Edited version of your written advice

Authorisation Number: 1012710546795

Advice

Subject: Superannuation Guarantee

Question 1

Are the Workers considered to be common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

Advice:

No

Refer to 'Reasons for decision'

Question 2

Are the Workers employees of the Principal by virtue of subsection 12(3) of the SGAA?

Advice:

No. Refer to 'Reasons for decision'

This advice applies for the following period

After 1 July 2014

We considered these to be the relevant facts

The Principal contracts with Workers to provide their services independently to the Principal's clients.

Where a client of the Principal utilises the services of the Worker the client of the Principal becomes a client of the Worker for the particular service only and the client pays the Worker directly for the services.

The Principal charges the Worker a weekly fee for the use of the facilities for the Worker's clients. The amount of the fee is dependent on the number of services the Workers conduct for their clients.

The Principal lodged a request for a binding advice to determine whether the services of the Workers are considered to be performed as employees or contractors and the Principal's superannuation guarantee (SG) obligations in respect of the Workers.

We received a completed Superannuation Guarantee: status of the worker questionnaire Principal/Payer (the Questionnaire) from the Principal and two invoices issued by a Worker.

During a telephone conversation between the Principal and a tax officer the following summary of information was provided:

• No Workers were engaged under the written contract prior to 1 July 2014.

• A clause was going to be inserted into the Contract with regards to uniforms that would provide for the Workers to use their own business uniforms and if they do not have uniforms they would be required to wear the uniforms of the Principal.

• The Contracts were being extended by way of an addendum, executed by both parties, rather than executing a whole new contract.

• That if the Workers were unable to provide their services they are responsible for finding someone else to do the work and renumerating them for the work.

• That the Principal provide the services for a Worker if the Worker has not been able to secure another person and in this case the Principal would not remunerate the Worker. The Principal does this as there is a requirement to provide some services at specific times and days otherwise the reputation of the Principals business may suffer.

• That the ultimate aim of the Principal is to have the Workers expand their personal businesses to a point where they may wish to franchise from the Principal and set themselves up as owner operators.

• In summary, your responses to the Questionnaire in relation to a worker provided the following information:

• Terms and the circumstances of the formation of the contract

• The Principal engages the Workers mainly by way of tender.

• The Principal has a written agreement with the Workers that formalises the relationship between the parties.

• The Workers are able to renegotiate their rate of pay and terms and conditions of the Contract as they become more skilled through their own training and experience.

• The Principal has the right to dismiss or terminate the services of the Worker at any time and vice versa with 14 days notice or immediately if either party is in breach of any term or condition contained in the Contract.

• There are a number of Workers engaged under the Contract and none of those Workers are engaged as employees.

Control Test - the lawful right to command

• The Workers hours of work are determined in consultation with the Principal and other Workers to devise a functional roster that takes into consideration the Worker's clients and the Principal's requirements.

• If a Worker is rostered to provide a service and they swap that with another Worker; the Worker that should have provided the service is remunerated by the Principal and they must then remunerate the Worker that did the work for them.

• The Workers are required to attend meetings only to discuss the renewal of contracts and if the terms and conditions are being met by both parties.

• The Workers were not entitled to paid breaks.

• The Worker is able to schedule their own services at a time that suits them. The Worker can employ others to provide the services as they see fit.

• There was no direction as to how the services were to be provided by the Worker. The Worker has the option of where to provide the services and how they do it.

• The Worker was not supervised.

• The Worker had the ability to refuse to do a particular job or task.

• If the Worker requires time off they are required to provide the Principal with enough notice to enable them to find a replacement Worker for the period if required. The Worker may also employ another person to undertake their role whilst they are taking time off and the Worker would still invoice the Principal for the work undertaken and pay the other person.

Integration Test - did the worker/payee work for themselves or in the business of the principal/payer?

• The Workers were able to provide their services to other individuals and/or businesses and this was encouraged by the Principal.

• The Workers worked alone.

• The Workers did not train, supervise or assess the work of other Workers or employees of the Principal.

• The Worker was required to wear a uniform. Initially this is/was temporary until the Workers are able to print their own business uniforms.

