RWPY and Commissioner of Taxation (Taxation)

[2021] AATA 4921

RWPY and Commissioner of Taxation (Taxation) [2021] AATA 4921 (24 December 2021)

Division:SMALL BUSINESS TAXATION DIVISION

File Number(s):      2020/4608

Re:RWPY

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:24 December 2021

Place:Sydney

The objection decision is affirmed.

.........................SGD..........................

Deputy President Bernard J McCabe

CATCHWORDS

Catchwords

ELIGIBILITY FOR JOBKEEPER PAYMENTS – whereas the applicant made an application for Jobkeeper payments – whether the applicant was carrying on a business – whether the applicant’s work was that of an independent contractor – applicant was not found to be carrying on a business – decision under review affirmed

LEGISLATION

Coronavirus Economic Response Package (Payments and Benefits) Rules 2020
Income Tax Assessmnet Act 1997
The Coronavirus Economic Response Package Act 2020 (Cth)

CASES

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122
Hollis v Vabu [2001] HCA 44
Jacobellis v. Ohio [1964] USSC 164; 378 US 184 (1964)
Martin v Federal Commissioner of Taxation (1953) 90 CLR 470
MWWD and Commissioner of Taxation [2020] AATA 4169
Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1

REASONS FOR DECISION

Deputy President Bernard J McCabe

24 December 2021

1. The Commissioner of Taxation says the applicant is unable to receive the Jobkeeper payment because she cannot satisfy one of the eligibility rules in the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (the Rules) – namely, the requirement in s 7(1)(a) of the Rules that she was carrying on a business as at 1 March 2020. If I am satisfied she was carrying on a business at the relevant time, she will be eligible to receive the Jobkeeper payment in respect of fortnights between 30 March and 10 May 2020.

2. The uncertainty arises because the applicant says she was an independent contractor who conducted her own business. The Commissioner doubts that: he says the applicant was properly regarded as an employee rather than an independent contractor, but she was not running her own business in any event.

3. After reviewing the evidence, I am not satisfied the applicant was carrying on a business. I explain my reasons below.

   THE APPLICANT’S BACKGROUND

4. The discussion which follows is drawn from the applicant’s evidence at the hearing, her two statements and the documents tendered in evidence. The applicant appeared to be an open and honest witness who did her best to assist me. The evidence she provided is uncontroversial. The real dispute in this case is over how to characterise the facts. It is not really a dispute over the facts themselves.

5. The applicant was 16 years of age when she did what many school students do: she began looking for part-time work so she could buy a car and obtain spending money. She initially tried working at a fast-food outlet. She quickly decided that was not for her. Her mother, who worked for a company that distributed a major cosmetics brand, suggested the applicant might consider working in a department store as a promotional make-up artist. The applicant said she thought that was worth trying because she liked make-up, and she thought the work would be more pleasant and better paying than other positions. She also said she was familiar with high-end cosmetics because she had used them from a young age under her mother’s tutelage. The applicant assumed she would have a good choice of getting work at one of the retail concessions operated by the cosmetics brand that employed her mother as a manager, but she recalled her mother explaining the applicant would have to be a contractor to work in one of the concessions because there were no employee positions available at the time.

6. With that end in mind, the applicant said her father assisted her to register an Australian Business Number (ABN) and she obtained a tax file number. She did not register for the Goods and Services Tax (GST) for the obvious reason that she was unlikely to exceed the relevant threshold. She then formally submitted her resume to the cosmetic company that employed her mother.

   THE FEATURES OF THE WORKPLACE AND THE APPLICANT’S INITIAL ENGAGEMENT

7. I should explain how the cosmetic company’s retail operations were carried on. The retail concession outlets were located in department stores. I was not provided with the terms of the arrangements between the concession-holders and any individual department store chain, but I do not understand there to be anything unusual about the way these things worked. The company’s concession in each store was comprised of a retail counter and displays featuring the company’s products. The counter and displays were adorned with signage and graphics bearing the company’s logo and other intellectual property, and there were dedicated staff wearing the company’s uniform. There was a ‘counter manager’ in each concession who might also be an employee of the department store. The counter manager’s responsibilities were broadly described in document ST12, which I will discuss below. I was told there was always at least one store employee working in each concession because they were the only individuals authorised to operate the cash-register and point-of-sale equipment. The concession might also have one or more ‘beauty advisors’ and promotional make-up artists who assisted with sales and demonstrated the company’s cosmetic products for the benefit of shoppers. The promotional make-up artists tended to work during peak times, such as Christmas, and during sales. They assisted the beauty advisers. I understand all the promotional make-up artists were engaged as contractors.

