Edited version of private advice

Authorisation Number: 1051955981819

Date of advice: 4 March 2022

Ruling

Subject: Status of worker

Issue 1

Question 1

Under the three different scenarios:

Are the Performers, your common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?

Answers

Scenario 1

No.

Scenario 2

No.

Scenario 3

No.

Question 2

Are the Performers your employees by the expanded definition contained in subsection 12(3) and 12(8) of the SGAA?

Answers

Scenario 1

No.

Scenario 2

No.

Scenario 3

No.

This advice applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The arrangement commences on:

1 July 20XX

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are 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.

The organisation is a talent agency that represents performers featuring in productions, endorsements and promotional and advertising material of advertising, production and events companies, and retailers, publishers and broadcasters.

The organisation and the performer enter into a written agreement.

The organisation is hired by the performer to be an independent contractor who acts as an intermediary between the Performer and the end user.

The organisation provides two types of services.

Standard services including seeking work opportunities, negotiating terms and conditions, finalising arrangements relating to payments dues, negotiating arrangements relating to Performer attendance, administering the agreement between the Performer and the end user, and arrangements for publicity attendances or associated responsibilities.

Additional services including management of the Performers professional engagements, end user relationships, professional reputation, career development, business interests, campaign deals and publicity and briefing the Performer on all matters which arise for consideration in relation to the Performers career, and to be reasonably available to consult with the Performer on such matters.

The Performer and End User enter into a separate contract for the performance of services.

Pursuant to the Performance Agreement, the End User pays the Performer a fee for the Performers services.

Under the terms of the Managerial Agreements, the Performer is required to instruct the End User to remit the fee to a trust account managed by the organisation.

The organisation is never a party to the Performance Agreement but may be referred to as the agent.

The Performer signs the Performance Agreement. However, pursuant to the Managerial Agreement the Performer may authorise the organisation to enter into agreements on behalf of the Performer provided the Performer has been given sufficient information about the Performance Agreement and gives written authority to do so.

The Performer must interview/audition for the End User who then chooses from a pool of talent from many different agencies.

Performers obtain work through various means. Sometimes the End Users ring the agency asking for a particular performer as they have used them before. In other instances, the End Users may find someone on the website who they invite to audition/interview.

Performers can have many agents to manage different aspects of their career.

A Performer can refuse to take a job.

The Performer cannot delegate their tasks. The Performer agrees to perform the tasks.

Performers provide their own assets/equipment, or it is provided by the End User. The organisation does not provide any assets or equipment.

The Performers are not required to promote the organisation when they are on assignment.

No Commission is charged to the End User for finding a Performer for them.

The organisation does not enter into a contract with the End User once a Performer has been placed.

Performers bear their own commercial risk. The Performer is wholly responsible to complete the work outlined in the Performance Agreement. If the End User does not pay the performance fee, the organisation is not liable to the Performer for the performance fee.

In the event that the Performer is not paid for the services they have provide they would sue the End User for breach of contract.

In the event that the Performer fails to appear or perform the work the End User can sue the Performer for breach of contract.

In all three scenarios, the invoice is issued in the name of the Performer to the End User. The organisation may raise the invoice as part of the services provided by them to the Performer under the Managerial Agreement.

Performers are not paid until the activity has been completed.

Scenario 1. Where the End User deducts Pay-As-You-Go withholding (PAYG(W)) and superannuation guarantee (SG) from the fee, the net fee is paid to the Performer. The organisation receives the funds on trust for the Performer and after deducting its commission and expenses, the organisation remits the balance of the fee to the Performers nominated account. Invoice provided as an example. Once the organisation receives payment of the invoice, they deduct their fee as agreed with the Performer and remit the remainder to the Performer's nominated bank account.

Scenario 2. Where the End User does not deduct PAYG(W) and SG obligations from the fee, the gross fee is paid to the Performer. The organisation receives the funds on trust for the Performer and after deducting its commission and expenses, the organisation remits the balance of the fee to the Performers nominated account. The agreed standard agent fee is the amount of money the organisation receives from the End User for deducting the PAYG (W) and superannuation for them. The organisation processes the PAYG (W) and superannuation and deducts their fee and remits the remainder to the Performer's nominated bank account.