• The Workers promoted their own business and services using flyers and other promotional ideas that they wished to build their profile with.

• The Principal did not advertise their business on any of the assets, tools or equipment owned and used by the Workers.

Results Test - was the worker/payee paid to achieve a specified result

• The Workers submitted invoices to the Principal. Invoices from a Worker were supplied with the Questionnaire show that the Principal paid a set amount for each service provided by the Worker and deducted a set fee for rent of premises.

• The Worker sets the fees for the work done.

• The Workers payment is dependent on the completion of the service. No services have been cancelled but if they were the Worker would still receive the payment for the service.

• The Principal asked clients if they enjoyed the services, or briefly watches the Workers to ensure that Worker is providing the agreed services.

• The Workers are paid into their nominated bank accounts.

• No amounts for income tax, superannuation or insurances are deducted from the Workers remuneration. The Principal currently deducts an amount for rental of premises and this amount is dependent on the number of clients the Worker has and will increase as the Workers get more of their own clients.

Delegation/Substitution Test - was the worker/payee expected to complete the work personally?

• The Principal did not provide instructions requiring the Worker to complete the work personally. The Worker has the ability to contract them out to another person of their choosing or employ someone to undertake the services. The Principal requires the Worker to ensure their replacement is able to provide the service to the same quality and standard of the Worker.

• If the Worker was sick or took holidays they could either assign their services to another worker of their choice or request the Principal to do this on their behalf.

• The Principal does not have employees and the Worker could only organise for their work or tasks to be completed by another person engaged by them, with or without the approval of the Principal.

Risk test- did the worker/payee bear any commercial risk?

• The Principal paid all public liability insurances and the worker had private accident insurance. Neither party had workers compensation insurance. The Worker is liable for any injuries whilst executing their contracted services and are responsible for their own insurance cover.

• The Worker has not made any insurance claims under the policies.

• If the Worker or their client made a mistake or broke something whilst doing their work they would have to correct the work in their own time, pay for the materials used to correct the mistake and pay for their breakage.

Provision of tools and equipment and payment of business expenses

• The Principal supplied the Worker with equipment to provide their services and the Worker is able to provide any equipment they wish to promote themselves.

• The Principal does not reimburse the Worker for any of the Worker's equipment that they supply and use.

• The Workers and the Principal will discuss ideas as a team through general conversations. It is us to the individual how they implement any ideas.

• The Worker was not required to wear any protective gear to complete the work.

Other Information

The Principal considers the Workers to be contractors and it is the Principal's intention to develop self-made business owner operators within the Principal's company infrastructure to help the workers gain clients of their own. If the Worker obtains their own clients the Worker is remunerated directly by that client and no money is received by the Principal. The Principal encourages the Workers to expand their own businesses so they have an opportunity to either employ their own staff or sub contract to another person any overflow. The Worker is able to work as often or little as they wish and can employ people to fulfil their contractual obligations with the Principal. The Contract value is always negotiable between the Worker and the Principal.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 subsection 12(1)

Superannuation Guarantee Administration Act 1992 subsection 12(3)

Reasons for decision

Summary

The facts and evidence suggest that the workers are not your employees for the purposes of the SGAA under either the common law definition or the expanded definition as set out in subsection 12(3) of the SGAA. You therefore do not have an obligation to pay superannuation contributions on behalf of the workers.

Detailed reasoning

The SGAA states that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the superannuation guarantee charge (SGC).

While the term 'employee' which is defined in section 12 of the SGAA, includes common law employees, it also extends to include workers who are engaged under a contract wholly or principally for their labour. This employment relationship is often referred to as a 'contract of service'. This relationship is distinguished in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? from a 'contract for service' which is typically a contractor and principal type of relationship and does not attract an SGC liability.

Therefore, it is necessary to consider not only whether there is a common law relationship of employer/employee between the parties, but also, if the common law test is not met or is inconclusive, whether the expanded definition of 'employee' in subsection 12(3) of the SGAA applies. If a worker is not an employee under subsections 12(1) or 12(3) of the SGAA, their status is described as an independent contractor and there is no SG obligation.

