Edited version of private advice

Authorisation Number: 1052155628754

Date of advice: 29 September 2023

Ruling

Subject: PAYG withholding - payments to umpires

Question 1

Is there an obligation on the recreational organisation to withhold from payments made to officials pursuant section 12-35 of Schedule 1 of the Taxation Administration Act 1953 (TAA)?

Answer

No

Question 2

Is there an obligation on the recreational organisation to withhold from payments made to official coaches pursuant section 12-35 of Schedule 1 to the TAA?

Answer

No

Question 3

Is there an obligation on the recreational organisation to withhold from payments made to strength and conditioning coaches pursuant section 12-35 of Schedule 1 of the TAA?

Answer

No

Question 4

Is there an obligation on the recreational organisation to withhold from payments made to persons appointed to the umpire appointment board pursuant section 12-35 of Schedule 1 of the TAA?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2023

Year ended 30 June 2024

Year ended 30 June 2025

Year ended 30 June 2026

Year ended 30 June 2027

The scheme commences on:

1 July 2022

Relevant facts and circumstances

Officials provide their services to the recreational organisation.

The only mandatory requirement to be able to officiate is the annual completion of an online registration form. Officials are required to provide all personal details and "working with children" accreditation details.

Officials are required to be currently accredited or actively undertaking accreditation to confirm a minimum level of competency while officiating.

The season and training requirements are listed below:

•                     Senior Officials - train two night per week for 1.5 hours approximately. Training begins in X and concludes at season end in X.

•                     Lower tier leagues - train one night per week for 1.5 hours approximately. Training begins in X and concludes at the season end in X.

•                     On a regular basis, regular and engaged umpires are appointed to officiate competitive league football matches based off a broad-spectrum policy.

Individual official performance is evaluated by the State Official Manager and other appointed observers.

The recreational organisation is accountable for the appointment and employment of the State Official Manager.

The State Official Manager then selects the other official staff and appoints the observer panel.

Official appointments are based on merit, such that the best available umpires are appointed to the most vital games. If an official advises, at short notice, that they are unavailable, the State Official Manager liaises with the relevant coach or co-ordinator where applicable with a view to find a suitable replacement.

Officials are paid a match fee for each match they officiate. The amounts paid vary from league to league and is dependent on what grade is officiated and the type of official.

An Official is appointed to a match generally on the X day of the week of the game. The Official formally accepts the appointment electronically. They arrive at the game X minutes before the match begins and leave approximately X minutes after the match concludes once match day paperwork is completed. This includes, team sheets, score cards, timecards, voting card, reports and interchange forms.

Official Travel allowance

The recreational organisation will pay each official, in addition to their match payment, an Official Travel Allowance for travel costs in relation to any Match umpired by the Official outside of their Home Local Government Area (LGA), determined as follows:

•                     if an Umpire is required to travel from their Home LGA through a neighbouring LGA into another LGA within their Area, an amount equivalent to the Umpire Travel Allowance will be paid to the Umpire

•                     if an Umpire is required to travel from their Home Area to another Area, an amount equivalent to the Umpire Travel Allowance multiplied by X will be paid to the Umpire

•                     if an Umpire is required to travel from their Home Area through a neighbouring Area into another Area, an amount equivalent to the Umpire Travel Allowance multiplied by X will be paid to the Umpire; and

•                     if an Umpire is required to travel, by any mode other than air transport, outside of the Areas altogether, an amount equivalent to the Umpire Travel Allowance multiplied by X will be paid to the Umpire

•                     An umpire's home LGA is the LGA in which the umpire has registered with the recreational organisation.

If an official is required to travel more than X kilometres from the CBD for any Match or representative Match, the recreational organisation bears the cost of all reasonable travel, accommodation and meal expenses (breakfast and dinner each day) incurred by an official in the performance of his or her duties.

All personal expenses such as entertainment, alcohol, travel (that is not necessary) and all telephone costs are at the official's own expense.

All personal expenses such as entertainment, alcohol, travel (that is not necessary) and all telephone costs are at the official's own expense.

All officials are paid directly by the recreational organisation fortnightly.

An official would be paid $X in 20XX.

Match payments are not intended to, nor do they usually cover expenses. The purpose of payments is to encourage members of the community to participate in local sporting activities by subsidising their participation.

Officials are required to incur expenditure on their shoes, whistles, wrist bands, training gear and other related officiating equipment. The recreational organisation supply one uniform (top, shorts and socks) and one training top free of charge.

During the 20XX/XX football season payments ranged from $X to $X depending on the role the official had.