Scenario 3. Where the End User appoints the organisation as its agent to operate PAYG(W)and SG on its behalf, the End User pays the gross fee to a trust account managed by the organisation. As agent for the End User, the organisation deductions PAYG(W) and SG from the fee and makes these payments to the ATO and superannuation fund respectively. The organisation receives the funds on trust for the End User and after deducting its commission, expenses, PAYG(W)and SG as agent for the End User, the organisation remits the balance of the fee to the Performers nominated bank account. Invoice provided as an example.

Assumptions

The Performer is not a foreign resident for income tax purposes.

The performer is paid solely for work undertaken in Australia.

The Performer is either:

• 18 years old or older and paid a salary of more than $450 per calendar month; or
• Under 18 years old and paid a salary of more than $450 per calendar month and working more than 30 hours per week.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 section 12

Superannuation Guarantee Administration Act 1992 subsection 12(1)

Reasons for Decision

These reasons for decision accompany the Notice of advice.

This is to explain how we reached our decision. This is not part of the advice.

Issue 1

Question 1 & 2

Summary

Having considered the nature of the working relationship between the parties and the relevant case law, and putting in balance the relevant indicators, it has been determined that a common law employment relationship does not exist between the organisation and the Performers and they are not considered to be employees under the extended definition of employee contained in subsection 12(3) or 12(8) of the SGAA.

Detailed reasoning

Tripartite employment arrangement

A characteristic of the labour market in Australia is that firms (end-users of labour) often acquire the services or labour of individuals through an intermediary rather than engaging them directly. Many of these intermediaries specialise in the supply of the services or labour of workers to client firms.

In contrast to the conventional working relationship between an entity and worker in which a single contract is formed, a number of contracts are often present in these tripartite working arrangements. Accordingly, it can sometimes be difficult to tell whether the worker is an employee of the intermediary or end-user, or neither, when they are engaged through an intermediary.

Superannuation Guarantee Ruling SGR 2005/2: Work arranged by intermediaries (SGR 2005/2) provides our view on how the definitions of employer and employee in the Superannuation Guarantee (Administration) Act (SGAA) apply to contractual and working arrangements involving tripartite employment arrangements.

SGR 2005/2 provides that whatever the circumstances of a particular tripartite working arrangement, it is first necessary to determine whether a contract for the performance of work exists and with whom it exists. Only after this is established can the precise nature of the relationship (whether employee or otherwise) be determined.

Paragraph 9 of SGR 2005/2 clarifies the two roles of intermediaries typical of tripartite arrangements. In one arrangement an intermediary agrees to supply the services of the worker to the end-user. In this instance a contract may exist between the intermediary and the end-user and between the intermediary and the worker. A contract does not exist between the worker and the end-user. In relation to this situation, paragraph 15 of SGR 2005/2 confirms that:

A contract between the intermediary and worker can still be a common law contract of employment even though the work is done for the immediate benefit of the end-user.

The other arrangement exists to bring the worker and the end-user together so that the end-user and the worker can enter into a contract with each other. Such intermediaries are commonly referred to as 'labour hire firms' and 'employment or recruitment agencies'. In this instance neither an employer/employee nor principal/independent contractor contract exists between the intermediary and the worker. Importantly, paragraph 12 of SGR 2005/2 affirms that:

If there is no contract between the worker and end-user in a tripartite working arrangement, the worker cannot be an employee of the end-user.

In tripartite working arrangements, it is the ultimate or legal control over the worker that is most relevant not the day-to-day direction and control. Hence a contract between the intermediary and worker can still be a common law contract of employment even though the work is done for the immediate benefit of the end-user.

