The Trustee for the SR & K Hall Family Trust v Commissioner of Taxation

[2013] AATA 681

---

(Decision by: Senior Member R W Dunne)

The Trustee for the SR & K Hall Family Trust
v Commissioner of Taxation

Tribunal:

Member:
Senior Member R W Dunne

Subject References:
SUPERANNUATION GUARANTEE
whether applicant's workers were employees or independent contractors
indicia
common law employees
contracts wholly or principally for labour
burden of proof
objection decisions under review affirmed

Legislative References:
Superannuation Guarantee (Administration) Act 1992 - s 11(1)(ba); s 12(1); s 12(3)
Taxation Administration Act 1953 - s 14ZZK(b)

Case References:
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) - [2011] FCA 366
Hollis v Vabu Pty Ltd - (2001) 207 CLR 21
ACE Insurance Limited v Trifunovski - [2013] FCAFC 3
The Commissioner of Taxation of the Commonwealth of Australia v Barrett - (1973) 129 CLR 395
Stevens v Brodribb Sawmilling Company Pty Ltd - (1986) 160 CLR 16
Zuijs V Wirth Bros Pty Ltd - (1955) 93 CLR 561
Federal Commissioner of Taxation v Dalco - (1990) 168 CLR 614
George v Federal Commissioner of Taxation - (1952) 86 CLR 183

Other References:
Superannuation Guarantee Ruling SGR 2005/1
Taxation Ruling TR 2005/16

Hearing date: 18 & 19 July 2013
Decision date: 24 September 2013

Adelaide

---

Decision by:
Senior Member R W Dunne

REASONS FOR DECISION

Senior Member R W Dunne

INTRODUCTION

1. The applicant, according to its application for review of decision, is S & K Hall & Sons Pty Ltd as trustee for the SR & K Hall Family Trust ("Trust"). The Trust carries on a commercial and residential plumbing business and trades as "Hall Plumbing".

2. During the period under review, the Trust had approximately 13 employee plumbers and 4 to 5 independent contractor plumbers. Following on an employer obligations audit, the respondent determined that the applicant did not meet its superannuation guarantee obligations for five of the independent contractor plumbers ("Workers"). Superannuation guarantee default assessments were issued to the applicant in respect of the Workers for the quarters from 1 July 2009 to 30 June 2011. The applicant objected against the assessments, the respondent decided to disallow the objection in full and the applicant applied to this Tribunal for review of the decision.

3. At the hearing, the applicant was represented by its accountant, Mr R Veitch, and the respondent was represented by Mr S Cole (of counsel). I received into evidence the T documents, as Volume 1 ^[1] and Volume 2 ^[2] , and the supplementary T documents ^[3] lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, together with the following exhibits:

(a)

Contractor Agreement - Mr John Dalzotto; ^[4]

(b)

Contractor Agreement - Mr Neil Whittle; ^[5]

(c)

Contractor Agreement - Mr Mark Mullen; ^[6]

(d)

Contractor Agreement - Mr Troy Kirchhofer; ^[7]

(e)

Letter from R Johns, Office Manager for Hall Plumbing, dated 17 July 2013, in reference to the evidence of Mr N Whittle; ^[8] and

(f)

Letter from R Johns, Office Manager for Hall Plumbing, dated 17 July 2013, in reference to the evidence of Mr T Kirchhofer. ^[9]

ISSUES FOR THE TRIBUNAL

4. The issues before me are as follows:

(a)

Were any of the Workers an employee of the applicant, pursuant to s 12(1) of the Superannuation Guarantee (Administration) Act 1992 ("SGAA"), in respect of the work they performed for the applicant during the period 1 July 2009 to 30 June 2011?

(b)

Did any of the Workers work under a contract with the applicant, that was wholly or principally for their labour, for the purposes of s 12(3) of the SGAA for the period 1 July 2009 to 30 June 2011?

(c)

Were the superannuation guarantee default assessments, issued to the applicant in respect of the period 1 July 2009 to 30 June 2011, excessive?

LEGISLATION

5. The legislation governing the superannuation guarantee scheme, administered by the respondent, is largely contained in the Superannuation Guarantee Charge Act 1992 and the SGAA. The superannuation guarantee regime applies on a quarterly basis, with the year divided into four quarters ending 30 September, 31 December, 31 March and 30 June. The respondent has published Superannuation Guarantee Ruling SGR 2005/1 and Taxation Ruling TR 2005/16, which are binding public rulings that deal with the legislation.

