment indicia from case law.[8] In Marshall v Whittaker's Building Supply Co,[9] Windeyer J said that the distinction between an employee and an independent contractor is:

"rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own."

11.  The common law indicia include the level of control exerted by the putative employer, the extent of integration of the worker into the business, whether the worker is able to delegate, whether the remuneration is for a specified result, whether the worker uses their own tools and equipment, whether either party generates goodwill and the level of risk borne by each party. Importantly though, the indicia are not to be applied as if they are a mechanical checklist.[10]

Whether the worker is serving in your business

12.  An employee serves in the business of an employer, performing their work as a representative of that business. In contrast, an independent contractor provides services to a principal's business, but the contractor does so in furthering their own business enterprise and representing their own business.

13.  A person is not excluded from being an employee just because they also conduct their own business.[11] A person may realistically have more than one job and may both conduct their own business and be employed in someone else's business.

14.  As such, it is helpful to focus attention upon the aspects of the contractual relationship which bear more directly upon whether the worker's work was so subordinate to the employer's business that it can be seen to have been performed as an employee of that business rather than as part of an independent enterprise.[12]

Characterising a putative employer's business

15.  The correct characterisation of the business being carried on by the putative employer is an essential part of determining whether the worker is working in the business of the putative employer.[13]

16.  In Personnel Contracting, the majority considered that the core of Construct's business was their promise to supply compliance labour to their customer, Hanssen. Construct's right to control the provision of Mr McCourt's labour was an essential asset of their business, which they deployed in order to fulfil contractual obligations with Hanssen.[14]

Presenting as an emanation of the business

17.  Whether a worker is represented to the public as an emanation of the putative employer's business is a key consideration in determining whose business they are serving in.

18.  However, it is important to distinguish between a worker being contractually obliged to present as an emanation of the putative employer's business (such as in Hollis v Vabu Pty Ltd (Hollis)[15]), and them merely choosing to do so to abide by a business' expectations (such as in ZG Operations Australia Pty Ltd & Anor v Martin Jamsek & Ors (ZG Operations)[16].

Control

19.  An employer is usually able to control how, where and/or when its employee performs their work. The importance of control in this context lies not in its actual exercise, but rather in the contractual right of the employer to exercise such control. [17]

20.  Where the main operating activity of the business is the supply of labour or a service of some kind, often a critical element of the business is the need to retain control over that labour or the workers providing the service. This was emphasised by Kiefel, Keane and Edelman JJ in Personnel Contracting:

21.  "... the existence of a right of control by the putative employer over the activities of the putative employee serves to sensitise one to the subservient and dependent nature of the work of the employee, so as to assist in an assessment of whether a relationship is properly to be regarded as a contract of service rather than a contract for services."[18]

22.  A term in a contract that purports to confer a right to control must be interpreted in the context of the broader contract and the services being provided. A contract may afford an employer a different kind of control, such as control over how long a casual worker can work, or the clause may allow 'reasonable direction' as distinguished from a true right to control a worker.[19]

Delegation

23.  An unlimited, unfettered power to delegate or subcontract to others to perform the work is usually an indication that the worker is not an employee.[20] That is so even if the contractor actually does perform the work personally and had no intention of doing otherwise. In contrast, where a person is contractually required to personally perform the work, this points to the person being an employee. Personal service is generally seen as a critical feature of an employment relationship, whereas a contractor having the ability to utilise their own workforce is consistent with carrying out their own business.

24.  True delegation is differentiated from situations where the worker has delegated tasks in a supervisory capacity or has asked another colleague to take an additional shift or responsibility where the worker is unable to work.[21] In these arrangements, the worker has merely organised a substitution or shared the workload. It is not the same as the freedom of an individual to subcontract or employ others to perform the work in their own business. A subcontractor is generally paid by the worker, reflecting that they work for the worker, whereas a substitute is usually paid directly by the putative employer, without the involvement of the worker.

25.  Some contracts may provide a "limited or occasional" power of delegation where the scope and operation of the power is so narrow that the worker cannot exercise it unilaterally, for example where the putative employer needs to provide consent before a subcontractor is engaged. This factor is not inconsistent with an employment relationship[22], as the putative employer effectively has full control over who provides the services.

