Laming and Secretary, Department of Family and Community Services

[2005] AATA 1137

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1137

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  D2004/36

GENERAL ADMINISTRATIVE DIVISION		)
Re		PETER LAMING

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member B J McCabe

Date17 November 2005

PlaceBrisbane

Decision The decision under review is set aside. The applicant is an independent contractor and is entitled to deduct his legitimate business expenses from his gross income for the purposes of the income test in s 1064 of the Social Security Act 1991.

......[Sgd].........

BJ McCabe

SENIOR MEMBER

CATCHWORDS

SOCIAL SECURITY – Pensions, Benefits and Allowances – carer’s pension – classification of applicant as self-employed contractor or employee in issue – applicant entitled to deduct reasonable business expenses in reporting income to Centrelink – applicant is a self-employed contractor – decision under review is set aside.

Social Security Act 1991 ss 1064, 1072, 1075

Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16

Hollis v Vabu Pty Ltd  [2001] HCA 44

REASONS FOR DECISION

17 November 2005               Senior Member B J McCabe

introduction

1.      Peter Laming’s son suffers from autism. Mr Peter Laming – a single man – is in receipt of the carer’s pension.  Mr Laming also works as a tutor. The respondent says Mr Laming failed to declare an amount of income earned between 23 August 2000 and 27 June 2003. As a result, the Secretary says the applicant was paid benefits to which he was not entitled. The Secretary raised a debt against the applicant and decided to recover the money. The debt has been recalculated after a review and stands at $5768.98.

2.      Mr Laming has asked the Tribunal to review the matter because he says he was (and is) a self-employed contractor rather than an employee. Self employed contractors are entitled to deduct reasonable business expenses from their income before reporting the balance. Mr Laming says his accounting to Centrelink was accurate if viewed in that light, so that no debt arises.

3.      The case turns on the question of whether or not the applicant is employed by the organisations that refer students to him for tutoring. For reasons I will explain, I am satisfied the applicant is not an employee. The decision is therefore set aside.

the material before the tribunal

4. The Tribunal was provided with the documents required under s 37 of the Administrative Appeals Tribunal Act 1975. The matter was heard in Darwin on 30 June 2005.

5.      Mr Laming was asked to search his records to locate some additional documents that might shed light on his relationship with the organisations that retained his services. A number of documents were provided to the tribunal under cover of a letter dated 8 July 2005.

6.      Mr Laming gave evidence at the hearing. He represented himself. Ms Oliver, a Centrelink advocate, represented the respondent. Both of the parties provided written submissions after the hearing.

the facts

7.      There is not a serious dispute over the facts. Mr Laming is a single man living in Darwin with his son, Derek. Derek is 27 years old. He suffers from autism. He requires constant care. While Mr Laming receives assistance from a carer, he is unable to participate in full-time work because of the demands of caring for his son.

8.      Mr Laming is trained in psychology. When he realised that full-time employment as a psychologist was practically impossible in light of his commitment to Derek, Mr Laming decided to operate his own business as a psychological consultant. To that end he established Peter Laming Consulting Services Pty Ltd.

9.      Mr Laming specialises in tutoring indigenous students. The tutoring is funded under the Aboriginal Tutorial Assistance Scheme (ATAS). ATAS is funded by the Commonwealth Department of Education, Science and Training (DEST).

10.     Mr Laming registered his interest and availability to provide tutoring services with DEST and with Charles Darwin University (CDU) which administers ATAS with respect to its own students.

11.     Mr Laming provided a copy of a document generated by DEST in 2001. The document is annexure B to the applicant’s letter of 8 July 2005. The communication from DEST (a form letter) dated 1 February 2001 invites Mr Laming to express his interest in being “a contractor to provide ATAS services”. The letter includes information for service providers on “ATAS contract agreements” and refers to a tutor’s “work program”. On the second page, under the heading “General Conditions”, the document says:

By signing a contract you do not become an employee of [DEST]. As a contractor you will be required to make your own insurance arrangements. This includes public liability, professional indemnity and personal accident covers.

12.     The document also provides for the payment of a travel allowance in certain circumstances to tutors retained to provide services under the scheme.

13.     In a subsequent letter from DEST dated 22 August 2001 (attachment to Mr Laming’s submissions dated 8 July 2005), Mr Laming was told approval was given for him “to be contracted under [ATAS]”. The agreement with DEST is described as an “ATAS retainer agreement”. The letter assigns Mr Laming a “client identification number”. I note that at least some of the payment advices received from Mr Laming record the payee as Peter Laming Consulting Services.

14.     DEST subsequently forwarded Mr Laming Payment Summaries recording the amount of income tax withheld. (The summaries replaced group certificates.)

15.     The respondent produced an Australian Taxation Office employment declaration form completed by the applicant on 19 August 2002. The form was completed in connection with his engagement by CDU (then known as the Northern Territory University). Mr Laming indicated on the form he was a casual employee of the university. CDU assigned him an employee number. Casual employment advice forms completed by Mr Laming and CDU were also provided to the Tribunal.