6. The legislation that applies to the issues to be decided in this case is contained in the SGAA, particularly ss 12(1) and 12(3). Also relevant can be s 11(1)(ba) of the SGAA. These provisions read:

SGAA

" 12 Interpretation: employee, employer

(1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):

(a) expand the meaning of those terms; and

(b) make particular provision to avoid doubt as to the status of certain persons.

...

(3) 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.

..."

" 11 Interpretation - salary or wages

(1) In this Act, salary or wages includes:

(a)...

(b)...

(ba) payments under a contract referred to in subsection 12(3) that are made in respect of the labour of the person working under the contract; and

..."

7. The legislation that also applies in this case is contained in the Taxation Administration Act 1953 ("TAA"), which relevantly provides:

" 14ZZK Grounds of objection and burden of proof

On an application for review of a reviewable objection decision:

...

(b) the applicant has the burden of proving that:

(i) if the taxation decision concerned is an assessment (other than a franking assessment)-the assessment is excessive; or

..."

BACKGROUND

8. The material facts in this case are not in dispute and are largely extracted from the statements of facts, issues and contentions of the applicant and the respondent. On 31 August 2011, the respondent advised the applicant by letter that a review of its employer obligations, including superannuation guarantee, was to be conducted. In the letter, a meeting with the respondent's officers was proposed and took place on 2 November 2011. Present at the meeting were Mr Stephen Hall and Ms Karen Hall, the applicant's tax agent, Mr Robert Veitch, and two of the respondent's officers. A "Field Questionnaire" was prepared by the respondent in respect of the meeting and it appears in the T documents. ^[10] In the Questionnaire, Mr and Ms Hall are described as the trustees of the Trust. The applicant's statement of issues indicates that the Trust was established by a deed dated 24 April 2002. A copy of the deed has not been provided in the T documents. The Trust employs the bulk of its plumbers as employees but, from time to time, it has engaged contractors to assist in meeting its work commitments.

9. On 10 January 2012, the respondent sent an email to Mr Veitch which read:

"...

As requested I have listed the workers that our investigations to date have determined to be employees and not sub-contractors.

MR JOHN DALZOTTO

MR MARK MULLEN

MR NATHON HART

MR NEIL WHITTLE

MR TROY KIRCHHOFER

..." ^[11]

10. On 18 January 2012, a further meeting was held between the applicant and the respondent. A record of the response from the applicant recorded by the respondent reads:

"Each worker is free to accept or refuse work provided by Ken Hall Plumbers. Each worker provides their own equipped van and provides equipment such as Back flow tester, drain clearing equipment and Kanga Hammer. They also claim that the workers do not carry any signage etc and hold their own licenses and insurance. All individuals however now operate through family trusts." ^[12]

11. On 31 January 2012, the respondent advised the applicant of the completion of the employer obligations audit and of the failure to meet the superannuation guarantee obligations for some of the contractors. After the respondent issued the superannuation guarantee default assessments for the relevant quarters in dispute (16 February 2012), on 27 February 2012 the applicant (through its tax agent) lodged the objection. On 2 April 2012, the applicant (again through its tax agent) provided a Principal/Payer "Superannuation Guarantee: Status of the worker questionnaire" dated 28 March 2012.

EVIDENCE

Evidence of Mr Stephen Hall

12. In giving his evidence, Mr Hall confirmed that the applicant's workers comprised both traditional employees and independent contractors. Each day a list of jobs was given out to the contractors or faxed through (in the case of Mr Mullen). The jobs were not given in any order and it was up to each of the contractors to decide which work they would do first. Materials for the work would generally be ordered by the applicant. There was no supervision by the applicant of the work done by the Workers.

13. Mr Hall said that, during the period under review, there were more traditional employees than independent contractors. He said the applicant had given the Workers the opportunity to become employees, but they preferred to remain as contractors. The only contractor that became an employee was Mr Dalzotto. When Mr Veitch referred Mr Hall to the principal/payer "Superannuation Guarantee: Status of the worker questionnaire" made by him in March 2012, he said that the answers given by the contractors to the employer/employee Questionnaires would have been different because the contractors would have been referring to the period before 2009 when there were no written contracts under which the contractors operated. But there were verbal arrangements in place. Since 2009 the position with contractors had changed.

