S&H Investments Pty Ltd and Commissioner of Taxation
[2024] AATA 893
•29 April 2024
S&H Investments Pty Ltd and Commissioner of Taxation [2024] AATA 893 (29 April 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Numbers: 2023/1573; 2023/1574; 2023/1575; 2023/1576; 2023/1577
Re:S&H Investments Pty Ltd
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Senior Member Dr M Evans-Bonner
Date:29 April 2024
Place:Perth
The Reviewable Decision is affirmed in applications 2023/1573, 2023/1574, 2023/1575, 2023/1576 and 2023/157.
........................[Sgd]................................................
Senior Member Dr M Evans-Bonner
CATCHWORDS
SUPERANNUATION – whether Applicant liable to make superannuation contributions on behalf of a worker – whether worker an “employee” under the extended definition in s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) – extended definition of “employee” satisfied – Reviewable Decision affirmed
LEGISLATION
Superannuation Guarantee (Administration) Act 1992 (Cth) – ss 12(1), 12(3)
Taxation Administration Act 1992 (Cth) – s 14ZZK
CASES
Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118
JMC Pty Limited v Commissioner of Taxation [2022] FCA 750
Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48
OEM Supplies Pty Ltd and Commissioner of Taxation [2015] AATA 532
The Trustee For Virdis Family Trust t/a Rickard Heating Pty Ltd and Commissioner of Taxation [2022] AATA 3
REASONS FOR DECISION
Senior Member Dr M Evans-Bonner
29 April 2024
BACKGROUND TO THE APPLICATIONS
On 9 March 2023, the Applicant lodged an application in the Taxation & Commercial Division of this Tribunal (T1) seeking review of an objection decision made by the Deputy Commissioner of Taxation dated 21 December 2022 (T2). This is the Reviewable Decision.
The Deputy Commissioner disallowed in full an objection by the Applicant dated 15 April 2022 (T71/284-288).
The Applicant objected against superannuation guarantee charge (SGC) assessments for the quarters ending 30 June 2015 to 30 September 2018 inclusive (T3-T16) (Relevant Quarters).
Consequently, although there is one Reviewable Decision, it relates to five income tax years (30 June 2015 through to the income year ending 30 June 2019). Therefore, five separate application numbers have been allocated.
The assessments were made on the basis that a worker, who I will refer to as TW, was the Applicant’s employee, within the extended definition of “employee” under s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGAA) during the Relevant Quarters. Specifically, the superannuation guarantee charge was imposed because the Deputy Commissioner believed that TW was an employee of the Applicant, and that the Applicant had failed to pay superannuation contributions for her.
However, the Applicant claims that TW was an independent contractor, not an employee. The Applicant claims a contractual arrangement was expressly agreed between the Applicant and TW. The Applicant submitted that TW was paid a higher hourly rate to include her superannuation, an arrangement that she agreed to in May 2015. The Applicant submitted that TW invoiced the Applicant for amounts which included superannuation using an ABN and that the Australian Taxation Office (ATO) should be pursuing her for the superannuation and not the Applicant (T1/5; A1). Consequently, the Applicant submitted that no superannuation contributions were payable and that the superannuation guarantee assessments for the Relevant Quarters were incorrect. It is on that basis that the Applicant seeks a review of the Reviewable Decision in this Tribunal.
ISSUE
The issue I must determine is whether TW was an employee of the Applicant within the extended definition of that term under s 12(3) of the SGAA during the Relevant Quarters.
RELEVANT LAW
Burden of proof
Section 14ZZK of the Taxation Administration Act 1953 (Cth) (the TAA), provides:
On an application for review of a reviewable objection decision:
(a)the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b)the applicant has the burden of proving:
(i) if the taxation decision concerned is an assessment—that the assessment is excessive or otherwise incorrect and what the assessment should have been; or
(ii) in any other case—that the taxation decision concerned should not have been made or should have been made differently.
The effect of s 14ZZK is that the Applicant bears the onus of proving that the superannuation guarantee assessments were excessive or otherwise incorrect and what they should have been. This effectively means that the Applicant has the burden of proving that TW was not an employee during the Relevant Quarters under 12(3) of the SGAA.