The officials appointed incur travel and miscellaneous expenses. The gratuity is designed to reimburse them for some but not all expenses they incur during the year.

Relevant legislative provisions

Taxation Administration Act 1953 section 12-35 of Schedule 1

Reasons for decision

Question 1

Summary

The recreational organisation is not required to withhold pay as you go (PAYG) withholding amounts from payments made to officials under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA).

Detailed Reasoning

Section 12-35 of Schedule 1 to the TAA states an entity must 'withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity)'. The withheld amount is referred to as 'PAYG withholding'.

Taxation Ruling TR 2023/D3 Income Tax: Pay As You Go - withholding from payments to employees (TR 2023/D3) provides guidance as to whether an individual is paid as an employee for the purposes of section 12-35 of Schedule 1 to the TAA.

Paragraph 14 of TR 2023/D3 states that there must be:

1.            an employee

2.            a payment of salary, wages etc to an employee

3.            a payment made as a consequence of his/her employment, and

4.            a payment made by an 'entity'.

In terms of the first condition, it is necessary to determine whether or not the officials are employees of the recreational organisation.

The term 'employee' is not defined in the TAA. For the purposes of withholding under section 12-35 of Schedule 1 to the TAA, the word 'employee' has its ordinary meaning.

In some cases, it is self-evident whether an employee and employer relationship exists. In other cases, it can be difficult to discern the true character of the relationship.

There is no single factor which is determinative of a contractual relationship. The totality of the relationship must be considered to determine whether, on balance, an individual is an employee.

The Courts have considered the common law relationship between parties in many situations, and a substantial and well-established body of case law has developed on the issue, from which a range of indicia has arisen.

Paragraphs 26 to 52 of TR 2023/D3 sets out the various indicators the Courts have considered in establishing whether a person engaged by another individual or entity is an employee within the common law meaning of the term.

These indicators include:

•                     The control test: the degree of control which the payer can exercise over the payee.

•                     The organisation or integration test: whether the worker operates on their own account or in the business of the payer.

•                     The results test: whether the worker is free to employ their own means and is paid to achieve the contractually specified outcome.

•                     The delegation test: whether the work can be delegated or subcontracted (with or without the approval or consent of the principal).

•                     The risk test: whether the worker bears the legal responsibility and expense of rectification or remedy in the case of unsatisfactory performance.

•                     Which party provides tools, equipment and payment of business expenses?

Control

The test for determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. A common law employee is told not only what work is to be done, but how and where it is to be done. The importance of control lays not so much in its actual exercise as in the right of the employer to exercise it.

A high degree of discretion or latitude in the manner in which a task is performed does not, of itself, indicate a contract for services. Further, although it is not uncommon for a contract to specify how the contracted services are to be performed, this does not necessarily imply an employment relationship. A high degree of direction and control is not uncommon in contracts of service. In contractual arrangements any control or direction must be expressed in terms of the contract only, otherwise the contractor is free to exercise their own discretion, because they work for themselves.

Organisation or integration

In an employment relationship, tasks are performed at the request of the employer and the employee is said to be working in the business of the employer. An independent contractor carries on a trade or business of their own. An independent contractor enters into a contract to perform specific tasks and has a high level of discretion and flexibility about how the work is to be performed, even if the contract contains precise terms about methods of performance. An employee works in the business of the employer and the work performed may be said to be integral to that business. An independent contractor works for the payer's business but the work is not integrated into the business; rather, it is an accessory to it.

Results

Where the substance of a contract is for the production of a given result, there is a strong indication that the contract is one for services.

'The production of a given result' means the performance of a service by one party for another where the first-mentioned party is free to employ their own means (such as third party labour, plant and equipment) to achieve the contractually specified outcome. Satisfactory completion of the specified services is the 'result' for which the parties have bargained.

The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to hours worked. If remuneration is payable when, and only when, the contractual conditions have been fulfilled, the remuneration is usually made for producing a given result.

Delegation

The power to delegate or subcontract 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.

Whereas if an individual has unfettered power to delegate the work to others (with or without approval or consent of the principal), this is a strong indication that the person is engaged as an independent contractor. The contractor is free to arrange for their employees to perform all or some of the work or may subcontract all or some of the work to another service provider. In these circumstances, the contractor is the party responsible for remunerating the replacement worker.

A common law employee may frequently 'delegate' tasks to other employees, particularly where the employee is performing a supervisory or managerial role. However, this 'delegation' exercised by an employee is fundamentally different to the delegation exercised by a contractor outlined above. 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 workers have merely organised a substitution or shared the work load. This is not delegation consistent with that exercised by a contractor.

