Decision impact statement

Commissioner of Taxation v Newton; Natalie Newton (trading as Combined Care for the Elderly) and Commissioner of Taxation

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Court Citation(s):
Federal Court
[2010] FCA 1440
2010 ATC 20-234
(2010) 81 ATR 693
(2010) 215 FCR 432
Administrative Appeals Tribunal
[2011] AATA 897
2011 ATC 10-226
85 ATR 959

Venue: Federal Court of Australia
Venue Reference No: 2008/3923
Judge Name: Senior Member S E Frost
Judgment date: 16 December 2011
Appeals on foot: No.

Impacted Advice

Relevant Rulings/Determinations:

Subject References:
Superannuation
superannuation guarantee charge
whether workers 'employees' under Superannuation Guarantee (Administration) Act 1992
decision under review varied
remittal from Federal Court

Précis

Outlines the ATO's response to this case which concerns whether the workers engaged by the Applicant were employees for the purposes of the Superannuation Guarantee (Administration) Act 1992.

Decision Outcome

Upon the matter being remitted to the AAT from the Federal Court, the objection decision was affirmed, subject to some variations which the Commissioner agreed to prior to the hearing.

Brief summary of facts

1. The Applicant, from July to December 2000, operated a business that principally provided community support services to the elderly. The services provided to them included amongst other things cooking, cleaning, shopping, showering, dressing and general household duties. The services were not physically or personally provided by the Applicant but by workers on whom the Applicant could call when a client placed a request for assistance.

2. The services were provided at the client's premises, except when the worker went shopping for the client. The equipment and materials required to perform the tasks (such as cleaning materials, brooms, vacuum cleaners, cooking equipment) were generally provided by the client rather than the worker.

3. The Commissioner made an assessment of Superannuation Guarantee Charge ("SGC") for the year ended 30 June 2001 on the basis that the Applicant had failed to make superannuation contributions on behalf of 21 of the Applicant's workers.

4. The Applicant lodged an objection against the SGC assessment. The Commissioner disallowed the objection in full. The objection decision was referred to the Administrative Appeals Tribunal for review.

5. At the hearing on 14 August 2009 and 24 February 2010, the Applicant argued that the workers were not "employees" of the Applicant (within the common law meaning under subsection 12(1) or the extended definition provided by subsection 12(3) of the Act).

6. After the hearing, Senior Member Frost decided that there was merit in the Applicant's original objection which pertained to whether the employees were paid to do work that was entirely "domestic" within a "domestic home situation" and as such were excluded from the definition of "employees" for the purposes of the Act where they have worked for less than 30 hours per week.

7. The Applicant and the Respondent were asked by Senior Member Frost to provide written submissions in respect of sections 11(2) and 12(11) of the Act. The Tribunal decided in favour of the Applicant: [2010] AATA 475.

8. The Commissioner appealed the decision of the AAT and the Federal Court of Australia constituted by Emmett J held that the AAT had committed an error of law in its construction of s 12(11): [2010] FCA 1440.

9. In particular, Emmett J preferred the Commissioner's construction that the exemption in s 12(11) was intended to be for the benefit of the householder for whom the relevant work was done. Where the work was done pursuant to a direct arrangement between the householder and the worker, s 12(11) would be attracted. It does not apply to workers engaged by labour hire entities to provide services to clients.

10. The Applicant appealed the decision to the Full Federal Court but the appeal was discontinued.

11. The matter was remitted to the AAT for further consideration and determination in accordance with the law.

Issues decided by the court or tribunal

1. The assessments are not excessive, subject to some agreed variations.

2. The workers were employees pursuant to subsection 12(3) and probably also pursuant to subsection 12(1) of the SGAA based on the following:

The materials and tools were provided by the client.
The workers were not free to delegate work to others because if the circumstance ever arose that an appointed worker became unavailable to provide agreed services, then the allocation of the work to an alternative worker was subject to the Applicant's approval.
Although it was argued that the workers were free to carry out work with the permission of the clients, this means nothing more than the actual detailed work to be undertaken in a given assignment would be determined by the client. It has nothing to say about the relationship between the Applicant (who allocated the assignment) and the worker.
The workers provided services under the Labour Hire Agreement and the signing of a Labour Hire Agreement pointed strongly in favour of a finding that the workers are employees - if not under s12(1) of the SGAA then certainly under s12(3).
There is no evidence that the workers were obliged to produce a result; the strong indications are that what the Applicant required of the workers was that they devote to the Applicant their labour during the period of any given assignment. There was never any requirement that they produce any 'result' (other than, perhaps, and only inferentially, a satisfied client).
Despite the contractual description being that of an independent contractor, that of itself establishes nothing.

ATO view of Decision

At [2010] FCA 1440 Emmett J upheld the Commissioner's view that the exemption in s 12(11) regarding work of a domestic or private nature was intended to be for the benefit of the householder for whom the relevant work was done and does not apply where the workers are paid by a labour hire entity.

Upon the matter being remitted to the AAT, the decision that the workers were employees under the SGAA, was based on the facts of the case and the findings made by the Tribunal. The final AAT decision is consistent with the Commissioner's submissions in the case. This case is the first AAT decision to affirm the Commissioner's view that certain labour hire arrangements whereby labour hire firms supply or provide the services and labour of workers to client organisations come within the scope of subsection 12(3).

The decisions are consistent with the ATO view as expressed in SGR 2005/1: Superannuation guarantee - who is an employee? and SGR 2005/2: Superannuation guarantee - work arranged by intermediaries.

Administrative Treatment

Implications for ATO precedential documents (Public Rulings & Determinations etc)

None

Implications for Law Administration Practice Statements

None.

Legislative References:
Superannuation Guarantee (Administration) Act 1992
12

Taxation Administration Act 1953
14ZZK

Case References:
Care Provider and Commissioner of Taxation
[2010] AATA 475
79 ATR 528

Natalie Newton (trading as Combined Care for the Elderly) and Commissioner of Taxation
[2010] AATA 725
80 ATR 739

Neale v Atlas Products (Vic) Pty Ltd
(1954) 94 CLR 419
[1955] HCA 18

World Book (Australia) Pty Ltd v Federal Commissioner of Taxation
(1992) 27 NSWLR 377
23 ATR 412
92 ATC 4327

Commissioner of Taxation v Newton; Natalie Newton (trading as Combined Care for the Elderly) and Commissioner of Taxation history
  Date: Version:
  8 March 2012 Response
You are here 17 June 2012 Resolved

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