The statutory regime
Deputy President Constance provided a succinct overview of the statutory regime in OEM Supplies Pty Ltd and Commissioner of Taxation [2015] AATA 532 at [6]-[8]:
A superannuation guarantee charge is imposed by the Commissioner in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth). Read with the Superannuation Guarantee Charge Act 1992 (Cth), it imposes a superannuation guarantee charge on employers who fail to pay superannuation contributions in respect of their employees.
The superannuation guarantee charge, in accordance with section 17 of the Administration Act, consists of the total of an employer’s individual superannuation guarantee shortfalls for a quarter, along with a component related to nominal interest and administration. The shortfall is calculated by reference to the “salary or wages” of the employee.
Once a charge is paid, the Commissioner pays the outstanding superannuation contributions to the employee.
(Original emphasis.)
Further, in Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48 (Jamsek), Perram and Anderson JJ explained at [46]:
… the purpose of the superannuation regime, including the SGA Act, is to secure Australian workers with a minimum level of superannuation by the application of a charge to all employers in respect of their individual employees, through an efficient mechanism based on self-assessment and administration by employers and the Australian Taxation Office …
Extended definition of an “employee”
Section 12 of the SGAA concerns the interpretation of the terms, “employee” and “employer”. Relevantly, s 12(1) provides:
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.
(Bold in original.)
As contemplated in s 12(1) of the SGAA, s 12(3) of the SGAA extends the definition of an “employee” beyond the common law definition. That is, it provides an additional basis for a person to be an employee for the purpose of the SGAA if they are not otherwise an employee at common law. The provision provides:
(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.
Three elements of the extended definition
In Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 (Moffet), Perram and Anderson JJ, with whom Wigney J agreed, explained that s 12(3) of the SGAA has three elements, at [82]:
In our opinion, what s 12(3) requires is that: (a) there should be a ‘contract’; (b) which is wholly or principally ‘for’ the labour of a person; and (c) that the person must ‘work’ under that contract.
In these applications there is no dispute between the parties that there is a contract and that TW performed work under the contract. It is whether the contract was wholly or principally for the labour of TW that is in contention.
The “for” element
In Jamsek, Perram and Anderson JJ explained the “for” element at [49]-[52]:
The second element of s 12(3), that is, whether the contract is wholly or principally “for” the labour of the person, is to be assessed from the perspective of the putative “employer” client: Moffet at [84]-[85] (Perram and Anderson JJ, Wigney J agreeing).
The question of what the contract was “for” from the perspective of the putative employer “is to be determined by reference to [the] terms” of the contract: Moffet at [86] (Perram and Anderson JJ).
A contract that “leaves the contractor free to do the work himself or to employ other persons to carry it out” is not “wholly or principally for the labour of the person”: Neale at 425. It does not matter that “the contractor has himself performed the bulk of the work under the contract or that it was the expectation of the parties that he would do so if, in truth, the contract did not create the relationship of master and servant”: Neale at 425.
A contract “whereby the contractor has undertaken to produce a given result” is also not “wholly or principally for the labour of the person”: Neale at 425. It follows from the above analysis, that “s 12(3) only applies in relation to contracts for the personal performance of work by the worker who is a party to the contract”: On Call at [309] per Bromberg J.
(My emphasis.)
In Moffet, [83]-[86] Perram and Anderson JJ determined the “for” element in the context of that application:
So far as (b) is concerned, the word ‘for’ is purposive but even the simplest employment relationship has two purposes depending on the perspective from which it is viewed. From the employer’s perspective an employment contract is ‘for’ the provision of labour (in return for wages); from the employee’s perspective it is ‘for’ the receipt of wages (in return for labour).
Since s 12(3) poses the question of whether the contract is ‘for’ the labour of a person, this shows that Parliament was mandating an inquiry into the purpose of the contract from the perspective of the person obtaining the benefit of the labour (ie the quasi-employer). On no view could the question posed by s 12(3) be answered by asking whether the contract was wholly or principally ‘for’ wages.
