PROVIDER And COMMISSIONER OF TAXATION

[2010] AATA 475

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 475

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/3923

TAXATION APPEALS DIVISION		)
Re		CARE PROVIDER

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr S E Frost, Senior Member

Date28 June 2010  

PlaceSydney

Decision The objection decision is remitted under s 42D of the Administrative Appeals Tribunal Act 1975 to the Commissioner for reconsideration, with a direction that the Commissioner note that the workers were paid to do work wholly or principally of a domestic or private nature.

...............[SGD]...............................

S E Frost
  Senior Member

CATCHWORDS

Taxation – Superannuation guarantee – section 12(11) of the Superannuation Guarantee (Administration) Act 1992 – Employer and Employee – Work principally of a domestic or private nature – workers not “employees” - no individual superannuation guarantee shortfall - Decision remitted.

Administrative Appeals Tribunal Act 1975, 42D

Superannuation Guarantee (Administration) Act 1992, ss 11, 12, 19

REASONS FOR DECISION

Mr S E Frost, Senior Member       

Introduction

1.      From July to December 2000 the taxpayer owned a business that provided what are described as community support services.  Typically the clients of the business were disabled, infirm, elderly or otherwise in need of physical assistance in their homes.  The services provided to them included cooking, cleaning, shopping, showering, dressing and general household duties.  The services were not physically or personally provided by the taxpayer, but by workers on whom the taxpayer could call when a client placed a request for assistance.

2.      In 2003 the Commissioner made an assessment of Superannuation Guarantee Charge for the year ended 30 June 2001 on the basis that the taxpayer had failed to make superannuation contributions on behalf of 21 of her workers, referred to in the notice of assessment as “employees”.  The taxpayer’s objection against that assessment was disallowed, and that objection decision is now before the Tribunal for review.

The issues

3.      The central issue before the Tribunal is whether the superannuation guarantee assessment made by the Commissioner is excessive.

4.      Originally the taxpayer contested the assessment on the ground that the workers were “exempt employees” because their duties “consisted entirely of Domestic Care within a Domestic Home situation” and they worked less than 30 hours per week each week.

5. That ground is based on ss 12(11) and 11(2) of the Superannuation Guarantee (Administration) Act 1992 (the Act) which provide an exception to the circumstances in which an employer has a superannuation guarantee shortfall in respect of salary or wages paid to an employee.  (Each of those highlighted words and expressions is defined in the Act.)

6. “Employee” and “employer” are dealt with in s 12 of the Act, as follows:

12  Interpretation: employee, employer

(1)       Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):

(a)expand the meaning of those terms; and

(b)make particular provision to avoid doubt as to the status of certain persons.

(2)       …

(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.

…

(11)     A person who is paid to do work wholly or principally of a domestic or private nature for not more than 30 hours per week is not regarded as an employee in relation to that work.

7. “Salary or wages” is defined in s 11(1) to include “commission” and certain specified types of “payment” or “remuneration” (none of which is relevant to the issues in this case). Section 11(2), though, provides:

(2)       Remuneration under a contract for the employment of a person, for not more than 30 hours per week, in work that is wholly or principally of a domestic or private nature is not to be taken into account as salary or wages for the purposes of this Act.

8. Probably because the Commissioner’s objection decision summarily rejected the taxpayer’s original ground of objection (as set out in [4] above), the taxpayer did not press that ground at the hearing, preferring to rely instead on an argument that the workers were not “employees” of the taxpayer within s 12 of the Act.

9.      The hearing was conducted on 14 August 2009 and 24 February 2010.  After the hearing, it became apparent to me that there was considerable merit in the taxpayer’s original ground of objection.  I therefore asked the Commissioner to provide written submissions on that issue, and following the filing of those submissions, I allowed the taxpayer a short time to respond.  The taxpayer’s submissions were received by the Tribunal on 16 June 2010.

Conclusion

10. I have come to the view that the workers, even if they were employees of the taxpayer because of s 12(1) or s 12(3) of the Act, were “paid to do work wholly or principally of a domestic or private nature”. That means that the workers’ circumstances satisfy one of the two broad elements of s 12(11) of the Act. In all likelihood their circumstances satisfy the second element as well, but since that particular question was not explored during the hearing, it would be inappropriate for me to make a finding of fact to that effect.

