Edited version of private advice

Authorisation Number: 1051416930558

Date of advice: 2 March 2020

Ruling

Subject: Status of the worker

Question 1

Are the Workers, who are paid by the Principal to provide services to End Users under a Services Agreement (SA), considered common law employees of the Principal as defined by subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA) for the period 1 July 2018 to 30 June 2021?

Answer

No. Refer to 'why we have made this decision'

Question 2

Are the Workers who are paid by the Principal to provide services to End Users under an SA, considered employees of the Principal as defined by subsection 12(3) of the SGAA for the period 1 July 2018 to 30 June 2021?

Answer

No. Refer to 'why we have made this decision'

The arrangement commences on:

01 July 2018

If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

We considered these to be the relevant facts

·        In late July 2018, a request for a private ruling was lodged by the Principal in regard to its obligation to pay superannuation guarantee for the Workers.

·        Further information was provided on various dates.

The Workers

The Principal provided the names of four Workers engaged for the provision of services.

·        The Workers have an Australian Business Number (ABN), as per the services invoices and Referrals.

·        The Workers are paid an hourly rate and are paid by the Principal within fourteen days of the Principal receiving their invoice - they are only paid for the hours they work and invoice the Principal.

·        The rates for the labour are negotiated by the Worker and the Principal - the Workers are paid different hourly rates.

On 16 May 2019 the Principal advised us that:

·        No advertisements are placed by the Principal for these contracted roles.

·        Referrals are based on word of mouth and the Principal is often approached directly.

·        No tender process is required due to the nature of the services and that these are smaller roles.

We formed our view on the facts by relying on this information

·        The private ruling application dated late July 2018;

·        Further information received on various dates.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 subsection 12(1)

Superannuation Guarantee Administration Act 1992 subsection 12(3)

Reasons for decision

Why we have made this decision

Summary

The Workers

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

Detailed reasoning

The SGAA requires that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the Superannuation Guarantee Charge (SGC).

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.

Is there a legal relationship between the Principal and the Workers?

The arrangement involves the Principal, referred to in this case as a 'receiver of Commonwealth grant funding via the Department of Health and the receiver of SA Government funding', engaging Workers to provide services to eligible members of the community as the End users in the arrangement. This type of arrangement is referred to as a 'tripartite employment arrangement' in Superannuation Guarantee Ruling SGR 2005/2 Superannuation guarantee: work arranged by intermediaries (SGR 2005/2).

In this arrangement there is an agreement between the Principal and the End user providing for the supply of Workers to the End user. There is also a services agreement between the Principal and the Workers, and the payments are made within fourteen days of receiving the invoice by the Principal to the Workers.

Paragraph 32 of SGR 2005/2 provides that when considering a tripartite employment arrangement, it is first necessary to determine whether a legal relationship exists for the performance of work and with whom it exists. Only after this has been established can consideration be given to the issue of whether the relationship is one of employment or of some other kind.

In determining the character of the relationship between the parties, as per paragraph 33 of SGR 2005/2, 'it is necessary to look beyond the form of the contractual relationships and the labels attached to the relationships by the parties to establish the true nature of the relationships of the parties involved'.

Paragraph 36 of SGR 2005/2 outlines the ordinary principles of contract law, being that a legally enforceable contract between the parties consists of three elements:

·        the parties must intend to be legally bound by their agreement;

·        there must be an offer by one party and its acceptance by the other; and

·        the promises which constitute the agreement must be supported by consideration (unless the agreement is in the form of a deed).

Paragraph 37 of SGR 2005/2 states that another way to ask this question is:

·        whom could the end user sue for breach of contract (as distinct from negligence) if the worker failed to appear or failed to work at an acceptable standard; and

·        equally, whom could the worker sue for breach of contract if they performed their work but their remuneration was not paid to them?

There is a consideration supporting the agreement between the Principal and the Workers. You have advised that the Principal is liable for all payments to the Workers, based on invoices issued by the Workers to the Principal for the work performed.

In the Full Federal Court case of Building Workers' Industrial Union of Australia and Others v. Odco Pty Ltd 20 (1991) 29 FCR 104 (Odco) at 114, it was held that 'the element of consideration which is essential to a contract of employment is the promise by the presumptive employer to pay for service as and when the service is rendered'.

Under clause 4.1 of the SA, the Principal has an obligation to pay the Workers for work completed.