8. The cosmetic company had an ‘onboarding’ process which established the company’s expectations of those engaged to work in its concessions that were located in department stores. The basic expectations were included in an email note (authored by the applicant’s mother in her managerial capacity) which is identified as document ST13. The note explained:

   Please read below for all guidelines during your time working as a PMUA [promotional make-up artist] for [the cosmetic company].

   1. All PMUA hours are to be approved by myself, you cannot change your hours unless approved my myself.

   2. You are contracted and are 100% paid by [the company] and are not to be working in any other areas or for any other brand whilst you are working as a PMUA for [the company]. Should you ever be requested to work somewhere else other than [the company], then you must contact me directly.

   3. You must arrive and finish in a timely manner, so example, if you finish at 4.00pm, then that is the time you leave, not 3.55pm, if you start at 9.00am you must be ready on the tile to work at 9.00am.

   4. As a PMUA we do not pay for any of your breaks, so, they must be taken off all time sheets and invoices.

   5. As a PMUA it is your job to SELL, not to unpack stock or do other counter duties, if however the counter needs help then you must get approval from me.

   6. As a PMUA the expectation is that you behave in a professional manner at all times and promote [the company] only.

   7. Processing your invoice is to be done in your own time (after hours), and not during a shift or a work.

   8. When we are in sale and have off location trestles, it is your job to stand and work from the trestles – no exceptions.

   9. Your time sheet MUST be signed at each shift by your Counter Manager or [department store] Manager, not a work colleague.

   10. A copy of your time sheet MUST be left at the counter and given to the counter manager, so that you understand your hours and sales MUST match all reports that I receive from each counter manager, and if they don’t I will need to follow up with you.

   11. If ever you become a BA who also works as a PMUA, then your hours and sales as a PMUA MUST be separate.

   12. You must wear the entire [company branded] Uniform as supplied, all exceptions, must be approved by myself. I have ordered more smaller sizes and I am just waiting to receive them, as soon as I do will be get them to you.

   13. You have already been sent the uniform guidelines, but to reiterate, you must wear a full face of makeup at each shift and your makeup must be all [the company’s product], we will assist in making sure you have some pieces when you start.

9. The email correspondence also included instructions on how to invoice the company for work undertaken and provided other information that would enable her to be paid.

10. A glossy presentation that explained the company’s uniform standards was also provided to the applicant at some point. That document is headed [Name of company] Uniform Standards 2020. It is reproduced in the materials as document ST14. The document includes information about the uniform and other aspects of the worker’s presentation. I note the opening line of the presentation explains:

    The [company’s] uniform is supplied to you as part of your employment at [the company]. Whilst wearing the uniform you are representing [the company], therefore the following standards are for you to follow and adhered to [sic] in order for you to maintain the image of the [company’s] Brand.

11. The presentation goes on to emphasise the worker has been “selected to represent a global recognised brand.” On the following page, the document says:

    What is…. the [company] Beauty Advisor Uniform:

    …

    Employment conditions apply. As a [company] BA you are responsible in maintaining your uniform correctly.

12. The reference to ‘Beauty Advisor’ requires some further explanation given the email from the applicant’s mother in ST13 appears to contemplate a “PMUA” (ie, a promotional make-up artist) potentially becoming “a BA” (presumably a ‘Beauty Advisor’) which suggests the two roles are distinct. (I note document ST12 makes the distinction as well.) In those circumstances, I cannot safely infer the reference in the presentation at ST14 to a ‘Beauty Advisor’ being subject to employment conditions inevitably extends to the applicant. However there does not seem to be any doubt that the detailed and prescriptive rules about presentation – about what to wear, and how to launder and maintain clothes and equipment like brushes and make-up belts – applied to the applicant.