What did Dental Corporation receive for entering into the Services Agreement? In particular, did it receive ‘wholly or principally’ the labour of Dr Moffet? In answering that question it is irrelevant to ask what Dr Moffet might have received from Dental Corporation. …
…
The question of what the Services Agreement was ‘for’ from Dental Corporation’s perspective is to be determined by reference to its terms. …
The “for” test was explained by Wigney J in JMC Pty Limited v Commissioner of Taxation [2022] FCA 750 (JMC) at [30]:
The question whether the contract is “for” the labour of the person must be approached from the perspective of the putative employer: Moffet at [84]. The question must also be determined by reference to the terms of the contract: Moffet at [86]. The question is essentially whether the terms of the contract reveal that the benefit that the putative employer receives from entering into the contract is “wholly or principally” the labour of the putative employee: Moffet at [84]-[85]. The word “principally” in this context is essentially synonymous with “substantially” (Moffet at [104]) or “predominant[ly]”: Moffet at [116].
Later in JMC, at [191], Wigney J summarised that principle more succinctly:
… the question of whether the contract is “for” the labour of the person must be approached from the perspective of the putative employer and determined by reference to the terms of the contract. The question is essentially whether the terms of the contract reveal that the benefit the putative employer receives from entering into the contract is wholly or principally the labour of the putative employee.
An analysis of the contractual relationship between the parties requires a consideration of the respective rights and obligations of the parties under the contracts. Determining whether a contract is wholly or principally for the labour of a person involves an analysis of the contractual relationship between the parties to ascertain, from the perspective of the putative employer, what benefits the putative employer obtained from the worker under the contract.
As was referred to in the passage from Jamsek cited above at para [16], a contract will not be wholly or principally for the labour of a person where it requires the person to produce a particular result. In Jamsek, Perram and Anderson JJ explained at [36], that “Section 12(3) is not satisfied where a contract is properly characterised as being for the provision of a result and not for labour” (see also Wigney J in JMC at [31]).
Relevantly, in JMC, Wigney J stated at [149]:
Ordinarily, however, a contract for the product of labour involves a mode or manner of remuneration which bears little or no reference to the time spent in producing the product: for example, an amount calculated by reference to the amount of timber delivered (Brodribb) or the number of cattle delivered (Queensland Stations Pty Ltd v Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539).
As was also referred to in the passage from Jamsek at para [16] above, a contract will not be wholly or principally for the labour of a person if the worker has the right to delegate the work. A power to delegate may indicate that performance of the contractual obligations was not personal to the worker. In JMC, Wigney J stated at [118]:
There could be no doubt that if clause 5 gave Mr Harrison an unlimited, unrestricted or unilateral power to delegate the contracted teaching services to someone else, that would be a powerful indication that he was an independent contractor, not an employee of JMC … In contrast, a “limited or occasional” power of delegation may not be inconsistent with an employment relationship …
THE RELATIONSHIP AND CONTRACT BETWEEN THE PARTIES
I now turn to the contractual relationship between the parties and a consideration of the respective rights and obligations of the parties under the contract.
The Applicant is a private company that provides technology solutions for corporate and government clients (T2/8).
In March 2014, the Applicant engaged TW as a full-time employee to clean the Applicant’s office. She was paid $23 per hour and was given a desk and a work email address (R2/ paras [2] and [4]). The Applicant paid superannuation for TW as her employer.
In March 2015, Mr Loader, a Director of the Applicant who represented the Applicant in these proceedings, advised the staff of the Applicant that the company was incurring higher expenses than could be sustained, and that he regretted to announce the company would be restructuring to reduce its expenses (T43/174).
On 11 May 2015, the Admin & HR Manager of the Applicant emailed TW to follow up Mr Loader’s email about restructuring and reducing expenses. The email was copied to Mr Loader. The relevant part of that email stated (T43/173):
We have been extremely happy with the service you have been providing over the last year and would like to keep you to continue with the office cleaning but it would be necessary for us to change the terms of your employment.