26.  The case in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) (On Call) entailed both of these circumstances. A purported power to delegate was found to be not any more than job swapping that can occur amongst casual employees, given the requirement that any replacement interpreter had be on the register and approved by On Call.[23]

'Results' contracts

27.  Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is one for services.[24]

28.  The meaning of the phrase 'producing a result' means the performance of a service by the worker for the putative employer where the worker 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 provide the worker's labour.

29.  Under a results-based contract, payment is often made for a negotiated fixed price on completion of the job, as opposed to an hourly rate.[25] The total fee may reflect an estimated completion time.

30.  However, a piece rate or output-based remuneration can still be consistent with an employment relationship if they are a natural means to remunerate the particular kind of task the worker is performing.[26] For example, in Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd (Roy Morgan), the Court found that although interviewers were only paid on the completion of each assignment, their pay was calculated by reference to their time spent, not for producing a result.[27] In Hollis, it was considered that payment to the bicycle couriers per delivery was a natural means to remunerate employees whose sole purpose is to perform deliveries, for ease of calculation and to provide an incentive to more efficiently to make deliveries.[28]

Tools and equipment

31.  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 their work and be reimbursed for business expenses by the employer. This includes being given a reimbursement or allowance for the use of the worker's own assets such as a car.

32.  In comparison, independent contractors carrying on their own business often provide and pay for their own assets, tools, equipment, maintenance costs and other expenses.[29] Usually, they will have factored these costs in their overall fee or will seek separate payment for such expenses from the principal.

33.  The question of scale with respect to the cost of tools and equipment is important. Where a worker uses a substantial item or piece of equipment for which they are wholly responsible to conduct their work, the mechanical aspect of the contract outweighs the personal.[30]

34.  Equipment that is not specialised or used only for completing the contracted services, such as a mobile phone, are less likely to be considered significant.[31]

Goodwill and Intellectual Property

35.  If an independent contractor performs services in the course of their own business, it would be common for the contractor to be able to generate goodwill for that business.

36.  Where a contract between a worker and putative employer prevents any goodwill from accruing for a worker's possible business, this may indicate that the worker is instead serving in the putative employer's business.

Risk

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

38.  Where a contract requires a worker to obtain their own insurance or indemnify the putative employer against loss arising from harm or injury caused by the worker, it may be seen as a consequence of a subjective characterisation that the contract is one for service, and as such must be considered in light of the entire contract.

39.  In On Call, although interpreters were contractually required to indemnify On Call against loss, Bromberg J found that On Call bore the ultimate financial risk for a failure by an interpreter to perform the work, having taken out its own insurance policy against claims made by clients and not financially penalising interpreters for unsatisfactory work.[32]

40.  In Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd[33], the Full Federal Court concluded although these workers were required to acquire their own public liability insurance, this one factor alone was insufficient to support a conclusion that the workers were not employees.

Use of labels to characterise relationship

41.  In Personnel Contracting the High Court found that the "labels" which the parties may have chosen to describe their relationship are not determinative or even likely relevant to, the characterisation of their relationship.[34] Rather the characterisation of the relationship needs to turn on the substantial rights and duties between the parties.[35]

42.  Clauses that stem as a consequence of the parties' characterisation of their relationship will be similarly limited in their impact on the actual character, for the same reasons, for example obtaining an ABN or the provision or lack of provision of certain work entitlements.

Serving in the engaging entity's business

43.  As detailed above, the majority of the High Court in Personnel Contracting confirmed that whether a worker is an employee of a putative employer is a question of fact to be determined by reference to an objective assessment of the totality of the relationship between the parties, having regard only to the legal rights and obligations which constitute that relationship.

44.  As such, the totality of the relationship is derived from the rights and obligations created by the contract between the parties, construed at the time they entered into it. Where the parties have comprehensively committed the terms of their relationship to a written contract, and the contract has not been varied, challenged as a sham or subject to legal or equitable relief, then it is the legal rights and obligations in that contract alone that are relevant in this analysis.