The task of defining the characteristics of the contract of service - the employment relationship - has been the subject of much judicial consideration. As a result, some general tests have been developed by the courts to assist in the determination of the nature of the relationship. However, defining the contractual relationship between the employer and employee can be difficult and will depend on the facts of each case.

Accordingly it is necessary to determine the true nature of the whole relationship between the principal and the workers, as to whether there was a common law employer and employee relationship, or whether the workers meet the expanded definition of employee under subsection 12(3) of the SGAA.

Question 1

Are the workers common law employees as defined in subsection 12(1) of the SGAA?

Common law employee

The relationship between an employer and employee is a contractual one. It is often referred to as a contract of service. Such a relationship is typically contrasted with the independent contractor relationship that is referred to as a contract for services. An independent contractor typically contracts to produce the contracted result in return for an agreed payment, whereas an employee contracts to provide their labour (typically to enable the employer to achieve a result).

The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts. As a result, a substantial and well-established body of case law has developed on the issue. Consideration should be given to the various indicators identified in judicial decisions. No list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor.

In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors we have considered are discussed below.

1. Terms of engagement

The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. For this test, we must determine the nature of the contract between the parties. We will consider whether the contract is written or verbal and whether the terms and conditions are express or implied. These factors are important in characterising the relationship between the parties.

It might be argued that the parties' intention in forming a contract is not subjective, but an objective one; that is, the task is not to discover the intention of the parties involved but to decide what each could reasonably conclude from the actions of the other. In the observation made by Isaacs J in Curtis v. The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17:

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.

Therefore, simply defining someone as a contractor does not necessarily lead to the conclusion that the individual is providing services as part of an operation of their own independent business. In Hollis v. Vabu Pty Ltd (2001) 207 CLR 21 (Hollis v. Vabu Pty Ltd) it was noted that although no payments of annual leave or sick leave were given, and no superannuation deductions were made by Vabu in respect of the bicycle couriers, the relationship between the parties was found not merely from these contractual terms. The system which was operated under and the work practices imposed by Vabu went to establishing 'the totality of the relationship' between the parties and it is this which is to be considered.

Application of the common law to your case:

You advised that you had engaged the Workers by way of a tender process.

The Workers commenced under the written Contract after working under an informal verbal arrangement to 'test the waters' and see if the working arrangement was something that both parties were amiable to. You advised that you have a number of Workers engaged under the Contract and none of those Workers were paid as employees.

Under the Contract and, as advised by you, the Workers are able to negotiate their rate of pay as they become more skilled through undertaking courses and relevant experience.

Either party can terminate the Contract at any time with the provision of 14 days written notice or immediately if a condition or term of the Contract is not met.

There are no provisions in the Contract for the Principal to provide annual leave, sick leave, long service leave and/or workers compensation.

Under the Contract, the Workers have a high degree of flexibility on how they provide their services and they have the discretion to subcontract to another person.

Overall, we are satisfied that the terms of engagement test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors.

2. Control

The extent to which the employer has the right to control the manner in which the work is performed is the classic test for determining the nature of a working relationship. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, 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.

The mere fact that a contract may specify in detail how the contracted services are to be performed does not necessarily imply an employment relationship. A high degree of direction and control is common in contracts for services because the payer has the right to specify in the contract how the services are to be performed. Similarly, the right to supervise how the work is to be performed does not constitute a contract of service where the essence is one of independent contractor.

Paragraphs 36 and 37 of Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? provides that while control is important, it is not the sole indicator of whether or not a relationship is one of employment. The approach of the Courts has been to regard it as one of a number of indicia which must be considered in determination of that question.

Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb ((1986) 160 CLR 16 at 36) (Stevens v. Brodribb), where they state:

In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee.

Application of the common law to your case:

The following information is relevant to your working relationship with the Workers and the extent to which you had the right to control the manner in which the work is performed.

You provided details about the degree of control exercised over the Worker. You advised that all Workers and yourself devised a functional roster that worked around each Worker's clients, the only meetings that were held with the Worker were in relation to Contract renewals, the Workers were not entitled to paid breaks, you did not direct where the services were to be provided, you did not supervise the Workers, the Workers could refuse a particular job, the Worker was required to provide notice if they wanted to take time off that was sufficient for you to find a replacement or the Worker could subcontract whilst they were taking time off and that you did schedule some services that Workers were required to run or subcontract but did not schedule the services between the Worker and their client.