13. During cross-examination, Mr Josifoski showed the applicant a document which had been reproduced from the [name of company] Counter Manager Manual. It is identified in the Tribunal’s hearing book as ST12. The extracted document was headed ‘PROMOTIONAL MAKEUP ARTIST (PMUA) JOB DESCRIPTION’. The applicant had apparently provided a copy of the document to the Commissioner prior to the hearing. She pointed out the document referred at the bottom of the page to a different department store chain to the one in which she worked, but it was not suggested the job description was inapplicable. The document explains the role of the PMUA as part of the team which assists beauty advisers. It also sets out the “[d]uties and responsibilities of PMUA’, which are:

    Before arrival:

    Communicates with the store the day before to advise of their arrival and to discuss the event and expectations.

    On arrival:

    Arrives promptly, in uniform, and fully made up in line with the current promotional event

    Maintains the highest standard of appearance and is keenly aware of latest trends in fashion and makeup, and ensures her image reflects this. (Refer also to Grooming Guidelines.)

    Sales Targets:

    Achieves or exceeds personal promotional target

    Assists counter to achieve or exceed target

    Works closely with the Counter Manager to ensure counter target is achieved and the promotion is successful.

    During the Promotion:

    Is professional and courteous to all store personnel and abides by store regulations

    Works outside the counter, or on the dais, concentrating on makeups, writing charts, giving advice, attracting customers and selling

    Uses the microphone whenever possible to create theatre and attract consumers to the counter.

    Administration:

    Maintains makeup kit and brushes, etc, in good condition and follows hygiene regulations

    Liaises with Counter Manager re overstocks/out of stocks

    Communicates with Counter Manager on regarding rostered break times

    Promptly completes daily and weekly promotional reports with all relevant details

    Alerts ADM/Promotions Manager on poor promotional support, or lack of support from store or counter staff.

14. The description clearly contemplates the Counter Manager overseeing and directing the individual’s work. That work is also integrated into that of the team with a view to achieving a “counter target”.

15. The applicant was briefly engaged through an employment agency but from late June 2019 she was engaged by the company. She did not work regular hours. I was told she participated in a Whatsapp chat group along with other individuals who worked in the concessions. From time to time, the manager (her mother) would send a message to the group asking who was available to work in various locations. The individuals would nominate themselves. The manager could allocate them to work at a particular location and they would report for work at that store at the appointed time.

    THE RELEVANT LEGAL RULES

16. The Commonwealth established the Jobkeeper payment and ‘Cashflow boost’ in response to the disruption caused by the Coronavirus pandemic. The different forms of relief were hastily arranged and introduced under the Coronavirus Economic Response Package Act 2020 (Cth) (the CERP Act). The Rules governing eligibility for Jobkeeper are authorised under the CERP Act.

17. Jobkeeper payments were made available to eligible businesses in respect of employees. Payments were also available to eligible ‘business participants’ - typically owner-operators. The Rules include criteria which must be satisfied before an individual becomes eligible to receive the payment in a particular fortnight. The applicant now acknowledges she is not eligible to receive the payments in fortnights after May 2020 which were the subject of her original claim because she was unable to satisfy the requirements. But she insists she satisfies the criteria in respect of the fortnightly periods from the end of March until 10 May 2020.

18. I have already explained the requirement at issue in this case is the requirement that the applicant be ‘carrying on a business’ at the relevant time. The word ‘business’ is not defined in the CERP Act or the Rules although s 4(2) of the CERP Rules says terms used in the Rules should generally be given the same meaning as they have where defined in the Income Tax Assessment Act 1997 (Cth) (ITAA97). That was done because the Rules were hastily assembled in response to a crisis and made use of existing processes and concepts.

19. The definition of ‘business’ in s 995-1 says the expression “includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee.” Mr Josifoski’s submissions are framed on the basis that the express exclusion of employment relationships is the key to this case but he argues the applicant does not answer the definition (such as it is) even if the applicant is a contractor given the way the courts have interpreted the expression ‘business’.