We would like to propose commencing Monday 25th May (2 weeks) to offer you contract work doing the cleaning at [office address omitted] for 20 hours per week. (4 hours per day x 5 days @ $30.00 ph)
If you would like to accept the contract cleaning then your full time employment will end on Friday 22nd May.
Let me know as soon as possible if these changes are acceptable to you [TW] so we can start working towards the changeover and the details involved.
On 12 May 2015 TW emailed the Admin & HR Manager and copied in Mr Loader. TW stated (T43/173):
Yes, this is acceptable. If I could still have some flexibility with my hours (providing of course that I ensure the building is clean for start of business each day) that would make it a lot easier for me to able [sic] to find other work so that I can supplement my income and still be able to work for the company. I’ll probably have quite a few more questions to ask but I’m sure we’ll cover most of them over the next two weeks.
As I said when we spoke yesterday – I’m sure I can provide a fairly good basic clean in the 20 hours per week which would focus mainly on kitchens, toilets, floors and desks. As I would have less time to spend on each I won’t be able to be quite as meticulous as I am now but it should still be fairly thorough. Some areas may not be able to be completed every day though and may need to be alternated but we will discuss and adjust as necessary. Some extra hours may be needed here and there to make sure the little extra things are also taking care of and don’t build up and get out of hand but we’ll see how it goes and we can talk about that if/when the need arises.
On 22 May 2015, the Admin & HR Manager sent TW an email attaching a list of cleaning duties that a temporary cleaning company undertook when TW was on holidays which she stated was “to assist you in the transition from 8 hours per day to 4 hours per day”. The email stated that the list shows daily tasks and once a week tasks, as well as items that were “main concerns” in terms of keeping the building clean and maintaining occupational safety and health standards (T20/48). TW stated in her witness statement that she recalled the list being “a generic list with tasks such as cleaning horizontal surfaces, emptying the bins, cleaning the toilets, cleaning the kitchen, and so on” (R2/ para [7]).
Mr Loader stated in his witness statement that he met with TW in May 2015 to discuss the new arrangement. He stated that he showed her the following Table and that TW said that she understood her hourly rate was higher because it was her responsibility to pay superannuation:
Description
Amount
Employee Hourly Rate
$23.03
Superannuation
$2.19
Payroll Tax
$1.27
Annual Leave
$1.77
Personal Leave
$0.88
Public Holidays
$0.88
Contractor Hourly Rate
$30.02
In email correspondence dated 19 November 2015, the Admin & HR Manager and TW discussed and agreed that she would work Monday to Friday, starting from 7pm each day for 5 hours a day, except for Tuesday which was four hours, with some flexibility. For example, if she was running half an hour late, she would still do the same number of hours (T83/311).
In an email dated 12 December 2017, TW advised Mr Loader that the ATO were of the view that she may not be entitled to have an ABN and that given the nature of the work she was doing she may be an employee (T85).
On 23 January 2018, TW advised Mr Loader via email that the ATO had cancelled her ABN because she could not demonstrate that she was carrying on a business as opposed to being an employee (T89/364-365).
In an email dated 23 January 2018, Mr Loader advised TW that the Applicant would be willing to offer her permanent part-time employment if she was unable to demonstrate to the ATO that she was operating a business and servicing a number of customers. He advised her of her pay and entitlements if she became an employee (T89/364-365).
An email from TW to Mr Loader dated 2 May 2018 (A3; T46/196-197) stated that TW had to “jump through a number of hoops” to get her ABN back. She stated that:
One of those hoops though is to ensure that I have a standard contract drafted to present to each business that I deal with so I am currently working on drawing that up and will be sure to send a copy for your perusal as soon as I have drafted it. The woman I spoke to is also insisting that I will need my own public liability insurance and so I am currently waiting to hear back on a few quotes …
Thank you again for your consideration in offering to raise the offer for coming back on as an employee to $25 per hour, I do appreciate your willingness to meet me halfway on that one. I think we both agree that sticking to operating as a separate business is better for everyone in the long run. I have been meaning to talk to you about a slight price rise for my services for some time now as I have been operating for the same rate for about 3 years and need to keep up with the rising costs of living plus maintaining the business. …
(My emphasis in bold.)