16.     Mr Laming explained how the tutoring worked in his oral evidence. He said a student who required tutoring and who was eligible for assistance under ATAS would be given his name by DEST or CDU. The student would contact him and arrange a time for a meeting. If Mr Laming and the student agreed to do so, they completed a tutorial program application form that was submitted for approval by the administering body. Students could choose from a list of tutors, and Mr Laming could accept (or reject) as many students as he liked. The tutorials were held at a place agreed between the tutor and the student. The timing and frequency of contact was a matter for the tutor and student to resolve amongst themselves, although the tutor could not claim more than a fixed number of hours for each student in a particular period. There was no guidance or direction as to what material should be covered in a tutorial. Tutors did not ordinarily have contact with course coordinators. Students brought along whatever material and questions they thought appropriate. There was no monitoring of a tutor’s performance apart from an evaluation form completed by the students at the end of the tutorial program. Tutors were entitled to submit claims for payment at the end of every fortnight although Mr Laming said there were occasionally larger gaps between his claims.

17.     Mr Laming said he regarded himself as being financially accountable to the administering bodies (DEST and CDU), but he did not appear to regard himself as being in a reporting relationship with either body. When asked about the role of CDU in particular, he suggested that – apart from referring students – CDU’s only role was to provide payroll services. Neither organisation appeared to exercise much (indeed, any) direct control over his work as a tutor.

18.     The respondent’s submissions suggest the administering bodies took a more active role in regulating the conduct of his work. After hearing Mr Laming’s evidence, I accept his explanation of the way in which the program worked in practice.  I am satisfied he was a witness of truth who was familiar with the operation of the program.

the law

19. The rate of payment for a carer’s pension is affected by the applicant’s income. Section 1064 of the Social Security Act 1991 sets out the calculator used in the assessment of income. “Income” for the purposes of the calculator would ordinarily include the person’s gross income from all sources: s 1072. Section 1075 creates an exception which is available to applicants who are carrying on a business. Section 1075 permits applicants who derive income from a business to reduce the amount of the income for the purposes of the assets test by the amount of any deductions that would be allowed under the general deduction provisions of the income tax legislation. The section says in effect that the applicant’s income for the purposes of the test will be his or her net income (ie, gross income less reasonable business expenses).

20. Mr Laming says he is entitled to take advantage of the exception in s 1075. If he is right, there would not have been an overpayment. It is necessary to consider whether or not he is an employee or an independent contractor in order to resolve the issue. That enquiry is complicated by the fact that some of the documents – especially those emanating from CDU - identify Mr Laming as an employee while other documents (especially those emanating from DEST dealing with a contractual relationship that is practically identical to the applicant’s relationship with CDU) expressly state Mr Laming is not an employee. The answer lies in an analysis of the common law.

21.     The High Court explained in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 that courts traditionally applied what is known as the control test to relationships to distinguish between contracts of service (employer-employee agreements) and contracts for service (contracts for the supply of services by an independent contractor). The law suggested managers had a greater degree of actual control over employees than they did over independent contractors. In Stevens, Mason J concluded (at 29) the courts would look to the potential for control as well as the actual exercise of control. The Court recognised other factors might also be relevant. Mason J explained (at 20) “it is the totality of the relationship between the parties which must be considered.”

22.     The High Court followed this approach in Hollis v Vabu Pty Ltd [2001] HCA 44. In Vabu, the Court was required to characterise the relationship between a courier firm and the bike-riders it retained to deliver packages. The case arose in the context of a claim that the firm was vicariously liable for the negligence of one of the riders. The Court (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ at paragraphs 43-45) considered whether:

·the couriers were skilled workers that were capable of working on their own, operating their own businesses;

·the couriers had control over the manner in which they performed their own work, or whether they had to comply with their manager’s instructions. The Court considered whether the couriers could work for other firms without permission or otherwise pursue a real business enterprise on their own account;

·the couriers were presented to the public as emanations of the firm;

·management of the firm controlled the couriers’ finances – which extended to organising and deducting the cost of insurance;

·the couriers were responsible for providing and maintaining their own equipment;

·management had the right to exercise control in incidental or collateral matters, or whether there was more scope for the exercise of substantive control.

23.     (The Court also considered questions of deterrence – a policy question that was relevant to the particular issue of vicarious liability before the Court.)

24.     The list of factors referred to in Vabu is not exhaustive. The factors referred to in that case provide an indication of the scope of the inquiry envisaged by Mason J in Stevens.   In this case, Mr Laming is a skilled worker. He is capable of working as an independent consultant in his own business, and does work in that capacity. CDU and DEST do not place any limit on his capacity to accept engagements from other organisations. He runs his business and deals with the students more or less as he sees fit. DEST and CDU apparently refer students on the basis that the tutoring will be conducted on a private basis, albeit that the tutors are funded by ATAS and the tutors are approved. As a practical matter, there is little supervision or capacity for supervision of his work. He operates outside the structure of CDU and DEST. Both organisations exert some control over the applicant’s finances (providing group certificates is one example; the possibility of payment of a travel allowance is another).

25.     After considering all of these factors, I am satisfied the applicants’ relationships with CDU and DEST should not be characterised as employment relationships. When I take into account the level and potential for control in particular, it is clear that Mr Laming was an independent contractor during the relevant period. He ran his own educational enterprise that was not integrated into the structure of either of the organisations that contracted with him. It follows he was entitled to deduct his business expenses and have his income assessment on that basis.

conclusion

26. The decision under review is set aside. The applicant is an independent contractor and is entitled to deduct his legitimate business expenses from his gross income for the purposes of the income test in s 1064 of the Social Security Act 1991. 

I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member B J McCabe.

Signed:         .....................................................................................
  Associate:     Sam J Appleton

Date of Hearing  30 June 2005, Darwin
Date of Decision  17 November 2005, Brisbane

The applicant appeared in person.

The respondent was represented by Ms Oliver, Departmental Advocate