45.  The ATO's response to the Personnel Contracting case is provided in a Decision impact statement (the Statement) issued on 31 March 2022, and states:

The long-established employment indicia are still relevant when characterising the contractual relationship between the parties. However, they are to be considered through the focusing question or prism of whether the putative employee is working in the business of the employer. This reflects the Commissioner's understanding and application of the business integration test. The High Court has elevated that test as one of the primary and focusing aspects of the examination of the contractual terms. In addition, the High Court has continued the emphasis on the examination of control as a complementary focus to the business integration test (emphasis added).

Application of the law

Characterising a putative employer's business

46.  In this case, the putative employer engaged the Worker under an Agreement.

47.  The Agreement provides the terms of the individual engagement. It is clearly understood that there are only two parties to the Agreement.

48.  Based on those terms, the Worker is not serving in the business of the employer. and it is more likely that the Worker would be viewed as consultant engaged to represent the business interests of the Principal.

49.  The Worker is an experienced consultant and has provided services to other businesses previously. It is reasonable to expect that they have established themself as an available agent to exert influence as required to appropriate stakeholders and whilst representing the other party's interests, they would not be seen as an employee.

50.  The terms in which the Worker is engaged make no reference to an intention to form an employment relationship.

51.  The remit of the Worker is to provide representation on behalf of the Principal. Based on the Worker's skill and experience, they will liaise with and exert suitable and appropriate influence to third parties that is likely to be beneficial to the Principal's interests. The agreed services will most likely take place in settings that are removed from the Principal's physical business premises.

Presenting as an emanation of the business

52.  No evidence was provided to show that the Worker performs any duties relating to the employer's operation. There is not any level of engagement/interaction with employees of the business, other than an executive the Worker reports to.

53.  The Worker's engagement is to reflect a temporary status during the term of the engagement but does not demonstrate integration within the entity. Although it was agreed that the Worker would identify as a representative of the Principal, it is understood that this quasi identification was a necessary part of the Worker's provided services.

54.  There is no indication that the Worker is available to or is assimilated into the organization.

55.  The Worker, in their capacity as a sole trader, delivers services to the Principal. Such services are unlikely to be considered as falling within the scope of the Principal's business. As such, it is likely that the Worker is not seen as serving in nor presenting as an emanation of the Principal's business.

Control

56.  The role of the Worker is to establish relationships with relevant individuals and organizations to promote the interests of the Principal's business. The Worker is expected to accomplish this by organizing meetings and briefings with such parties, in line with the Agreement. How the Worker does so is at his discretion and judgement. Other than the expectation that the Worker would be seeking a meeting or briefing with a stakeholder to work towards the Principal's objective, there is no control exerted over how the Worker, engaged as an experienced professional, achieves this.

57.  No evidence was provided to demonstrate that the Principal controls how the Worker is to perform their services. The Agreement does not detail how the Principal specifically wants the tasks executed.

Summary - Business Integration and Control

58.  The Worker is not integrated into, nor likely to be perceived as a representative of, the employer's business. The Principal's right to exercise control is very limited to that of the expectation that the Worker will satisfactorily and favourably deliver services in the interests of the Principal's business.

59.  The Principal would accept the Worker as having completed the task as notified, rather than being achieved with the Principal having to provide any type of supervisory presence.

Other indicia

Terms of Engagement

60.  The Worker is engaged as an independent entity, in their own right, trading under their business name, and using their own ABN. This is clearly documented in the Agreement which identifies the Worker, their individual ABN and current business name.

61.  The Worker offered to provide their services to the Principal, and determined the terms and conditions of the services they would provide, as well as setting their monthly fee. These were accepted by the Principal upon emails between the parties and evidenced by signing the Agreement.

62.  The Principal accepted the Worker's terms when providing their services, and the expected commencement of delivery of services.

63.  Accordingly, the terms of engagement are indicative that the Worker is working as an independent contractor and not as an employee of the Principal.

Whether the work can be delegated or subcontracted

64.  The delivery of the agreed services is to be done by the Worker personally, a notion confirmed by the Principal. The confirmation is not reflected under the express rights in the Agreement as there is no delegation clause.