Risk

An employee bears little or no risk of the costs arising out of injury or defect in carrying out their work. An independent contractor bears the commercial risk and responsibility for any poor workmanship or injury sustained in the performance of work. An independent contractor is usually expected to take out their own insurance and indemnity policies.

Whether the worker is contractually obliged to accept liability for the cost, in terms of time or money, for the rectification of faulty or defective work is a relevant consideration in determining if that worker should be regarded as an employee or independent contractor.

Commonly, an independent contractor or entity would solely bear the risk and responsibility of liability for their work if it does not meet an agreed standard and would be required to either rectify this defective work in their own time or at their own expense.

An employee on the other hand, would bear no such responsibility and the liability for any defective work of the employee, either to a third party or otherwise, would fall to the employer in terms of the burden of cost or time for rectification.

Provision of tools and equipment and payment of business expenses

The provision of assets, equipment and tools by an individual and the incurring of expenses and other overheads is an indicator that the individual is an independent contractor.

However, the provision of necessary tools and equipment is not necessarily inconsistent with an employment relationship. The provision and maintenance of tools and equipment and payment of business expenses should be significant for the individual to be considered an independent contractor.

There are situations where very little or no tools of trade or plant and equipment are necessary to perform the work. This fact by itself will not lead to the conclusion that the individual engaged is as an employee. The weight or emphasis given to this indicator (as with all the other indicators) depends on the particular circumstances and the context and nature of the contractual work.

Further, an employee, unlike an independent contractor, is often reimbursed (or receives an allowance) for expenses incurred in the course of employment, including for the use of their own assets such as a car.

In this case, the recreational organisation uses officials to officiate in games. The officials are only told the time and venue of the game they are required to officiate in. They are not told how to officiate the game. Officials are paid for a given result i.e. the satisfactory officiating of a game. The official is chosen to officiate in a game because they have the requisite skills so it is assumed that the umpire cannot sub-contract their officiating role in any game.

After comparing the facts against the above factors, it is considered that officials are not employees of the recreational organisation.

As officials are not employees of the recreational organisation, amounts paid to these officials are not paid as a consequence of employment. Therefore, there is no obligation to withhold from payments made to them under section 12-35 of Schedule 1 to the TAA.

Question 2

Summary

The recreational organisation is not required to withhold PAYG withholding amounts from payments made to official coaches under section 12-35 of Schedule 1 to the TAA.

Detailed Reasoning

The recreational organisation uses official coaches to assist in the development of current officials. These coaches are told the time and venue of the training. They are not told how to provide that training. Official coaches are paid for a given result i.e. the satisfactory development of current officials. The official coach is chosen because they have the requisite skills so it is assumed that they cannot sub-contract their coaching role.

After considering the facts against the indicators listed above, it is considered that official coaches are not employees of the recreational organisation.

As official coaches are not employees of the recreational organisation, amounts paid to them are not paid as a consequence of employment. Therefore, there is no obligation to withhold from payments made to them under section 12-35 of Schedule 1 to the TAA.

Question 3

Summary

The recreational organisation is not required to withhold PAYG withholding amounts from payments made to strength and conditioning coaches under section 12-35 of Schedule 1 to the TAA.

Detailed Reasoning

The recreational organisation uses strength and conditioning coaches, to assist umpires with their overall general fitness and attend weekly training with umpires. Strength and conditioning coaches are paid for a given result i.e. the satisfactory development of current officials. They are chosen because they have the requisite skills so it is assumed that they cannot subcontract their roles.

After considering the facts against the indicators listed above, it is considered that strength and conditioning coaches are not employees of the recreational organisation.

As strength and conditioning coaches are not employees of the recreational organisation, amounts paid to them are not paid as a consequence of employment. Therefore, there is no obligation to withhold from payments made to them under section 12-35 of Schedule 1 to the TAA.

Question 4

Summary

The recreational organisation is not required to withhold PAYG withholding amounts from payments made to persons appointed to the umpire appointment board under section 12-35 of Schedule 1 to the TAA.

Detailed Reasoning

After considering the facts against the indicators listed above, it is considered that persons appointed to the umpire appointment board are not employees of the recreational organisation.

As persons appointed to the umpire appointment board are not employees of the recreational organisation, amounts paid to them are not paid as a consequence of employment. Therefore, there is no obligation to withhold from payments made to them under section 12-35 of Schedule 1 to the TAA.