11.     The appropriate course for the Tribunal is to remit the objection decision to the Commissioner for reconsideration, with a direction that the Commissioner note that the workers were “paid to do work wholly or principally of a domestic or private nature”.  What will remain for the Commissioner’s consideration is the question whether the workers were paid for not more than 30 hours per week each week. 

Work of a domestic or private nature

12. Section 12(11) of the Act is set out earlier in these reasons, at [6].

13. A person whose circumstances satisfy s 12(11) is “not regarded as an employee” in relation to work which is described in the subsection. It follows that the entity which would otherwise be regarded as that person’s employer cannot have an “individual superannuation guarantee shortfall” for the person (s 19 of the Act).

14. The immediate question under s 12(11) is whether the workers, under the arrangement they had with the taxpayer, were “paid to do work wholly or principally of a domestic or private nature”.

15.     The relevant facts are not in dispute.  The business of the taxpayer is accurately described as that of an “intermediary”.  It receives calls from members of the community when they require assistance in the home.  The taxpayer will consult its list of workers, determine which of the workers is appropriate for the assignment, and then offer the assignment to that worker.  If the worker accepts the offer, then the worker attends the home of the “client” and performs the required work.  If the worker declines the offer, then the taxpayer offers the assignment to alternative workers, one at a time, until someone accepts.

16.     The work that is undertaken is performed at the client’s premises, with one exception – when the worker goes shopping for the client.  The tasks include cooking, cleaning, showering, dressing and sometimes lawnmowing.  Apart from the lawnmowers (where the workers will use their own), the equipment and materials required to perform the tasks (such as cleaning materials, brooms, vacuum cleaners, cooking equipment) are generally provided by the client rather than the worker.  However, if the client does not have, say, a vacuum cleaner then the worker will provide one. 

17. All the tasks are based in or around the home – or, in the case of shopping, they have a close connection with the client’s home life. For that reason they are clearly “domestic” in nature, in that they relate to the home, house or household. The Commissioner’s principal argument against the application of s 12(11) of the Act is set out in [26] of his written submissions:

In the context of the facts of this matter, it is submitted that while the work done for the end-user may be objectively viewed to be of a domestic or private nature that of itself cannot determine the nature of the work done for the Applicant.  The work done when viewed from the Applicant’s point of view (as the payer) was labour provided in the course of the Applicant’s business and not work done for the Applicant personally or work that related to the Applicant’s home, household affairs or family organisation.

18. The Commissioner’s approach, in my view, misconstrues s 12(11). The subsection requires an examination of the nature of the work, not the identity or any of the attributes of the person who directly pays for that work, nor the relationship between that payer and the worker.  The focus is on the nature of the work for which the worker is paid.  It is irrelevant that the payer is making its payment in the course of a business that it carries on.  That circumstance has no impact on the nature of the work that the worker is being paid for.

19.     It may be accepted that the workers are not providing domestic services to the taxpayer, but that is not the question.  The question does not concern itself with the nature of the services the workers provide to the taxpayer; instead the question is whether the workers are “paid to do work wholly or principally of a domestic or private nature”.  To suggest that the work that the workers do, and for which they are paid, changes from work of a domestic nature to work of some other nature, simply because the work is not performed in the home of the taxpayer, but in the home of some other person in what is obviously a domestic setting, is, in my view, wrong.

Decision

20. For these reasons I remit the objection decision, under s 42D of the Administrative Appeals Tribunal Act 1975 (the AAT Act), to the Commissioner for reconsideration, with a direction that the Commissioner note that the workers were paid to do work wholly or principally of a domestic or private nature.

21. For the purposes of s 42D(5) of the AAT Act, I allow the Commissioner 42 days to undertake that reconsideration and to take appropriate action under s 42D(2).

I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S E Frost, Senior Member

Signed: .............[SGD]......................................................
  Associate

Dates of Hearing  14 August 2009, 24 February 2010

Final submissions received               16 June 2010
Date of Decision  28 June 2010
Appearance for the Applicant            The Applicant’s father      
Appearance for the Respondent       Mr J Burne, ATO Legal Services