14. When asked how the contractors were treated during the period under review Mr Hall said that they were all mainly treated the same. If contractors wanted time off, they would not seek permission. They would simply advise the applicant that they would not be available on certain days. In relation to uniforms which included the name "Hall Plumbing" on them, these uniforms were supplied by the applicant prior to 2009. But since 2009, there was no need for contractors to wear uniforms. Generally, the Workers would not refuse to do work, although there were occasions when certain types of work were refused. When asked how the Workers were paid, Mr Hall said that when they were working on government contracts a work order sheet would be provided by each Worker in which details of the work done was set out, and the Worker would be paid for the work performed under the government contract. In relation to guarantees for their work, the contractors under industry regulations were required to provide a 12 months guarantee of workmanship to the client.

15. In cross-examination by Mr Cole, Mr Hall said that the ordinary contractor rate for a plumber was greater than $40 per hour. He would then invoice the client his own rate, which would be higher than the rate charged by the Worker. Workers working for the applicant would be paid more than the applicant's traditional employees. As far as the Workers were concerned, the applicant would choose which Worker it would send to do a client's work. It could be a Worker or one of the applicant's traditional employees. In relation to the hourly rate paid to the Workers, which was higher than the rate paid to employees, Mr Hall said that the higher rate occurred because the Workers supplied their own motor vehicles and equipment. If the Workers chose to become employees, they would be paid less than contractors, but they would get employee benefits, such as annual leave and sick leave.

16. If the Workers became employees, they would do the same work as contractors, but it would not necessarily be the same type of work. As employees, they would be provided with a vehicle or be taken to the work site. In the case of ordinary employees needing to travel, they would bring their own vehicles to the applicant's premises and then travel to the job in the applicant's vehicles. The hourly rate for the Workers in the period under review was generally the same for each of them, and the written contracts were the same for each of the Workers. When Mr Cole referred Mr Hall to tax invoices provided by the Workers to the applicant, he acknowledged that, during June 2010, the same hourly rate of $41 was charged for both the supply of labour and also for the supply of labour and plant/equipment. He said that not all of the Workers would work a full week. Some did and some did not, but all of them would work 25-30 hours per week.

17. When asked about work materials, Mr Hall said that the Workers would provide small materials themselves, but if larger materials were needed they would purchase them on a Hall Plumbing trade account. Meetings were held with the Workers from time to time to discuss their status as contractors. Discussions with the Workers were also held from time to time to discuss work allocations and job arrangements. As far as uniforms were concerned, the Workers wore clothing with the Hall Plumbing logo, so as to identify them when government contracts were involved. From time to time, the Workers would be required to use Hall Plumbing vehicles where special equipment was needed. Mr Hall said that the Workers did not sub-contract their work to others.

Evidence of Mr Troy Kirchhofer

18. Mr Cole referred Mr Kirchhofer to the worker/payee "Superannuation Guarantee: Status of the worker questionnaire" that he had received from the respondent and had dated 1 April 2013. ^[13] He said that during the 2010/2011 financial years, the majority of the plumbing work that he did was for the applicant. He said he would not refuse to do a particular job or task for the applicant and, as a matter of courtesy, he would always ask permission for time off. He said he had a business name and a business number and that he obtained the ABN in 2002. He had a full uniform with the Hall Plumbing logo and his own name on it. The style of the uniform had changed over the years. Up until the end of 2011, he wore the Hall Plumbing uniform, with logo. In the latter part of his time with the applicant when he did not wear the full uniform, he was criticised and asked to wear the uniform in the work he did for the applicant. In further questioning, he said that he did not sub-contract any of the work that he was asked to do by the applicant. He used his own vehicle when working for the applicant, but there were occasions when he used the Hall Plumbing vehicles when large items of equipment were needed. He used his own tools and equipment when working for the applicant, but he also used the applicant's larger items of equipment when it was required. Since leaving Hall Plumbing he has had to buy more of his own tools, such as a drain-machine, a concrete cutter and more specialised plumbing tools.