Under the Contract the Worker is able to schedule their clients at a time that suits the Worker, within the opening hours. The Contract requires that the Worker conducts their work in a proper and professional manner and in accordance with the Principal's Code of Conduct but does not go further to specify how the work is to be performed.

The Contract does not specify the hours to be worked, where the work is to be performed or how the work is to be done.

The Workers deal directly with their own clients in relation to some services and the Principal does not direct or control the provision of these services in any way.

Overall, we are satisfied that the control test in isolation is more in favour of the notion that the relationship between you and the workers was one of principal and independent contractors.

3. Integration

Another significant factor in establishing the nature of a contractual relationship at common law is to determine whether the worker's services are an integral part of the employer's business (under a contract of service as an employee) or providing services as an individual carrying on his or her own business (under a contract for services as an independent contractor). This is known as the 'integration' test.

If the worker's services are an integral and essential part of the employer's business that engages them, they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business, they are an independent contractor.

It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer. The worker needs to be running their own business or enterprise and have independence in the conduct of their operations.

In Montreal v. Montreal Locomotive Works [1947] 1 DLR 161, Lord Wright said:

...it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior.

Similarly, in Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans [1952] 1 TLR 101 Denning LJ said:

...under a contract of service, a man is employed as part of the business, and his work is done as a integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it.

The professional skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills.

This was highlighted in Hollis v. Vabu Pty Ltd at paragraph 48, where the court said in relation to bicycle couriers hired by Vabu:

The couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any 'goodwill' as a bicycle courier…

Consideration may also be given to whether the worker could be expected to generate goodwill in their own right. If the benefits from the creation of goodwill flow to the worker then this would indicate that they are an independent contractor. Alternatively, if goodwill flows to the principal, this suggests an employer/employee relationship.

It is therefore necessary to consider whether the worker is providing services as part of the principal's business (under a contract of service as an employee) or providing services as part of their own business (under a contract for services as an independent contractor).

Application of the common law to your case:

Under the Contract the Workers were required to have their own Australian Business Number (ABN) and relevant insurances to utilise the premises of the Principal.

You provided details about whether the Workers services are an integral part of your business. You advised that the Workers were able to provide their services to other individuals and businesses, the Worker worked alone, the Worker did not train or supervise other people associated with your business, the Worker was required to wear a uniform and this could be their own business uniform, the Workers promoted their own businesses through flyers and other methods, you did not advertise your business on any of the Workers tools or equipment and the Workers advertised themselves on promotional products issued by your company.

The Workers were contracted to you to provide services. The Workers also provide services directly their own clients. The Workers invoiced their client directly and they paid the Worker directly. The Workers pay you a set amount per week for the use of the premises to run their business depending on the number of the Workers clients. The Worker's clients pays the Worker varying amounts per hour depending on the agreement between the Worker and their client and you charge the Worker for hire of the premises.

Under the Contract the Worker is required to enter into an agreement with their clients which includes a clause providing that the Worker is providing their service in their capacity as a business/company that is not affiliated with the Principal and a clause that releases the Principal of any liability for any injury, damages or loss suffered as a result of any acts or omissions by the Worker in their providing their services or other use of the premises.

Overall, we are satisfied that the integration test in isolation is more in favour of the notion that the relationship between you and the workers was one of principal and independent contractors.

4. 'Results' test

Under a results based contract, payment is often made for a negotiated contract price, as opposed to an hourly rate. The meaning of the phrase 'producing a result' means the performance of a service by one party for another where the first mentioned party 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 do work.

Satisfactory completion of the specified services is the result for which the parties have bargained. That is, a payment becomes payable when, and only when, the contractual conditions have been fulfilled.

Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is one for services. In World Book (Australia) Pty Ltd v. FC of T 92 ATC 4327 (World Book (Australia) Pty Ltd v. FC of T) Sheller JA said:

Undertaking the production of a given result has been considered to be a mark, if not the mark, of an independent contractor.