The invoices issued by the Workers to the Principal show an hourly rate of payment referrable to the times worked. The SA constitutes the legal relationship between the Principal and the Workers, for the purpose of making payment in consideration for the work performed. Furthermore, tax invoices from four Workers provide evidence that administrative and operational actions align with the payment liabilities as detailed in the SA.

Question 1

Are the Workers considered common law employees of the Principal as defined by subsection 12(1) of the SGAA for the period 1 July 2018 to 30 June 2021?

The facts and evidence lead to the conclusion that the Workers were not your employees for the purposes of the SGAA under the common law definition as defined under subsection 12(1) of the SGAA and therefore under this subsection you did not have an obligation to pay superannuation contributions on behalf of the Workers.

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.

Terms and circumstances of the formation of the contract

The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. This is achieved through examining the contract between the parties, considering whether the contract is written or verbal, and whether the terms and conditions are expressed or implied. These factors are important in characterising the relationship between the parties.

When considering the intentions of the parties in forming the contract, it must be determined what each party could reasonably conclude from the actions of the other. 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.

Control

The extent to which the engaging entity 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 lays not so much in its actual exercise, but in the right of the employer to exercise it.

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.

Does the worker operate on his or her own account or in the business of the payer?

If the worker's services are an integral and essential part of the business that engages them (under a contract of service), 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 (under a contract for services), 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 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.

Consideration may also be given to whether the worker could be expected to generate goodwill in their own right.

'Results' contracts

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.

Whether the work can be delegated or subcontracted

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.

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.

Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). 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.

Risk

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

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.

Provision of tools and equipment and payment of business expenses

A worker/payee who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required to complete their 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 they will seek separate payment for such expenses from the principal.

In your case

TERMS AND CIRCUMSTANCES OF THE FORMATION OF THE CONTRACT

The relationship is formed by both the Principal and Workers entering into a comprehensive written agreement for services (the SA) via a direct negotiation process. The Workers will seek work with the Principal directly and the Principal's co-ordinator will undertake an interview to ensure all the relevant requirements are satisfied from a service delivery and contractor perspective.

You advise that the Workers set the rate of pay at the commencement of the contract. These rates are negotiated by the Workers and they will inform you of any changes to their rate as the contracts are renewed. The contracts are drawn for 12 months and they provide to the Principal the respective Worker's ABN.

The SA is based on an arrangement under which the principal is not obliged to request any or any minimum number of works from the Workers.

The SA makes no provision for any type of leave.

On this basis of the formation of the relationship and in particular the engagement by way of a comprehensive SA, it appears that it is reasonable to consider that each party could reasonably conclude from the actions of the other that a principal/independent contractor relationship was intended.

Paragraph 31 of SGR 2005/1 states:

The circumstances surrounding the formation of the contract may assist in determining the true character of the contract. Thus, if a contract comes into existence because the contractor advertises their services to the public in the ordinary course of carrying on a business or as a result of a successful tender application, the existence of a principal/independent contractor relationship is more likely. Conversely, if the contract is formed in response to a job vacancy advertisement or through the services of a placement agency, the existence of an employer/employee relationship is more likely.

The apparent true nature of the relationship between the Principal and the Workers is of fundamental importance. As referred to in paragraph 29 of SGR 2009/1, in the RE Porte: re Transport Workers Union of Australia case, although parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive.

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.

CONTROL

The extent to which the engaging entity 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 lays not so much in its actual exercise, but in the right of the employer to exercise it.

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.

In your case once the worker accepts the Referral, all arrangements for scheduling of jobs are done directly between the Worker and the End user including making arrangement to reschedule a job if the worker is sick. On acceptance of the Referral, the worker is responsible for determining what is required and the services that are to be delivered. They perform the services with no direction or interference by the Principal. The Principal does not control how the work is done.

It can be evidenced from the information provided that the authority for work performed by the Workers did not appear to rest with the Principal, as the Workers decided not only what was done but also how and where it was to be done. The lack of rights to control the work, where it was performed, the fact that the Worker could refuse the work and the lack of control over the Worker's presence at the Principal's business, all indicate that the majority of the control for the work performed is exercised by the Worker and not by the Principal.

Whilst a payer's control is not determinative of an employment relationship, it can be reasonably assumed that an employment relationship does not exist without it.

As explained in paragraph 33 of SGR 2005/1, with the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lays not so much in its actual exercise, but in the right of the employer to exercise it.

