Edited version of private advice

Authorisation Number: 7910166657669

Date of advice: 28 April 2025

Ruling

Subject: Status of worker - superannuation guarantee

Question

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

Answer

Yes

This advice applies for the following periods:

Quarter ending March 202X

Quarter ending June 202X

Quarter ending September 202X

Quarter ending December 202X

The scheme commenced on:

XXXX

Relevant facts and circumstances

Your advice is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

1. The Applicant is wholly owned and operated by XXX Trust.

2. The Applicant is a not-for-profit organisation.

3. The Applicant engages as in-home care educators.

4. The Worker was engaged by the Applicant as an in-home care educator, operating the childcare facility from their own home.

5. The Worker provides services to each child every day. The services include reading different stories, singing and dancing, artwork, encouraging routines for meals, sleep and eating times, playgroups, feeding birds, exercising, goals of independence, using different methods for counting and recorded achievements and goals of child.

6. The Worker:

a)    signed a contract with the Applicant on the DD MM YYYY.

b)    was paid an hourly rate.

c)    cannot delegate the tasks they perform to someone else.

d)    needs to follow directions documented in the Handbook.

Relevant legislative provisions

Superannuation Guarantee Administrations Act 1992 subsection 12(3)

Other references

Taxation Ruling TR 2023/4 Income tax and superannuation guarantee: who is an employee?

Reasons for decision

The SGAA requires that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the Superannuation Guarantee Charge (SGC). Subsection 12(3) of the SGAA extends the scope of superannuation beyond traditional employment relationships to take into account some independent contractors who principally provide their own labour to meet obligations under a contract.

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

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

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

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

3)     that person works under that contract.

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

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.

First element - must be a contract

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

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

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

This case, the Worker signed a contract with the Applicant on DD MM YYYY to provide services like singing, dancing, artwork to children at the Worker's home. The first element under subsection 12(3) of SGAA is satisfied.

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

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

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

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

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

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

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

The Worker is remunerated for their labour to provide services to the children. The services include stories telling, singing and dancing, artwork, encouraging routines for meals, sleep and eating times, playgroups, feeding birds etc.

The Worker is paid hourly rate, this indicates that the Worker is not contracted for a result. The Worker has to follow directions given in accordance with the Handbook, they are not free to employ their own means to achieve the contractual outcome.

The Worker is required to perform the services personally, they cannot delegate the work to other person without the approval from the Applicant.

Based on the above, the Worker provides labour wholly and principally when performing their duties under the contract. The second element under subsection 12(3) of the SGAA is satisfied.

Third element - person works under the contract

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

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

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

Conclusion as to subsection 12(3) of the SGAA

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

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