While the notion of 'payment for a result' is expected in a contract for services, it is not necessarily inconsistent with a contract of service. For example, the Full Court of the Supreme Court of South Australia in the decision of Commissioner of State Taxation v. Roy Morgan Research Centre Pty Ltd (2004) SASC 288 (Commissioner of State Taxation v. Roy Morgan Research Centre Pty Ltd), found that interviewers who were only paid on the completion of each assignment not on an hourly basis, were employees and not independent contractors. It was found that the workers were paid for their time spent and labour, and not to produce a result.

Having regard to the true essence of the contract, the manner in which payment is structured will not of itself exclude genuine result based contracts. For example, there are results based contracts where the contract price is based on an estimate of the time and labour cost that is necessary to complete the task, or may even be calculated on that basis, subject to reasonable completion times. Generally, where a worker submits quotes or issues invoices for each job to the principal, this would be consistent with operating their own business. Nonetheless, the issuing of invoices is not necessarily determinative of the nature of the relationship.

Accordingly, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties.

Application of the common law to your case:

You provided details about whether the Workers services were for a result. You advised that the Workers submitted invoices to you for payment, the Worker set their own rates and fees and this has not changed but will as they become more qualified/experienced, payment to the Worker was dependant on completion of a job, you did briefly observe your Workers and checked with your clients to ensure that the agreed service is being provided, the Workers were paid directly into their bank accounts, no payments were made for leave, allowance or expenses incurred by the Worker, no deductions were made from the payment to the Workers for superannuation, income tax or insurances, the Workers rented space at your premises.

Overall, we are satisfied that the results test in isolation is more in favour of the notion that the relationship between you and the workers was one of principal and independent contractors.

5. Delegation

The power to delegate or subcontract (in the sense of the capacity to engage others to do the work) is a significant factor in deciding whether a worker is an employee or independent contractor. If a person is contractually required to personally perform the work, this is an indication that the person is an employee.

If the contract does not expressly require the worker to personally perform the services, an independent contractor has the capacity to delegate or subcontract all (or some) of the work to others. Where the worker delegates, they are responsible for remunerating that worker.

In the case of Neale (DFC of T) v. Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 425; 6 AITR 201 at 202, the High Court interpreted the words 'a contract which is wholly or substantially for the labour of the person to whom the payments are made' to decide that if a contract leaves a person completely free, if he or she chooses, to engage others to perform the work on his or her behalf means that the payments are not payments under a contract for labour. That is so even if the contractor actually does perform the work personally and had no intention of doing otherwise.

If the contract leaves the contractor free to do the work himself or employ other persons to carry it out the contractual remuneration when paid is not a payment made wholly or at all for the labour of the person to whom the payments are made. It is a payment made under a contract whereby the contractor has undertaken to produce a result...

When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker; rather the employee has merely substituted or shared the workload.

However, a clause in the contract may permit the worker to delegate the task to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site or who may not be suitably qualified.

In the case of Bowerman v. Sinclair Halvorsen Pty Ltd [1999] NSWIRComm 21, Bishop J said:

The fact that any substitute driver had to be approved by the company does not give the respondent [the principal] control over that delegation… the company surely had the right to be confident that any substitute driver was competent to do the job and maintain the "integrity" of the company as Mr Coomb put it.

Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). A person who has a right to delegate work (whether or not that right is exercised in practice) does not work under a contract wholly or principally for their labour. Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider.

Application of the common law to your case:

You provided details about whether the Workers were able to delegate their work. You advised that the Workers was not required to complete the work personally, the Worker could subcontract or employ someone else to undertake the work as long as they had the relevant experience to deliver the quality that the Worker would deliver, if the Worker was sick or on leave that they would either arrange for someone else to undertake the work or request you to do this and the Worker could engage another person to do the work with or without your approval.

The Contract provides the Workers with the right to employ their own staff/contractors to complete the services requested by the Principal.

Overall, we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between you and the workers was one of principal and independent contractor.

6. Risk

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

The higher the degree to which a worker is exposed to the risk of commercial loss (and the chance of commercial profit), the more they are likely to be regarded as being independent. Typically, a worker who derives piece rate payments and sustains large outgoings would be so exposed. The higher the proportion of the gross income of the worker which is required to be expended in deriving that income, and the more substantial the assets which the worker brings to the tasks, the more likely that the contract is for service, or a contract with an independent contractor.