As stated in paragraph 35 of SGR 2005/1 the payer has a right to specify how the contracted services are to be performed, but such control must be expressed in the terms of the contract; otherwise the contractor is free to exercise their discretion (subject to any terms implied by law). This is because the contractor is working for themselves.

The question arises as to what if any control is expressed in the terms of the SA. The terms of the SA do not detail how the actual work tasks are to be performed, however the SA does give the Principal the right to exercise a form of control by way of the special conditions, standards and principles that the Worker is required to comply with.

Special conditions apply to the operation of the Workers as directed by the principal to carry out the works only between the hours advised, to promptly and competently carry out instructions of the Principal where defects are found and to provide a job safety analysis (JSA) document setting out the specific work health safety resources, responsibilities and procedures or practices relevant to the contract.

Although general control is exercised through the above mentioned documents, apart from specified work timeframes, no evidence was provided to demonstrate that the Workers were subject to the Principal's control to the extent that they were not free to exercise their discretion in completing their tasks.

We are satisfied that the control test in isolation is more in favour of the notion that the relationship between you and the workers is that of principal and independent contractor.

INTEGRATION

If the worker's services are an integral and essential part of the business that engages them (under a contract of service), 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 (under a contract for services), 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 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.

The Workers would work alone independently of others. They do not train any of the Principal's employees or supervise any work completed by the principal's employees.

There is no requirement for the Workers to wear or use a name badge, clothing, business cards, stationary or any other item that would promote your business.

The Workers have their own Australian Business Number (ABN) and maintain public liability insurance. ABN registration is not necessarily indicative of the existence of a contract relationship, nor of running one's own business. A person may hold an ABN and carry on a business or trade in their own right and in their own name (for example, a tradesperson performing work as a sole trader), while also working for another as an employee at the same time. In this situation, the fact that they work in their own business will not alter their employment status. Consequently, the quoting of an ABN by the worker is a relevant consideration, but is not determinative of whether the workers are employees or independent contractors.

The special conditions, standards and principles as discussed under the paragraphs above, are general requirements under which the Workers are required to operate. The conditions are nothing more than would be reasonably expected in a services agreement of this type and observing the conditions would not specifically render the Workers as being integrated into the Principal's business.

We are satisfied that the integration test in isolation is more in favour of the notion that the relationship between you and the workers is that of principal and independent contractor.

RESULTS

The workers submit an invoice for payment upon completion of their work. You have provided copies of invoices from each group Worker as an example.

The samples of invoices that you have provided in relation to the Workers indicate that each Worker was paid for particular trade works undertaken and the specific tasks that were carried out.

The Workers provide at their own expense, all plant, equipment vehicles and facilities required for the performance of the works. The End user will ultimately pay for these materials and any other major material purchases.

As part of the Referral process the Principal advises the end user of either the maximum number of hours that are available for the type of service required or a job for which no timeframe is specified. In both cases, although an hourly rate is a factor in determining amounts charged to the Principal, the result on which the Principal pays the Worker is the satisfactory completion of the job.

Some invoices indicate that certain jobs are completed prior to the maximum hours allowed. In these instances the Worker invoices for the time taken to achieve the result, in contrast to billing for the maximum hours. On the other hand, if the job is unable to be completed in the maximum hours allowed the Worker is unable to continue and is paid on the basis of that result, which is the completion of the maximum hours allowed.

As referred to under paragraph 43 of SGR 2009/1, if remuneration is payable when and only when, the contractual conditions have been fulfilled, the remuneration is usually made for producing a given result.

Paragraph 45 of SGR 2009/1 states that 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. In this case the reliance on an hourly rate to determine amounts payable does not overshadow the requirement for the Worker to produce a result for amounts to become payable.

In Stevens v. Brodribb at 38, the High Court observed that working on one's own account (as an independent contractor) often involves:

The provision by him of his own place of work or of his equipment, the creation by 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.

In this case although the Workers are not producing saleable assets from their own place of work they have business expenses and the ability to create goodwill in the course of using their equipment to provide an acceptable level of service.

We are satisfied that the results test in isolation is more in favour of the notion that the relationship between you and the workers is that of principal and independent contractor.

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.

A clause in a contract may permit the worker to delegate tasks to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site, particularly if they are not suitably qualified.

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.