19. In re-examination by Mr Veitch, Mr Kirchhofer said that he would receive several jobs covering a period, but this would vary from time to time. In relation to the work he performed, he said he was verbally told by the applicant where to go and what to do. His ability to delegate came in the later years, but generally this did not happen. When Mr Veitch asked whether he wanted to be an employee, Mr Kirchhofer said he did not know what the terms of the package would be and he did not hear from the applicant about a package. When asked whether the $40 hourly rate he received from the applicant was intended to reimburse him for any of his assets, equipment or tools, he did not agree that a large part of the rate was intended as reimbursement for these items, but he acknowledged that part of the rate would be as reimbursement for the use of his vehicle.

Evidence of Mr Neil Whittle

20. Mr Cole referred Mr Whittle to the worker/payee "Superannuation Guarantee Status of the worker questionnaire" that he had received from the respondent and had dated 20 April 2013. ^[14] Mr Whittle said he had obtained an ABN when he established a family trust in 2011. During the 2011/2012 year, he had worked on average 40 hours per week with the applicant. He said his hours of work were determined by the applicant. He had not undertaken any work in his own business during this period. When referred to question 3 in the Questionnaire, Mr Whittle said that the applicant set the rates of pay that he received during this period. He reported to the applicant's premises daily and was given work which he attended to until the end of the day. If he needed more work, he would go back to the premises for allocation. Some of the days were longer than eight hours and to get the work done he might have to work for up to fourteen hours per day. Others he would work for less than eight hours per day. He said he would attend meetings at the applicant's premises to discuss work and the priority of tasks. The meetings were held once or twice a year.

21. In relation the question 11, Mr Whittle said that he was supervised in the sense that he reported to work and then provided a work sheet for the work that he had undertaken during the week. He did not refuse work, but he thought he could do so if he was not comfortable doing the work. In relation to time off, he said he didn't seek this, but would let the applicant know if he wasn't going to do the work on a particular day or during a period, such as the Christmas holidays. While working for the applicant, there were times when he was required to work with employees or apprentices. He did not have to supervise the others, but merely work with them. He wore a uniform with the Hall Plumbing logo and did so until the time he left the applicant. However, there were times when a clean uniform was not available, so he wore other work clothing. He was told that he had to wear the Hall Plumbing uniform and he did so. In relation to question 25, he said he received payment on completion of work, but often the payment included an amount for time wasted because materials were not provided or available. In relation to receiving payment from the applicant, he did not receive payments or reimbursements for items, such as a car allowance, or tool allowance, other than for the work he completed. He did not delegate or subcontract his work because the hourly rate was such that he needed to do the work himself rather than allow others to do it. He was not required to rectify work that was found to be deficient. He said he had his own utility, and plumbing tools which he would use for small items. But if bigger work was required he would use the applicant's tools or would hire them on the applicant's trade account. Since leaving the applicant, he has bought or hired bigger tools for use in his business, depending on the type of work that was required.

22. In cross examination by Mr Veitch, Mr Whittle said that he had not received an offer from the applicant for employment on a full time basis. He confirmed this response when Mr Veitch referred to (and read) a letter from Mr Richard Johns from Hall Plumbing dated 17 July 2013. ^[15] The letter suggested that Mr Whittle had been informed by the applicant that if he wished to continue to be engaged as a sub-contractor he would need to sign a contract that would clarify his status. When asked by Mr Veitch whether the applicant had the right to terminate his services, Mr Whittle said that he assumed they could be terminated, with notice. When questioned about the allocation of a number of jobs at once, he said that if government work was involved he would undertake it in priority to other work. In relation to the submission of invoices to the applicant, Mr Whittle said that he did this fortnightly. In addition, he would provide dockets with the hours worked and he expected to be paid at his hourly rate for this. He confirmed that he was not required to guarantee his work. He said his work was always good and a guarantee was not required. In relation to refusing work, he said that he was not prepared to go on to the call-out roster. He was happy to do the work that was allocated to him, but the applicant provided no incentive for him to go on to the call-out roster.

CONSIDERATION

Were any of the Workers an employee of the applicant, pursuant to s 12(1) of the SGAA, in respect of the work they performed for the applicant during the period 1 July 2009 to 30 June 2011?

Analysis of Previous Cases

23. Many Australian courts over the years have been involved in deciding whether individuals in their relationships, regarding work or the provision of services, are engaging in contracts of service or contracts for services. The courts have outlined key indicators of whether an individual worker is an employee or an independent contractor. Those indicators have often been (or included):

•

contractual terms;

•

control;

•

integration or organisation test (does the worker operate on his or her own account or in the business of the payer);

•

results contracts;

•

delegation or sub-contracting;

•

risk; and

•

capital or scale (provision of tools and equipment).