An intermediary may be authorised by another party to do something on that party's behalf. Paragraph 70 of SGR 2005/2 states that:

In certain situations, the agent is authorised by the principal to bring about a contractual relationship between the principal and a third party. Where the agent acts within the scope of his or her authority and accordingly brings about a contractual relationship between the principal and the third party; the contract is between the principal and the third party: the agent is not a party to the contract but is essentially the intermediary or conduit to bring about the contractual relationship between the principal and the third party.

We need to establish firstly if a contract exists before applying any common law tests. In this case, the organisation has a written contract with the Performers in addition to the Performers having their own contract with the End User. From the information provided it appears that the organisation has the role of agency similar to what is described in paragraph 70 of SGR 2005/2.

As there is a contract between the Performers and the End User it is considered that the End User has the ultimate control over the Performers. The organisation does not appear to have any control over the day-to-day activities or direction of the Performers.

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

Expanded definition of employee under subsection 12(3) 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.

Paragraph 21 of SGR 2005/2 states:

The extending provision that is the most important in the context of this Ruling is subsection 12(3). Under subsection 12(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.

Paragraph 30 of SGR 2005/2 states that where an individual who has been engaged under a contract is not a common law employee, or there is some doubt as to the status of the individual at common law, that individual will be an employee under subsection 12(3) if:

• 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.

If 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.

Are the Performers remunerated wholly or principally for labour?

In assessing whether a person has been remunerated wholly or principally for labour and skills the ATO view is that, in the context of subsection 12(3) of the SGAA the word 'principally' assumes its commonly understood meaning that is, chiefly or mainly.

Generally, the value of various parts of a contract is specified in the contract (i.e the labour and non-labour components of the contract are clearly expressed.

In this instance, it is concluded from the facts that the Performers are being wholly or principally remunerated for their labour.

Are the Performers required to perform the work personally?

The second requirement of subsection 12(3) of the SGAA is that it requires the individual to carry out the work personally. That is, the worker does not have the right to delegate or subcontract the work to another party. Even if the contractor has no intention to delegate or subcontract the work and actually performs the work personally, the contract itself is still not for the labour of the person if there is a possibility of delegating work to another person.

Upon examining the information, the organisation provided it has been determined that the Performers are required to perform the work personally.

Are the workers paid to achieve a result?

The third and last requirement of subsection 12(3) of the SGAA is that the payments received by the worker must not be in relation to the production of a given result, but instead should be for their labour.

Upon examining the information and in particular the Agreement between the Performer and the End User it has been determined that the Performers are paid to achieve a result

Conclusion - extended definition of employee

As stated above, each of the three conditions in paragraph 11 of SGR 2005/1 must be met before subsection 12(3) of the SGAA can be satisfied. In this case all three conditions have not been satisfied; therefore, it is considered that the Performers do not meet the extended definition of employees as set out in subsection 12(3) of the SGAA.

As the Performer is not an employee under either subsection 12(1) or 12(3) a consideration of subsection 12(8), which makes particular provision to avoid doubt as to the status of certain persons, is necessary.

Expanded Definition of Employee under Subsection 12 (8) of the SGAA

Subsection 11(1) of the SGAA provides an inclusive definition of the term 'salary or wages'. Under paragraph 11(1)(d) payments to a person for work referred to in subsection 12(8) are specifically included in salary or wages.

Paragraph 12(8)(a) of the SGAA states

a person who is paid to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills is an employee of the person liable to make the payment.

Paragraph 12(8)(b) of the SGAA states

a person who is paid to provide services in connection with an activity referred to in paragraph (a) is an employee of the person liable to make the payment.

In this case you informed us that the organisation has responsibility to pay the Performer once they have received the money from the End User. The organisation invoices the End User on behalf of the Performer, but no contract exists between the organisation and the End User. The contract is between the End User and the Performer. The End User is liable for the payment to the Performer via the organisation. In addition, the Performer can sue the End User for breach of contract if they do not receive payment for their services and not the organisation.

Conclusion - overall

Upon considering all the available facts and evidence, the Commissioner is satisfied that the workers 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) and 12(8) of the SGAA.

Accordingly, the organisation does not have an obligation to pay superannuation contributions for the benefit of the workers under the SGAA.