Under paragraph 49 of SGR 2009/1, 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.

The Principal enters into the SA with the Worker on the basis of skills, reputation, qualifications, experience and knowledge of the worker and their staff and that the works must be performed only by them.

SA states that the contractor may request in writing that the Council approve further people as Contractor's Staff'.

The Services Agreement states that the contractor must not assign or subcontract this agreement or any right or obligation under it without the prior written consent of the Principal, which may be granted or withheld by the Principal at its absolute discretion.

It is clear under the SA that the Workers can delegate/subcontract their services with the approval of the Principal.

Delegation is not simply the delegation of task from one employee to another or the ability to swap shifts or request a fellow employee to perform some duties; it is the ability to freely subcontract or employ others to perform the work. Delegation clauses are considered in the context of the contract as a whole to determine if they are consistent with the apparent essence of the contract or if they are merely self-serving statements.

It is evident from the SA that the Workers may engage others to complete the works, however as per case extract quoted in On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 (13 April 2011) at 283, the mere right to delegate in the absence of the likelihood or actuality of delegation occurring may be of little consequence.

Although the Workers have the right to delegate under the terms of the SA, no examples of this right being exercised were provided. If delegation was never exercised by the Workers, the impact that this common law element would have on the overall decision as to whether the Workers were common law employees would be reduced, however it remains that the right of delegation exists.

We are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between you and the workers is that of principal and independent contractor.

RISK

One of the considerations 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.

Under special conditions of the SA, the Workers are required to rectify defects in strict accordance with Principal Defects Notices. If the rectification is not completed within the time stipulated in the Defects Notice, the Principal may rectify the defect at the Worker's expense.

Under clause of the SA the Workers are required to hold public liability insurance at their own expense and, where applicable workers compensation insurance at their own expense. The Principal makes available a group public liability policy which is reimbursed by the worker to the Principal.

Paragraph 51 of SGR 2005/1 states that an independent contractor will often carry their own insurance and indemnity policies. This indicates that the Worker bears the primary risk for any costs that arise from carrying out their services.

Taking into account that the workers' have their own insurance, the nature of the tasks performed, the circumstances under which they are performed, the tools and equipment used to perform the tasks, and the ability to generate goodwill, it is considered that the Workers are exposed to commercial risk.

We are satisfied that the risk test in isolation is more in favour of the notion that the relationship between you and the workers is that of principal and independent contractor.

Our conclusion regarding the common law definition of employee

In summary, each party on the basis of the express terms of the SA could reasonably expect that a principal/independent contractor relationship was intended, and no evidence was provided to demonstrate that the Workers are subject to the Principal's control to the extent that they are not free to exercise their discretion in completing their tasks.

The Workers are considered to be carrying on their own business rather than being an integral part of the Principal's business, the Workers are paid on completion of the services provided, and although it did not occur, the Workers have the right to delegate under the SA.

The Workers provide their own tools and equipment, and they are responsible for arranging appropriate insurance and for rectifying defects.

In conclusion the Commissioner, when looking at the relationship as a whole is satisfied that the facts and evidence are indicative that the Workers are not common law employees under subsection 12(1) of the SGAA.

As our decision is that the Workers are not common law employees, we are required to consider the extended definition in subsection 12(3) of the SGAA. The extended definition has been considered and is discussed below.

Question 2

Are the Workers, who invoice and are paid by the Principal, and engaged by the End user, considered employees of the Principal as defined by subsection 12(3) of the SGAA for the period 1 July 2018 to 30 June 2021?

The Workers are not employees of the Principal by virtue of subsection 12(3) of the SGAA.

Detailed reasoning

Expanded definition of employee for SGAA purposes

The expanded definition of employee within subsection 12(3) of the SGAA 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 for their personal labour and skills, rather than for the provision or hire of equipment or materials to complete a job. Major material items are either supplied by the Principal or on occasions by the End user. Any tools and equipment provided by the Workers are incidental to the work performed under the contract. Accordingly, it is considered that the contract between you and the workers is principally for labour.

The individual must perform the duties themselves

As discussed earlier, we consider that the facts and evidence indicate that the Workers have the right under the SA 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 were 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 concludes that with respect to work performed for you by the workers that they do 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 you do not have an obligation to pay superannuation contributions for the benefit of the workers under the SGAA.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 subsection 12(1)

Superannuation Guarantee Administration Act 1992subsection 12(3)