65.  The Principal provided further advice that the Worker does have the right to delegate, but they also advised that the Worker is expected to provide services that includes 'personal contact with relevant industry bodies'.

66.  Further, this implied that the Worker is engaged for their relevant professional expertise and would be able to employ their own means in order to deliver that result, notwithstanding that the Worker was specifically selected based on their experience and that there would not be an expectation that a third party would act in place of the Worker. On the other hand, the Principal has implied that delegation was allowable.

67.  In these circumstances, an implied right to delegate cannot generally be written into the Agreement which requires personal performance by the Worker. It is generally not legitimate to use in aid of construction of a contract, anything which the parties said or did after it was made: JMC at [8]. As detailed in paragraph 8 of TR 2023/4, the task of ascertaining the legal rights and obligations of the parties must be construed in accordance with the established principles of contractual interpretation and focus on a characterisation of the contract at the time of entry into it.

68.  While the contract is silent on the issue of delegation this does not necessarily indicate the worker is an employee under the extended definition of an employee. The absence of a right to delegate is one of several factors to be considered in assessing the relationship.

Results' Contracts

69.  The provided Agreement, as well as the sample tax invoice, were central in understanding the nature and operation of the contractual relationship between the parties.

70.  The Statement issued for the Personnel Contracting case states, amongst other things, that the most significant clarification arises primarily in examining the terms of the written contract between the parties to establish the character of the relationship. Furthermore, as highlighted in JMC Pty Ltd v Commissioner of Taxation [2023] FCAFC 76 (JMC) the law is settled in respect of the need to consider both express and implied contract terms when determining the nature of a relationship.

71.  In this case, the Agreement refers to the Worker as providing the contracted services.

72.  The Agreement lists the periods the Worker is engaged for; the sample invoice lists the provision of services as well as the compensation the Worker agreed to receive in exchange for the delivery of these services.

73.  The compensation is in the form of lump sum payments, which are paid in arrears, exclusive of GST.

74.  No evidence was provided to show that all labour required to plan and design and deliver the agreed services was recognised as labour and paid at an hourly rate. Rather, the lump sum payments for the Worker's services represent a fixed price, determined prior the delivery of the agreed services.

75.  Although the Worker is being paid by the Principal for the agreed fee upon the completion of agreed services upon issue of a monthly invoice, there is uncertainty around the basis for payment. While the agreement states that payment is made upon completion of agreed services, it also acknowledges that the worker may not achieve the intended outcomes within the contract period, and that payment may be made for progress toward an overall outcome.

76.  Payment is made to the Worker for the completion of elements, culminating in completion of the review.

77.  The monthly fee is contingent on the Principal's acceptance of defined deliverables such as stakeholder engagement milestones, strategic recommendations, or reports as set out in Appendix A. Payment is not made for hours worked but for meeting deliverables. While the worker may not complete all strategic goals with the contract term, payment is conditional on demonstrating measurable progress towards those goals.

78.  Both the agreed purpose and structure of the payments are indicative of being paid for a result, in contrast to being paid an hourly rate for actual hours of attendance. Additionally, the recent view expressed in paragraph 62 of Taxation Ruling TR 2023/4 is that a payment is more likely to be for a result if it bears little to no reference to the time spent working to produce the outcome. Given the potential range of the Worker's services, which include the planning and design of the delivery of their services, there is little likelihood of the fixed payments for the delivery of these services reconciling with the time spent working to produce the outcome. The method of payment is merely one aspect of the overall working relationship and does not, by itself, determine whether the Worker is an employee or contractor. The payment structure was considered alongside other common law elements in a determination of whether the Worker was an employee or independent contractor.

79.  In summary, under the express and implied contractual terms, the Worker has contractual obligations, inclusive of the preparation, organization of/attendance at meetings, liaison and other means of representing the Principal's business. This is the result that the Worker is paid to achieve.

Tools and equipment

80.  No evidence of any significance was provided in relation to the provision of tools and equipment, the burden of risk, or any associated insurance arrangements.