24. The courts have pointed out that no indicator, amongst those outlined above, is determinative in itself. For example, the parties may agree the terms of their contract, but any statement by them about the character of their relationship, or of their contract, has consistently been held not to be decisive of the true legal character of either. Whether a person is an employee or alternatively an independent contractor is to be answered by reference to an objective assessment of the nature of the relationship that person has with the entity that takes the benefit of that person's work.

25. The distinction between an employee and an independent contractor was analysed by Bromberg J in the Federal Court in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3). ^[16] In that case, the learned Judge referred (amongst others) to the decision of the High Court in Hollis v Vabu Pty Ltd, ^[17] which related to the activities of bicycle couriers, and said: ^[18]

"Whether a person is an employee or alternatively an independent contractor is to be answered by reference to an objective assessment of the nature of the relationship that person has with the entity that takes the benefit of that person's work. Either the relationship is between an employee and an employer or the relationship is between an independent contractor and its client...

In that regard, it is well settled that what a court will look to is the real substance of the relationship in question. As early as 1914, Isaacs J in Curtis v Perth and Fremantle Bottle Exchange Co Limited [1914] HCA 21; (1914) 18 CLR 17 at 25 said:

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.

The plurality in Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21, also emphasised that the substance or reality of the relationship needed to be identified. In that respect the plurality stated that the terms agreed between the parties are not of themselves determinative because parties cannot deem their relationship to be something it is not: at [58]. The relationship is to be found not simply from the contractual terms agreed to but by the system operated thereunder and the work practices which establish the 'totality of the relationship' (at [24]). The application of a practical and realistic approach by the majority in Hollis is discernable from the conclusions reached in that case, including that viewed as 'a practical matter' the bicycle couriers were not independent contractors (at [47]); and that it would be "unrealistic" to describe those persons as other than employees (at [57])."

26. Later, in On Call Interpreters, Bromberg J also said: ^[19]

"An analysis of the nature of a legal relationship should commence with a proper identification of the parties to that relationship, their role and function and the nature of the interactions which constitute their relations. The employment relationship classically contains two parties. A worker who provides his or her labour and an entity that receives the benefit of that labour. In an employment relationship, labour (being a combination of time, skill and effort) is traded for remuneration. Like many commercial relationships, there is a provider, a purchaser, an exchange and a contract containing the terms and conditions that regulate that exchange.

The exchange involves a form of hire. In return for payment, the time, skill and effort of the employee (the personal services) are provided to the employer for an agreed time or until the completion of an agreed task.

How then is an employee, a person providing personal services for hire, to be distinguished from an independent contractor, and in particular an independent contractor who provides personal services for hire?

Despite the earlier preoccupation of the law with the degree of control exercised by the putative employer as defining an employment relationship, the modern approach is multi-factorial. As the majority said in Hollis at [24] it is "the totality of the relationship" which is to be considered. A range of indicia may be examined. Some will be more useful than others in some work arrangements but less useful in other work arrangements. Because of the multiplicity and diversity of work arrangements and the ingenuity of those fostering disguised relationships, there is value in a multi-factorial test which recognises that one spotlight will not necessarily adequately illuminate the totality of the relationship."[emphasis mine]

27. Bromberg J then went on to refer to the multi-factorial approach in Hollis and said: ^[20]

"... As Wilson and Dawson J in Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 observed at 35 'the ultimate question' was posed by Windeyer J in Marshall v Whittaker's Building Supply Co Ltd [1963] HCA 26; (1963) 109 CLR 210 at 217, in a passage which the majority in Hollis strongly endorsed at [40]. The majority in Hollis (citing Windeyer J) said, the distinction between an employee and an independent contractor is 'rooted fundamentally' in the fact that when personal services are provided to another business, an independent contractor provides those services whilst working in and for his or her own business, whereas an employee provides personal services whilst working in the employer's business: at [40]. Unless the work is being provided by an independent contractor as a representative of that entrepreneur's own business and not as a manifestation of the business receiving the work, the person providing the work is an employee.

...

Simply expressed, the question of whether a person is an independent contractor in relation to the performance of particular work, may be posed and answered as follows:

Viewed as a "practical matter":

(i)

is the person performing the work an entrepreneur who owns and operates a business; and,

(ii)

in performing the work, is that person working in and for that person's business as a representative of that business and not of the business receiving the work?