20. The business concept has been discussed in many leading authorities. Well-known authorities include the High Court’s judgment in Martin v Federal Commissioner of Taxation (1953) 90 CLR 470. In that case, Webb J explained (at 474) the fluid nature of the concept and the need for an assessment of all the facts and circumstances to form an impression. One must look to the activities themselves, but one must also look to the objectives of the person engaging in those activities. Mr Josifoski also referred me to the High Court’s observations in Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 where the Court explained (at [59]):

    The existence of a business is a matter of fact and degree. It will depend on a number of indicia, which must be considered in combination and as a whole. No one factor is necessarily determinative…. Relevant factors include, but are not limited to, the existence of a profit-making purpose, the scale of activities, the commercial character of the transactions, and whether the activities are systematic and organised, often described as whether the activities are carried out in a business-like manner…

21. It follows I must undertake a wide-ranging survey of the activities and reach a view having regard to various indicia of a business. I will deal with the parties’ submissions on this point below. But I should mention at this juncture the Commissioner’s specific submission that the applicant cannot be carrying on a business because she is involved in an employment relationship with the company. It stands to reason that one cannot be conducting one’s own business if one is participating as an integral part of the business of another as an employee of that other entity. The distinction between contracts of service (ie, employment contracts) and contracts for service (ie, non-employment relationships in which a contractor provides services) is almost as fuzzy as the definition of ‘business’. While the courts have emphasised the importance of looking at all aspects of the relationship in question (see for example Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122 at [20] per Allsop CJ), the High Court explained in Hollis v Vabu [2001] HCA 44 (per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ at [40]) the distinction was:

    rooted fundamentally in the difference between a person who serves his employer in his, the employer’s business, and a person who carries on a trade or business of his own.

22. In MWWD and Commissioner of Taxation [2020] AATA 4169, I summarised the challenge facing a decision-maker, in light of the authorities, as follows:

    The challenge then, is to look to the relationship between the parties whilst keeping in mind the essence of what constitutes an employment relationship as opposed to an independent contractor arrangement. There may be aspects of the relationship which point one way or the other. The assessment is necessarily impressionistic but, like obscenity, an employment relationship should be more or less obvious when one sees it: see Jacobellis v. Ohio [1964] USSC 164; 378 US 184 (1964) at 197 per Stewart J.

    IS THE APPLICANT CARRYING ON A BUSINESS? THE INDICIA

23. I acknowledge the applicant and the company used the language of contract (as opposed to the language of employment) to describe their relationship. The language is consistent with the applicant conducting a business. But there are other features of the relationship which are inconsistent. I will address the various features under convenient headings that are derived from the case law in relation to businesses. That caselaw overlaps with the cases that distinguish between employees and independent contractors.

24. Existence of a profit-making purpose: I accept the applicant was motivated by a desire to make money when she took steps (including acquiring an ABN) to commence the activity. But when I asked the applicant specific questions about her motivation at the hearing, her evidence made clear she was motivated by a desire to get a suitable job that would generate income. It was clear she went about it in the way she did because the company did not have any employed positions available but was offering contracts. A desire to achieve a position in which you are paid a fair remuneration in return for your labour is not the same thing as a profit-making purpose. In this regard, I note the applicant did not bargain over her fees.  She accepted the standard hourly rates, and there was no provision for commission or profit margins or individualised incentives that one might often see in a contract for service.

25. The commercial nature of the transactions: The applicant’s services were essentially those which would be provided in the course of a conventional employment relationship. The applicant did not provide her own tools, such as brushes used to apply the make-up. She only supplied semi-skilled labour. There was nothing especially commercial about the interaction with the company that would distinguish that relationship from that which typically existed between employer and employee. Indeed, there is evidence that she subsequently obtained employment with the department store and worked in a similar role.

1. The scale and intensity or regularity of the activities: This was not a business in which the applicant undertook regular interactions with a range of clients. While some businesses might only engage in one transaction or have one regular client, the activities in question here look more like a casual employment arrangement in which one is rostered or allocated work on an as-needed basis. There were limitations on the ability of the applicant to accept work from other similar businesses, although she was not expected to work exclusively for the company. The want of exclusivity is not an indicator one way or the other in the circumstances. The scale and intensity is more consistent with an employment relationship and looks less like a business.