Generation of goodwill

81.  The Worker is able to generate goodwill through the provision of their services.

Risk

82.  Employers are generally liable for costs arising out of injury or defects in carrying out the agreed work by their employees, whereas a principal will not be liable for costs arising out of injury or defects caused by an independent contractor.

83.  The Worker must comply with copyright and confidentiality clauses in the Agreement.

84.  There is no discernible risk to the Worker (other than reputational damage should they be considered as not reasonably having achieved ensuring the Principal's business interests were suitably promoted).

85.  Accordingly, based on the facts and evidence relevant to the risk test, it is considered that the working relationship between the Principal and the Worker neither favours an employer/employee or Principal/independent contractor agreement.

Conclusion

86.  Hence, after the evaluation of the integration and control indicia in particular and the relationship with the other common law indicia, we consider that the working arrangement between the Principal and the Worker is that of an independent contractor providing services to the Principal's business.

87.  On balance, it is considered that the Worker is not a common law employee of the employer under subsection 12(1) of the SGAA but is an independent contractor.

Question 2

Is the Worker engaged by the Principal, an employee within the expanded definition of an employee under subsection 12(3) of the SGAA?

Answer 2

No

Summary

The facts and evidence provided suggest that the Worker is not an employee of the Principal for the purposes of subsection 12(3) of the SGAA.

The law

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

(a) there must be a contract (written or otherwise)

(b) which is wholly or principally for the labour of a person, and

(c) that person works under that contract.

89.  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:

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

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

(c) the individual is not contracted to achieve a result.

The existence of a contract (written or otherwise)

90.  An Agreement was signed by both parties, effective XX September 20XX.

Accordingly, element a) is satisfied.

The person works under that contract

91.  The word 'work' in subsection 12(3) 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. The Worker provided the agreed services under the Agreement.

Accordingly, element c) is satisfied.

92.  The following is a discussion as to whether 'element b) the contract is wholly or principally for the labour of a person' is satisfied.

Wholly or principally for the person's labour

93.  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.'

Benefit derived by the putative employer

94.  The case of Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118(Moffet) provides guidance as to determining whether the contract is wholly or principally for the labour of the individual engaged. Specifically, the question must be answered from the perspective of the person obtaining the benefit of the labour (that is, the quasi-employer).

95.  In Moffet, Perram and Anderson JJ considered that the Services Agreement provided Dental Corporation, the putative employer, with two sets of benefits:

... One related to Dr Moffet's personal services as a dentist, as a practice manager, as a consultant both in relation to the administration of the practice but also in relation to fees and as a maintainer of medical records (i.e., the 'Dentistry Services' contained in Sch 1). The other was his promise that the practice would achieve a minimum cash flow which was backed up by a right in Dental Corporation to reduce his monthly drawings by 50% until any shortfall was made good.

96.  Dr Moffet's obligation to provide personal services as a dentist and manager was 'for labour', whereas the promise to achieve the minimum cash flow was not. The two benefits were so intertwined that they had to be dealt with together, where the requirement to provide minimum annual cash flows could not be met without Dr Moffet carrying out his services. For that reason, the Services Agreement was, from Dental Corporation's perspective, wholly or principally for Dr Moffet's labour. It was substantially for that purpose, notwithstanding that the contract also provided a secondary, non-labour benefit.

97.  In a discussion of how to determine if labour is the principal benefit or component contracted for paragraph 111 of TR 2023/4 refers to the need for a quantitative valuation, or where appropriate a qualitative analysis, to be undertaken. The Commissioner issued Decision Impact Statement - Jamsek v ZG Operations Australia Pty ltd (No 3) on 15 May 2024, in which the Commissioner accepts that it remains open to apply a qualitative analysis for the purpose of testing whether a contact is principally for the labour under subsection 12(3) of the SGAA, where the factual circumstances of a case warrant that approach.

98.  There was no equipment component under this Agreement, and as such a quantitative analysis was not possible. An additional non-labour benefit, as discussed in Moffet, was recognised, however no evidence was provided to warrant a qualitative analysis for the purpose of testing whether the Agreement was principally for labour.