If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an employee. [emphasis mine]

..."

28. Probably the most recent decision on employees and independent contractors is that in ACE Insurance Limited v Trifunovski. ^[21] In that case, the Full Federal Court (Lander, Buchanan and Robertson JJ) unanimously upheld a decision to order a company to pay unpaid leave entitlements and penalties after it was found to have wrongfully engaged five former insurance sales agents as independent contractors. (I note that leave to appeal the decision has been refused by the High Court.) The leading judgement was written by Buchanan J and, after providing a useful summary of the case law on the independent contractors/employees distinction, he held that the five agents were employees. In doing so, he made reference to decisions in the following cases that, in my view, are capable of applying in the present matter.

29. In The Commissioner of Taxation of the Commonwealth of Australia v Barrett ^[22] , Stephen J in the High Court considered whether land salesmen, paid by commission on sales, were employees or independent contractors. Stephen J said: ^[23]

"... An important factor on which the courts have fastened in differentiating between servant and independent contractor has been that of control. This distinction was first developed in determining the existence of vicarious liability, to third parties for the acts of those performing work for others, the discrimen being said to be that a master was vicariously liable for the acts of his servant over whom he exercised control in the manner of performance of his work, whereas for an independent contractor, whom he might only direct as to what he should do and not how it should be done, he is not vicariously liable.

...

However it is clear that the fact of control is no more than one of a number of indicia ..."

Having analysed the activities of the land salesmen in some detail, he went on to say: ^[24]

"...I would conclude from the foregoing that, whichever of the acknowledged tests of an employer-employee relationship may be applied, the conclusion must be that such a relationship does exist in the present case."

30. In Stevens v Brodribb Sawmilling Company Pty Ltd ^[25] , the High Court dealt with a case involving a plaintiff engaged to perform work in the defendant's logging operations, along with others also engaged as contractors. Some were "fellers" and some were "sniggers". The plaintiff was a truck driver and was injured by the negligence of a snigger and claimed that the defendant was liable as the employer of the snigger. Mason J said: ^[26]

"... A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. It has been held, however, that 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: Zuijs v Wirth Bros. Pty Ltd.; Federal Commissioner of Taxation v Barrett; Humberstone v Northern Timber Mills.

...

But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question: Queensland Stations Pty Ltd v Federal Commissioner of Taxation; Zuijs' Case; Federal Commissioner of Taxation v Barrett; Marshall v Whittaker's Building Supply Co."

31. As had been the case of Bromberg J in On Call Interpreters (supra), Buchanan J referred to the judgment of the High Court in Hollis (supra). In so referring, he said: ^[27]

"It appears to me to have been in Hollis that a real emphasis was authoritatively placed on the notion of working in the business of another, rather than in the business of the individual. The joint judgment said (at [39]-[40]):

In Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia, Dixon J explained the dichotomy between the relationships of employer and employee, and principal and independent contractor, in a passage which has frequently been referred to in this Court. His Honour explained that, in the case of an independent contractor:

'[t]he work, although done at [the principal's] request and for his benefit, is considered as the independent function of the person who undertakes it, and not as something which the person obtaining the benefit does by his representative standing in his place and, therefore, identified with him for the purpose of liability arising in the course of its performance. The independent contractor carries out his work, not as a representative but as a principal.'

This statement merits close attention. It indicates that employees and independent contractors perform work for the benefit of their employers and principals respectively. Thus, by itself, the circumstance that the business enterprise of a party said to be an employer is benefited by the activities of the person in question cannot be a sufficient indication that this person is an employee. However, Dixon J fixed upon the absence of representation and of identification with the alleged employer as indicative of a relationship of principal and independent contractor. These notions later were expressed positively by Windeyer J in Marshall v Whittaker's Building Supply Co. His Honour 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'.

It seemed to be important to the reasoning that individual bicycle couriers made no great investment in, or commitment to, a 'business' of their own.

...

The restriction of analysis and conclusions to the circumstances of bicycle couriers is, in my view, a potentially important one. It seems to suggest that questions of scale may be important, and even decisive. In similar vein, dealing with the facts of the case, the joint judgment said (at [47]-[48]):

In classifying the bicycle couriers as independent contractors, the Court of Appeal fell into error in making too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of running them and supplied many of their own accessories. Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might, for example, be appropriate where the investment in capital equipment was more significant, and greater skill and training were required to operate it. ..."