As stated by McKenna J in Ready Mixed Concrete (South East) Limited v. Minister Pensions and National Insurance [1968] 2 QB 497 at 526:

…the owner of assets, the chance of profit and risk of loss in the business of carriage are his and not the company's.

Another consideration of risk is the liability for the cost of rectifying faulty work. That is, the key underlying consideration is whether the individual is exposed to commercial risk in terms of a liability to cover the cost of rectifying defective work. This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business.

Carrying their own insurance and indemnity policies is an indicator that a worker is engaged as an independent contractor.

Application of the common law to your case:

You provided details about whether the Workers bore any commercial or personal risk. You advised that the Workers were responsible for obtaining private accident insurance and that you had public liability insurance, that the Workers had not made a claim against any insurance policies held by you, the Worker was required to provide their services for the period of time of the Contract, the Worker had to correct any mistakes in their own time and pay for any materials required to do this as well as pay for any breakages.

Under the Contract the Worker is required to enter into an agreement with their own clients which includes a clause providing that the Worker is providing their service in their capacity as a business/company that is not affiliated with the Principal and a clause that releases the Principal of any liability for any injury, damages or loss suffered as a result of any acts or omissions by the Worker in providing their services or other use of the premises.

Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors.

7. Capital - Provision of tools and equipment and payment of business expenses.

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 his work by the employer. Furthermore, the employer is often also responsible for the business expenses incurred by the worker, since the worker has been integrated into the employer's business.

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

In Stevens v. Brodribb at 36-37, the High Court observed that working on one's own account (as an independent contractor) often involves:

The provision of him by his own place of work or of his equipment, the creation of him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion…

Application of the common law to your case:

You provided details about whether the Workers provided any tools and equipment or paid any business expenses. You advised that you provided the equipment and premises and the Workers were able to provide any additional equipment or tools they desired, you did not reimburse the Worker for any of their tools and equipment or associated expenses, you supplied the materials for the job because you own the premises and all plant and equipment and that the Worker was not required to wear any protective work gear.

Overall, we are satisfied that the capital test in isolation is more in favour of the notion that the relationship between you and the workers was inconclusive.

Our conclusion regarding the common law definition of employee

With respect to the relationship between you and the worker, the facts and evidence provided points to the conclusion that the worker was not a common law employee of the principal.

As the facts and evidence indicate that the workers were not your employees under common law, we are required to consider the expanded definition of employee under subsection 12(3) of the SGAA.

Question 2

Were the workers your employees by virtue of subsection 12(3) of the SGAA?

Expanded definition of employee for SGAA purposes

The expanded definition of employee within subsection 12(3) of the SGAA, which states:

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.

SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA.

Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that:

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

• the individual must perform the contractual work personally (there is no right to delegate); and

• the individual is not paid to achieve a result.

The contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA.

Wholly or principally for labour

In this context, the word "principally" assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil.

A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour.

Based on the available facts and evidence, we consider that the workers were paid primarily for their own labour and skills.

There is no evidence that their remuneration was intended to cover any more than this as they were not required to supply any materials and had no significant ongoing expenses.

The individual must perform the duties themselves

As discussed earlier, we consider that the facts and evidence indicate that the workers did have the right to delegate work to others.

Not paid to achieve a result

As discussed earlier, we consider that the facts and evidence indicate that the workers are paid for a result.

Our conclusion regarding the expanded definition of employee

Accordingly, as the workers do not satisfy all three components of the expanded definition under subsection 12(3) of the SGAA, they do not meet the expanded definition of employee as set out under subsection 12(3) of the SGAA.

Conclusion - overall

Upon considering of all the available facts and evidence, the Commissioner is satisfied that with respect to work performed for the principal, the workers did not meet the definition of an employee for the purposes of the SGAA under either common law or the expanded definition provided under subsection 12(3) of the SGAA. Accordingly the principal does not have an obligation to pay superannuation contributions for the benefit of the workers under the SGAA.