Mr Loader submitted that the passages I have highlighted in bold “corroborates the Applicant’s testimony that TW was employed by a contractor with multiple customers and was not an employee of the Applicant”. The Applicant further stated that the fact that TW had a “standard contract” contradicted her statement in her witness statement that she did not clean for anyone except the Applicant (A2).
Emails between Mr Loader and the Admin & HR Manager, Mr Loader and TW, and the Admin & HR Manager and TW, discuss TW not completing enough hours and leaving tasks incomplete (T80/304-310).
In an email dated 2 August 2015, TW asked to increase her hours by an extra 4 or 5 hours per week. Mr Loader agreed to the proposal, stating in an undated email: “Please go ahead and spend the proposed extra hours on the job” (T81/307). The Admin & HR Manager confirmed the agreement that TW would undertake 24 hours of cleaning per week in an email dated 19 November 2015. In an email dated 25 November 2015, TW stated, “Yes the amount of hours for each day are fine” (T83/311-312).
Thus, although there was no formal written agreement, the contract was recorded in the exchange of emails. The arrangement continued until TW left the company in August 2018 (R2/para [15]).
In her witness statement, TW described that she did the same type of work under the new contractual arrangement (R2/ para [9]):
I did the same work under the new arrangement as I did and as a full-time employee - I was still doing the same cleaning work as before but in less time and less hourly than when I was working full-time. My general routine was to clean the bathrooms and kitchen, vacuum and mop the floors, and dust the desks and windowsills. I did as much as I could in the time available each shift. I was occasionally given specific tasks, such as cleaning a coffee stain, but was generally left to my own devices.
I note that in an email dated 15 June 2015, TW acknowledges that she “agreed to go from being an employee of [the Applicant company] to being a contracted cleaner because [she] understood the company was experiencing financial difficulties” (T80/305). This email was sent in the context of a concern raised by the Admin & HR Manager that TW had invoiced the company even though she had missed a day of work.
TW stated that she worked by herself, did not have any employees, and that she solely worked for the Applicant, apart from occasionally cleaning Mr Loader’s house (R2/para [10]). She recalled that on one occasion when she was sick and unable to work, she spoke with Mr Loader about finding someone to cover for her. Mr Loader had asked if she could find someone to fill in for her and she suggested a friend, C. Her recollection was that the discussion went no further. She did not recall having any other conversations about having someone else work her hours. She stated that she needed the work and could not afford to work less hours (R2/para [14]).
With respect to TW’s friend, C, in his witness statement Mr Loader stated that he asked for a police clearance for C, but that one was not provided (A2).
TW further stated that:
·The cleaning equipment was provided by the Applicant, but from time to time she would purchase cleaning products and would provide receipts and be reimbursed (R2/ para [10]; see also T18/44).
·She kept her work email address and used it throughout her time with the Applicant (R2/ para [11]) and had a desk at the office (R2/para [2]).
·She was paid for the time she worked and submitted invoices each week. For example, an invoice dated 4 April 2018 stated TW’s name at the top, an Australian Business Number (ABN), and stated 25 hours “General office cleaning (for the period 02/04/18 – 06/04/18)” at $30 per hour for a total of $750. TW’s bank details were included at the bottom of the invoice (T47/231). The company issued corresponding creditor remittance advice (for example, T21/49; T24-T29).
·If she was sick or unavailable, she would call up the company and let them know. Sometimes she would make up the hours later in the week or over the weekend. She stated that “Mr Loader was flexible and usually agreed to let me make up the time” (R2/para [12]; see also T80/304-305).
As part of an audit undertaken by the ATO, TW and the Applicant completed a Payee Super Questionnaire (T37 and T45).
Their responses were succinctly summarised in the Respondent’s Amended Statement of Facts, Issues and Contentions (RASFIC), which I have quoted from below.