Contract for a result - the law

99.  Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is not wholly or principally for the person's labour, but rather for the worker to produce the result they have contracted to produce. While the worker may perform labour, they do so for their own purposes to achieve the contracted result.

100.    A contract is for the production of a given result where the worker 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 wholly or principally to provide the worker's underlying labour that produces the result.

101.    Where a worker uses a substantial item or piece of equipment for which they are wholly responsible to conduct their work, the contract may be better described as for a result that entails the specific use of the item. In other circumstances, the contract may be for the sum of multiple components that involve both labour and equipment, but the use of the equipment is so significant that the labour is no longer principal. This contract would not be wholly or principally for the worker's labour even if it is not for a result.

102.    Under a results-based contract, payment is often made for a negotiated fixed price on completion of the job, as opposed to an hourly rate. The total fee may reflect an estimated completion time.

103.    However, a piece rate or output-based remuneration can still be consistent with an employment relationship if they are a natural means to remunerate the particular kind of task the worker is performing. For example, in Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd, the Court found that although interviewers were only paid on the completion of each assignment, their pay was calculated by reference to their time spent, not for producing a result. In Hollis, it was considered that payment to the bicycle couriers per delivery was a natural means to remunerate employees whose sole purpose is to perform deliveries, for ease of calculation and to provide an incentive to more efficiently to make deliveries.

104.    As such the contractual relationship as a whole must still be considered to determine whether the legal rights and obligations in contract demonstrate an intention to wholly or principally engage labour to serve in the putative employer's business or to obtain a result.

Worker must perform the work personally - the law

105.    Subsection 12(3) requires the contract to be for the worker's labour specifically. An unlimited, unfettered power to delegate or subcontract to others to perform the work is usually an indication that the worker is not required to perform the work personally. That is so even if the contractor actually does personally perform the work and had no intention of doing otherwise. Even if a contract is 'for labour', an unrestricted delegation power indicates that the contract is not for the worker's labour.

106.    Some contracts may provide a 'limited or occasional' power of delegation where the scope and operation of the power is narrow and the worker cannot exercise it unilaterally, for example where the putative employer needs to provide consent before a subcontractor is engaged. The putative employer effectively has full control over who provides the services, and the contract more clearly contemplates that it would primarily be the worker who does the work. Thus, a limited delegation power may indicate that while the contract is not wholly for the worker's labour, it is still principally for their labour.

107.    True delegation is differentiated from situations where the worker has delegated tasks in a supervisory capacity or has asked another colleague to take an additional shift or responsibility where the worker is unable to work. In these arrangements, the worker has merely organised a substitution or shared the workload. It is not the same as the freedom of an individual to subcontract or employ others to perform the work in their own business. A subcontractor is generally paid by the worker, reflecting that they work for the worker, whereas a substitute is usually paid directly by the putative employer, without the involvement of the worker.

108.    The case in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 (On Call) entailed both of these circumstances. A purported power to delegate was found to be not any more than job swapping that can occur amongst casual employees, given the requirement that any replacement interpreter had be on the register and approved by On Call.

Wholly or principally for the person's labour - application

109.    Moffet provides guidance as to determining whether the contract is wholly or principally for the labour of the individual engaged. Specifically, the question must be answered from the perspective of the person obtaining the benefit of the labour (i.e., the quasi-employer).

110.    The Worker is engaged to provide a service to the Principal by with the intention of favourably representing the Principal's business interests.

111.    The Worker is engaged specifically for his experience, expertise and perceived ability to exert appropriate influence within the industry environment.

112.    The Agreement does not support that the arrangement is in part for the supply of any materials or equipment. The provision of services will be done on a personal basis with the stakeholders, by the Worker.

113.    As detailed above, because the Agreement provided two benefits to the Principal, we are unable to conclude with any certainty that the Agreement was wholly or principally for the Worker's labour.

The individual must perform the duties personally - application

114.    Whether the individual must perform the duties themselves is a significant factor in determining whether an individual is considered an employee under the extended definition of the SGAA.

115.    There is no provision in the Agreement for the Worker to either delegate or to not delegate. Although the Principal has subsequently advised that the Worker can do so, this implied delegation carries less weight, in terms of establishing the type of relationship, than a right included as a term of the original Agreement.