32. Buchanan J then observed that his analysis of the case law in the employee/independent contractor area failed to yield a single or unifying test to determine whether an employment relationship existed. However, he importantly observed: ^[28]

"Of the indicia of employment it is clear that a right of control remains an important consideration in many cases. It may be found in a right of organisation and allocation of work, as much as in some theoretical right to say how actual work should be done."

The Present Case

33. I now turn to examine the circumstances in the present case, where the applicant contends that the Workers were independent contractors and not employees. Mr Cole submitted that the applicant's contention was based on the following:

(a)

contractual documentation;

(b)

the Workers provided their own vehicle, and their own tools and equipment;

(c)

the applicant exercised at best limited control over the manner of the work done by the Workers;

(d)

the Workers had the right to delegate;

(e)

the Workers set up their own businesses;

(f)

the Workers did some work for others;

(g)

the Workers obtained tax benefits from having their own business;

(h)

the Workers had their own insurance;

(i)

the Workers refused some work;

(j)

the Workers bore the costs of rectifying defective work;

(k)

the Workers were not paid for sick, holiday or long service leave; and

(l)

the Workers were paid an hourly rate in excess of that paid to employees of the applicant who were subject to an award/EBA.

34. In relation to the contractual documentation, the Workers had the same contract with the same terms. Although the Workers were different contractors, they were largely treated the same under their contracts with the applicant. This type of arrangement is expected for employees, but is extraordinary for independent contractors and one would expect that at least some of their terms and conditions would be different.

35. The Workers would use their own vehicles, but where larger work was required they would use the applicant's vehicles. They would also use their own tools and equipment, but where specialised work was required the Workers would use the applicant's tools and equipment. Plumbing supplies for work they carried out were purchased by the Workers on credit cards provided by the applicant.

36. Even though control by the applicant of the work done was limited, this is not surprising, given that each of the Workers was a qualified and experienced plumber (see Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561). In any event, the fact of control is no more than one of a number of indicia: see Barrett (supra). The right to delegate was only with the consent of the applicant, and in any event was illusory. None of the Workers delegated or subcontracted. They did the work themselves. Although the Workers set up their own businesses, they did little work for others in those businesses. They worked almost exclusively for the applicant. They did not present as independent contractors pursuing their own businesses independently from the applicant's business. As Buchanan J inferred in his Ace Insurance decision, the independent contractor carries out his work, not as a representative but as a principal. ^[29]

37. Generally, the workers did not refuse work allocated to them by the applicant. They wanted the work themselves and, unless there were particular reasons to do so, they did the work allocated to them. They did not rectify any of their defective work at their own cost. The hourly rate charged by the Workers for the work they did for customers was largely set by the applicant. The hourly rate was less than would ordinarily be charged by other plumbing contractors, although it was greater than a regular employee rate. On occasions, the hourly rate took into account the use of the Workers' "plant", but they were not separately paid for travel time, nor leave. However, casual employees would also not be paid for leave, but would be paid a higher rate than permanent employees.

38. A number of the Workers worked largely 40 hour weeks. The rest worked at least 25 hours per week. Such hours on a regular basis are in keeping with employees, not independent contractors. Each of the Workers had an ABN. With the applicant, they did not quote for jobs, they simply did the jobs at an hourly rate for their labour. They did not invoice on their own business letterheads, and invoicing and payment of the invoices was not results based.

39. The Workers wore clothing with the Hall Plumbing brand/logo on it. In doing so, they presented themselves as part of the applicant's business. They sometimes worked with the applicant's apprentices and other employees. The scale of any business conducted by the Workers for their own customers must necessarily have been very small. The hours they worked for the applicant were too extensive to allow otherwise.

40. In the case of time off, permission was sought from the applicant, at least by some of the Workers. A supervisor of the applicant monitored the attendance of the Workers, but only to see that the work was being done. Meetings by the Workers with the applicant at its premises were only rare and generally dealt with the status of the work being done.

41. I have considered the "totality of the relationship" as the High Court did in Hollis (supra) and as Bromberg J did in On Call Interpreters (supra). On the evidence before me and having regard to the above factors, the conclusion to be drawn is (and I so find) that the Workers were employees and not independent contractors. Mr Cole submitted (which submission I accept) that effectively some Workers were full time casuals, were paid an hourly rate and accordingly were not eligible for holiday or sick leave. In my view, the Workers were employees within the meaning and tests of the common law. The applicant may have thought it had established a principal/contractor relationship, but if the facts do not support that characterisation of the real working relationship, then it cannot prevail.