TW’s responses were as follows (RASFIC, para [31]):
(a) she was not required to attending meetings within the Applicant’s business and/or with the Applicant’s clients;
(b) payment for her work was dependant on completion of tasks and/or jobs;
(c) she was reimbursed for minor cleaning supplies purchased, such as Spray & Wipe;
(d) the Applicant gave her specific instructions that she was to complete the work personally;
(e) if she was sick or went on holiday that the Applicant arranged for her work to be done or no-one did the work;
(f) she could not organise for an employee of the Applicant, another person engaged by her or any other person to perform her work;
(g) she did not supply her own assets, equipment or tools in respect of the work; and
(h) except with respect to cleaning supplies mentioned above at (c), it was the Applicant that supplied and arranged delivery of the cleaning supplies needed for her work (i.e., toilet paper and paper hand towels)
(Footnotes omitted.)
The Applicant’s responses were as follows:
(a) Ms W was not required to attending meetings within the Applicant’s business and/or with the Applicant’s clients;
(b) payment to Ms W was dependant on her completing tasks and/or jobs;
(c) the Applicant did not check to confirm that Ms W had completed her work before paying her;
(d) Ms W was paid for expenses. …
(e) the Applicant gave specific instructions to Ms W that she was to compete her work personally. However, when asked to provide a detailed explanation of when the instructions were given, how the instructions were communicated and what the instructions were, the Applicant’s only remarks were:
Since building security is vitally important TW was required to submit the details of any other person, she required to perform the required duties. She did not do so. It is possible others employed by her company did provide the required services since no personal security checks were made and the service was mostly provided when other employees were not a work.
(f) if Ms W was sick or went on holiday it was the Applicant that arranged for her work to be done while she was absent. The Applicant specifically noted that:
the company’s receptionist and administrative personnel performed basic cleaning tasks when TW was not available. On 1 occasion when she was not available for 2 weeks another cleaning contractor was engaged
(g) Ms W could organise for another person to complete her work provided that individual was engaged by Ms W. She could not, however, arrange for an employee of the Applicant to complete her work, or any other individual not engaged by her;
(h) Ms W did provide some cleaning materials and equipment to complete her work (although the exact nature of such cleaning supplies and equipment were not specified in the Payer Superannuation Questionnaire); and
(i) the Applicant did supply and arrange for delivery of cleaning supplies (other than those occasionally purchased by Ms W) to allow Ms W to complete her work.
(Footnotes omitted.)
Now that I have provided an overview of the parties’ interactions and correspondence, the terms of the contractual relationship can be summarised as follows:
·There was no formal written contract. The terms of the contract were recorded in the correspondence between the parties and by their conduct.
·The parties thought that TW was an independent contractor, and not an employee, and she was paid a higher hourly rate to incorporate superannuation and to compensate for not accruing entitlements such as personal leave and annual leave.
·TW undertook cleaning work for the Applicant five days a week starting at 7pm Monday to Friday, for four to five hours a day during the Relevant Quarters, and there was some flexibility to do extra hours if additional cleaning was required. If she was sick, she would call up the company and let them know.
·There was some flexibility if she was running late to extend her shift, or if she was sick, to make up the hours at another time.
·TW was paid an hourly rate, and she was required to invoice the Applicant using an ABN.
·TW was not required to attend any meetings, including to check the progress of her work.
·She was engaged to undertake office cleaning, was given a generic list of tasks and some guidance as to what daily and weekly tasks should be undertaken. There was no change in the work she did from when she was an employee, although she had less time to complete the work.
·The Applicant provided cleaning equipment and materials, and if TW purchased any such items they were reimbursed.
·TW referred to needing a standard contract and public liability insurance, but there was no evidence they were ever provided or obtained.
·The Applicant did not have any employees.
·TW never delegated her work. There was a discussion with Mr Loader where she suggested her friend C could fill in for her on one occasion, but this did not eventuate due to Mr Loader not being provided with a police certificate. There were concerns about building security because cleaning occurred after hours. There only appeared to have been this one conversation about someone else working TW’s hours. IF TW was absent, the Applicant engaged a replacement contractor or one of its other staff did the work.
·Mr Loader and the Admin & HR Manager emailed TW about tasks that were not undertaken and querying the number of hours she had worked; however, the Applicant did not otherwise perform any checks on her work.