2. Control and autonomy: the applicant was subjected to detailed rules governing her appearance and presentation. She was supervised by the counter manager when in the store, and the instructions from the company when she was engaged refer to circumstances in which the applicant would be required to check with the company before acting. The position description in the counter manager’s manual makes clear the applicant is also required to observe ‘store regulations’, all of which suggests her work took place within the constraints that one typically associates with an employment environment. Complaints were dealt with by the company and the store rather than by the applicant herself, which also points to a want of autonomy. The applicant had the freedom to accept work when it was offered, but only to the same extent as any ordinary casual employee, and there is no evidence to suggest she could delegate to others when she accepted an engagement. Once she agreed to work, the instructions from the company make clear she was required to strictly observe the set hours. She had an entitlement to breaks, and she explained she did not need to seek permission to go on a break precisely because it was an entitlement – but she also agreed she routinely engaged with the counter manager or other staff when she did take her break. It follows she had limited control over her working day. The applicant did not establish that she was free to exercise judgment in the way in which she undertook her work. The evidence does not establish she enjoyed the sort of autonomy one would expect from somebody conducting their own business.

3. Extent of integration into the business of the company: the counter manager’s manual makes clear the applicant is part of a team that operates together under unified command in pursuit of sales targets. The language in the manual refers to the role occupied by the applicant as being a supporting role. That reflects a relatively high level of integration into the company’s business, at least when the applicant is present and working. That is inconsistent with the applicant conducting a business of her own.

4. The applicant was certainly not permitted to identify herself to third parties as an independent contractor running her own business. The documentary evidence – most obviously the glossy Uniform Standards document – makes clear that individuals represent the brand. The prescriptive requirements as to presentation make clear the applicant must subordinate individual characteristics to conform closely to the company’s marketing. That is inconsistent with the applicant conducting her own venture.

5. Risk-allocation: the applicant was required to take out insurance which suggests she bears enterprise risk – but it is not clear what that risk might be. It is not skilled work which is more likely to expose the applicant to potential liability. I do not think the requirement to take out insurance in this case is strong evidence of a business.

6. Record-keeping, billing and remuneration: the applicant was required to keep timesheets. That is not inconsistent with an employment relationship. She did generate invoices bearing her ABN and the company did not make superannuation or withhold PAYG tax. That behaviour is consistent with the applicant being an independent contractor but the behaviour must be understood in the context of the company’s preference for dealing with contractors instead of employees. It is certainly evidence of the company’s intention that the relationship be treated as a contract for service, but it is difficult to give that significant weight.

7. I note the applicant did not keep extensive records apart from copies of the invoices. I do not expect sophisticated records in the circumstances, but the applicant has not reported the income she derived from the company in her tax return for the relevant period. I would have expected a business-person would have reported any income and identified it as business income as opposed to income derived from salary or wages.

8. In correspondence with the Commissioner reproduced in document ST11, it was made clear the applicant was paid an hourly rate that was applicable to all promotional make-up artists engaged by the company in that state. There was no negotiation of a higher rate of pay or incentives and no prospect for individualised arrangements in recognition of her skills or experience or qualities. Her remuneration arrangements were more akin to wages in which she received an hourly rate in return for providing her labour, albeit that she did not receive superannuation or other benefits usually associated with employment.

9. Intellectual property and other intangible assets: the applicant did not contribute any intellectual property to the venture. She contracted in her own name, and she did not expect to receive or retain any goodwill in the business. She did not have an established reputation or track-record as an independent contractor.

   CONCLUSION

10. There are some indicia of a business but on balance, when one has regard to the entirety of the relationship, it is tolerably clear the applicant was not conducting a business. The relationship has more in common with an employment arrangement than a business conducted by the applicant. The applicant is supplying labour to the company and receiving remuneration, albeit that the arrangement is explained by the company as a contracting arrangement for its own reasons. The fact the applicant might diversify in the future (as she mentioned in her evidence) to provide make-up services to other paying customers is something that might change the balance – but that is not relevant to the characterisation of the activities in March 2020.

11. I am not required to make a positive finding that the applicant was engaged in an employment relationship with the company. I am merely required to decide whether she has discharged the burden of establishing the Commissioner’s eligibility decision was wrong, and that it should have been made differently. I am not satisfied the burden has been discharged in this case given the doubts I have discussed. It follows the objection decision must be affirmed.

I certify that the preceding 36 (thirty -six) paragraphs are a true copy of the reasons for the decision herein of

...................SGD.....................

Associate

Dated:   24 December 2021

Date(s) of hearing:	10 December 2021
Applicant’s Advocate:	Self-represented
Counsel for the Respondent:	Mr Keni Josifoski
Solicitors for the Respondent:	Self-represented