Did any of the Workers work under a contract with the applicant, that was wholly or principally for their labour, for the purposes of s 12(3) of the SGAA for the period 1 July 2009 to 30 June 2011?

42. The Workers charged their clients at the rate of approximately $40 per hour. As I said above, this hourly rate charged by the Workers for the work they did was largely set by the applicant. It sometimes took into account the Workers' motor vehicles and some tools and equipment. However, contrary to the assertion being made by the applicant, the evidence supports a finding, which I make, that the Workers were paid principally for their labour. In the circumstances, they come within the expanded definition of "employee" in s 12(3) of the SGAA.

Were the superannuation guarantee default assessments, issued to the applicant in respect of the period 1 July 2009 to 30 June 2011, excessive?

43. In proceedings before the Tribunal, neither party carries the burden of proof. However, under s 14ZZK(b)(i) of the TAA, when the Tribunal reviews an objection decision, the taxpayer applying for review has the burden of proving, where an assessment is involved, that the assessment is excessive. What this means is the subject of the decision of the High Court in Federal Commissioner of Taxation v Dalco. ^[30] There, the Court was considering a predecessor of s 14ZZK, being s 190(b), of the Income Tax Assessment Act 1936. Brennan J said: ^[31]

"Where one or other of the situations described in pars (a), (b) and (c) of s. 167 exists, the Commissioner or his delegate is empowered to make an assessment of an amount which, in the Commissioner's judgment, is the amount on which tax ought to be levied: George's Case (1952) 86 CLR at p 204. It is that amount which, for the purpose of s. 166, becomes the taxpayer's taxable income. That amount may not be in truth the taxpayer's taxable income for a particular income year and it may not be so regarded by the Commissioner (as in Trautwein v. Federal Commissioner of Taxation (1936) 56 CLR 63) but, for the purpose of s. 166, that amount is the taxpayer's taxable income for the income year to which the assessment relates unless it is shown on appeal from, or on review of, the assessment that the amount of the assessment is wrong: Henderson v. Federal Commissioner of Taxation (1970) 119 CLR 612 at p 648. ..."

44. Later, Brennan J said: ^[32]

" ...Although the grounds of objection limit the grounds of appeal, the ultimate question for the court hearing the appeal is not whether the grounds have been made out but whether the amount assessed as taxable income is wrong. The burden which rests on a taxpayer is to prove that the assessment is excessive and that burden is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment."

45. Rather, the burden on the applicant is to show that the amount assessed is actually excessive. Even if some error in the method of assessment can be pointed to, that of itself does not show that the assessment is excessive (per Brennan J in Dalco ^[33] ). As to what is required of this burden of proof in practice, Brennan J quoted Kitto J in George v Federal Commissioner of Taxation ^[34] where he said: ^[35]

"[Section] 190(b) places a burden of proving that the assessment is excessive upon the appellant; and in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment."

This places an onerous burden on the taxpayer. Brennan J went on to say: ^[36]

"... Absent such a confining of the issues for determination, the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment, though the taxpayer is limited to the grounds of his objection. In Gauci v. Federal Commissioner of Taxation (1975) 135 CLR 81, Mason J. said (at p 89):

'The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s.190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail.'

..."

46. It has been held that, on occasion, the respondent should show some particulars of the basis on which he proposes to support an assessment (see Dalco ^[37] ). It is noted that, in the present case, the respondent has put before the Tribunal its Reasons for Decision, the audit information and the Superannuation Guarantee: Status of the worker questionnaires, so that there is an understanding of how the relevant assessments were made. This prevents the Tribunal from finding for the applicant and again, as was held by Brennan J in Dalco: ^[38]

"But where, as here, the taxpayer has not proved that his actual taxable income is less than the amount assessed, the Court does not know all the material facts and it cannot find that the amount assessed is wrong."

47. The Tribunal is not satisfied that the applicant has discharged the onus of proving that the superannuation default assessments for the period 1 July 2009 to 30 June 2011 are excessive.

DECISION

48. For the reasons outlined above, the objection decisions under review are affirmed.