·TW had a desk and an email address at the office of the Applicant.
CHARACTERISING THE CONTRACT
I now turn to whether the contract was wholly or principally for the labour of TW. This involves a consideration of the benefits the Applicant obtained from the worker under the contract.
I make the following findings:
·The benefit that the Applicant obtained from the contract was TW’s personal services cleaning the Applicant’s office. In other words, TW was remunerated for her personal labour and skills in cleaning the Applicant’s office.
·The conduct of the parties suggests that there was no right to delegate. TW never actually delegated her work. She had no employees, and there were practical difficulties with police clearance and office security when she suggested a friend could cover for her on one occasion. When she was absent it was the Applicant who arranged for a contractor or staff member to cover for her. Therefore, it is reasonable to conclude that the performance of the work was personal to TW.
·TW was not required to achieve a result, and the work she performed was not connected to any quantifiable result. She did not need to attend meetings to discuss her progress. She was remunerated by the hour, which also suggests she was not engaged to achieve a particular result.
I therefore find that the contract was wholly or principally for the labour of TW. Consequently, the three elements of the extended definition of an “employee” in s 12(3) of the SGAA have been met. That is, there was a contract between the parties, it was wholly or principally for the labour of TW, and TW performed work under the contract.
As I mentioned in the Background section above, the Applicant contended that TW agreed to assume responsibility for her own superannuation contributions from May 2015, that she was paid a higher hourly rate, and therefore it was TW’s responsibility to withhold superannuation contributions on her own behalf.
However, employers cannot contract out of their superannuation obligations, nor can employees waive their entitlements under the SGAA. This issue was dealt with directly by Member Reitano in The Trustee For Virdis Family Trust t/a Rickard Heating Pty Ltd and Commissioner of Taxation [2022] AATA 3. The Tribunal observed that the statutory scheme makes no allowance for private arrangements [38]:
It is important to make clear that the Superannuation Guarantee Scheme has no regard for private arrangements that may have made to pay amounts of one kind or another as a substitute for superannuation contributions, nor for arrangements that are made to avoid obligations created by the Act: if superannuation contributions are not made to employees as defined by the Act, the Superannuation Guarantee Charge will apply regardless. It is not for parties to a private contract to determine when the law contained in the Act should apply. Far less is it for the Tribunal to determine that issue other than in accordance with the legislative prescription. The fact that Mr Pirie agreed to pay his own superannuation contributions or agreed that Rickard should not pay them is irrelevant to the liability of to pay the Superannuation Guarantee Charge.
Thus, although the parties may have thought TW was an independent contractor, the parties’ subjective intentions are not relevant, and they cannot contract out of their obligations under the SGAA.
CONCLUSION
For the reasons outlined above, I find that TW was an employee of the Applicant within the extended definition of that term under s 12(3) of the SGAA during the Relevant Quarters. In other words, the Applicant has not met the burden of proving that TW was not an employee during the Relevant Quarters. This means that overall, the Applicant has not met the burden under s 14ZZK of proving that the superannuation guarantee assessments were excessive or otherwise incorrect and what they should have been.
There is no suggestion that the Applicant has done anything improper or wrong. Although the parties may have regarded themselves as being in an independent contractor arrangement their subjective intentions are not determinative. Rather, it is the definition in s 12(3) of the SGAA that must be satisfied, which is broader and much easier to meet than the common law definition of an employee.
DECISION
The Reviewable Decision is affirmed in applications 2023/1573, 2023/1574, 2023/1575, 2023/1576 and 2023/157.
I certify that the preceding 59 (fifty-nine) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans-Bonner
...................[Sgd].........................................
Associate
Dated: 29 April 2024
Date of hearing: 21 February 2024
Representative for the Applicant: Mr J Loader, Director of the Applicant
Representative for the Respondent: Mr L Firios, Quayside Chambers
Solicitor for the Respondent: Ms S Neagu, Australian Taxation Office
Key Legal Topics
Areas of Law
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Tax Law
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Statutory Interpretation
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Administrative Law
Legal Concepts
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Statutory Construction
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Appeal
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