116.    It is implied that the Worker is engaged for their relevant professional skill and expertise, and would be able to employ their own means in order to deliver that result.

117.    While the contract is silent on the issue of delegation this does not necessarily indicate the worker is an employee under the extended definition of an employee.

Contract for a result - application

118.    As discussed previously, the Worker is free to employ their own means to achieve the required outcome in delivering the agreed services. The nature of the provided Agreement is to achieve a result, with the intention of effectively promoting the Principal's business interests.

119.    Rather than being paid an hourly rate, the Worker is paid agreed monthly lump sums, which are paid upon invoice, exclusive of GST.

120.    No evidence was provided to show that all labour required to plan and design and deliver the agreed services was recognised as labour and paid at an hourly rate. Rather, the lump sum payments for the Worker's services represent a fixed price, determined prior to the delivery of the agreed services.

121.    Accordingly, the substance of the contract is to achieve a result.

Summary

122.    In considering all the terms of the contractual relationship the Commissioner of Taxation considers that the Worker is not an employee of the Principal under subsection 12(3) of the SGAA. As there were two benefits provided to the Principal, there is some uncertainty as to whether the working arrangement reflects that the individual is remunerated (either wholly or principally) for their personal labour and skills. The Worker has an implied right of delegation and as such need not perform all the tasks personally. Additionally, the Worker is contracted to achieve a result.

Conclusion

123.    Accordingly, as all three elements, listed at paragraph 88, for the Worker to be an employee under subsection 12(3) of the SGAA are not satisfied, the Worker does not meet the extended definition of employee as set out under subsection 12(3) of the SGAA.

Overall conclusion

124.    On balance, the Worker is not an employee of the employer for the purpose of either subsection 12(1) or 12(3) of the SGAA.

[1] Personnel Contracting [2022] HCA 1.

[2] Personnel Contracting at [61] and [172-173].

[3] Personnel Contracting at [60], [124] and [173].

[4] Personnel Contracting at [174].

[5] Personnel Contracting at [43], [59] and [173]; WorkPac Pty Ltd v Rossato [2021] HCA 23 at [56-57] and [63].

[6] Personnel Contracting at [54], [59] and [177].

[7] Secretary, Attorney-General's Department v O'Dwyer [2022] FCA 1183.

[8] Personnel Contracting at [36-39], [61-62], [121], [173] and [183]. The relationship may be affected by statutory provisions and by awards made under statutes (Personnel Contracting at [41]).

[9] (1963) 109 CLR 210 at [217].

[10] Personnel Contracting at [34].

[11] Personnel Contracting at [181].

[12] Personnel Contracting at[39].

[13] Personnel Contracting at [70-71], [89] and [200].

[14] Personnel Contracting at [89].

[15] Hollis 2001 ATC 4508 at [50-52].

[16] ZG Operations at[32-33] and[52-53].

[17] Zuijs v Wirth Bros Pty Ltd [1955] HCA 73; 93 CLR 561 (Zuijs) at [571-573]; Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; 160 CLR 16 (Stevens) at [9] and [15-20], per Mason J.

[18] Personnel Contracting at[73].

[19] ZG Operations at[69] and [105].

[20] Australian Mutual Provident Society v Chaplin and Anor (1978) 18 ALR 385 at [391]. See also Neale (DFC of T) v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at[425].

[21] On Call [2011] FCA 366 at [105] and [253].

[22] Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 515, cited with approval in On Call at [283].

[23] On Call at [253].

[24] World Book (Australia) Pty Ltd v FC of T 92 ATC 4327 at [4334].

[25] For example, in Stevens.

[26] Hollis at [54]

[27] Roy Morgan (2004) SASC 288at [42].

[28] Hollis at [4520].

[29] Stevens at [12].

[30] ZG Operations at [88].

[31] Hollis at[56].

[32] On Call at [290].

[33] [2015] FCAFC 37.

[34] Personnel Contracting at [58], [63], [127] and [184].

[35] Personnel Contracting at[66].

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