Toowong Pastures Pty Ltd as Trustee for the DB Family Trust trading as KBE Contracting Australia Pty Ltd and Commissioner of Taxation

[2019] AATA 4897

Toowong Pastures Pty Ltd as Trustee for the DB Family Trust trading as KBE Contracting Australia Pty Ltd and Commissioner of Taxation [2019] AATA 4897 (20 November 2019)

Division:TAXATION AND COMMERCIAL DIVISION

File Number:           2018/3208

Re:Toowong Pastures Pty Ltd as Trustee for the DB Family Trust trading as KBE Contracting Australia Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Senior Member Dr M Evans

Date:20 November 2019

Place:Perth

The Reviewable Decision is affirmed.

......................[sgd]..................................................

Senior Member Dr M Evans

Catchwords

SUPERANNUATION – Superannuation Guarantee Charge – whether Applicant liable for superannuation guarantee shortfall – whether worker an employee of the Applicant or independent contractor– contract of service or contract for services – factors to be taken into account – common law meaning of “employee” considered – Reviewable Decision affirmed

Legislation

Superannuation Guarantee (Administration) Act 1992 (Cth) – ss 12(1), 12(3), 16

Taxation Administration Act 1992 (Cth) – s 14ZZK

Cases

Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd [2004] SASC 288; (2004) 90 SASR 12

Curtis v Perth and Fremantle Bottle Exchange Co Limited (1914) 18 CLR 17

Hollis v Vabu (2001) 207 CLR 21

OEM Supplies Pty Ltd and Commissioner of Taxation [2015] AATA 532

On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) (2011) 214 FCR 82

Roy Morgan Research Pty Ltd v Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448

Secondary Materials

Superannuation Guarantee Ruling 2005/1: Superannuation guarantee: who is an employee?

REASONS FOR DECISION

Senior Member Dr M Evans

20 November 2019

BACKGROUND

1. On 12 June 2018, the Applicant filed an application in the Taxation & Commercial Division of the Administrative Appeals Tribunal (the Tribunal) (T1, pages 1-4) seeking review of an objection decision dated 15 May 2018 made by the Commissioner of Taxation (the Commissioner) (T2, page 5). This decision will be referred to as the Reviewable Decision.

2. The Reviewable Decision disallowed the Applicant’s objection dated 27 December 2017 (T16, pages 113-121) in relation to ten Notices of Assessment of Superannuation Guarantee Charge dated 30 October 2017 and 31 October 2017 (T17, pages 122-141)  (Notices of Assessment). The superannuation guarantee charges totalled $14,924.65.

3. These Notices of Assessment were for the quarterly periods between 1 April 2013 to

   
   

   30 June 2014 and 1 January 2016 to 31 March 2017. These periods will be collectively referred to as the Work Periods. 

4. The Notices of Assessment were made on the basis that a worker by the name of Mr Wheeler, 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 Work Periods (T2, page 6). Specifically, the superannuation guarantee charge was imposed because the Commissioner was of the opinion that Mr Wheeler was an employee of the Applicant, and that the Applicant had failed to pay superannuation contributions for him.

5. However, the Applicant claims that Mr Wheeler was an independent contractor, not an employee, and consequently that no superannuation contributions were payable, and therefore the Notices of Assessment had been issued in error. It is on that basis that the Applicant seeks a review of the Reviewable Decision in this Tribunal.

   ISSUE

6. The issue for determination by the Tribunal is whether the Notices of Assessment were issued in error. This requires a consideration of whether Mr Wheeler was an employee of the Applicant during the Work Periods:

   (a)at common law, within the meaning of s 12(1) of the SGAA; or

   (b)within the extended definition of that term under s 12(3) of the SGAA.

   MATERIAL BEFORE THE TRIBUNAL

7. The hearing of this application was on 14 June 2019.

8. The Applicant was represented by his tax practitioner Mr Cook.

9. Mr Walker appeared as counsel for the Respondent.

10. The application proceeded on the basis of submissions from the parties’ representatives at the hearing and no witnesses were called. This was because the parties were largely in agreement about the facts. However, the dispute between the parties was with respect to the interpretation and application of the facts.

11. The following documents were admitted into evidence at the hearing:

    (a)

    Applicant’s Statement of Facts, Issues and Contentions (SFIC) dated

    
    

    5 March 2019 (Exhibit A1);

    (b)

    s 37 documents (T-documents) numbered T1 to T22, filed with the Tribunal on

    
    

    4 February 2019 (Exhibit R1);

    (c)Respondent’s SFIC dated 31 January 2019 (Exhibit R2); and

    (d)Respondent’s Written Closing Submissions handed up at the hearing (Exhibit R3).

12. Exhibits A1, R2, and R3 are submissions rather than evidence, but were labelled as Exhibits for ease of reference.

13. Following the hearing, the Tribunal received and has considered written closing submissions from the Applicant, which were dated 28 June 2019 and filed with the Tribunal on 1 July 2019.

    RELEVANT LEGISLATION AND POLICY

14. 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.

15. The effect of s 14ZZK is that the Applicant bears the onus of proving that the assessments were excessive or otherwise incorrect. This means that the Applicant has the burden of proving that Mr Wheeler was not an employee during the Work Periods under s 12(1) or s 12(3) of the SGAA.

16. 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]:

    6. 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.

    7. 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.

    8. Once a charge is paid, the Commissioner pays the outstanding superannuation contributions to the employee.

    (Original emphasis.)

17. Subsection 12(1) of the SGAA provides that “employee” has an ordinary meaning, as defined by the common law:

    (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.

    (Original emphasis.)

18. Subsection 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.

19. The Superannuation Guarantee Ruling 2005/1: Superannuation guarantee: who is an employee? (the SGR 2005/1), paragraph [24], explains that an employment relationship is sometimes referred to as a “contract of service”, whereas an independent contractor relationship is sometimes referred to as a “contract for services”.

20. In On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) (2011) 214 FCR 82 (On Call), Bromberg J stated that the question as to whether a person was a common law employee or an independent contractor was an objective one. His Honour stated, at [188]:

    Whether a person is an employee or alternatively an independent contractor is to be answered by reference to an objective assessment of the nature of the relationship that person has with the entity that takes the benefit of that person’s work. Either the relationship is between an employee and an employer or the relationship is between an independent contractor and its client. Whether a person falls on one side or the other of that binary divide is often a question which may not be easy to answer. It is important that in attempting to arrive at the right answer, the correct interpretative tools are utilised.

21. Bromberg J explained that “what a court will look to is the real substance of the relationship in question”. He cited Isaacs J in Curtis v Perth and Fremantle Bottle Exchange Co Limited (1914) 18 CLR 17 at [25] as follows:

    Where parties enter into a bargain with one another whereby certain rights and obligations are created, they cannot by a mere consensual label alter the inherent character of the relations they have actually called into existence. Many cases have arisen where Courts have disregarded such labels, because in law they were wrong, and have looked beneath them to the real substance.

22. As stated by Bromberg J and Isaacs J in the two cases above, it is the “real substance” of the parties’ relationship, and not the way the parties’ regard or label that relationship, that is relevant. In On Call, Bromberg J (at [190]) referred to the High Court’s decision in Hollis v Vabu (2001) 207 CLR 21 (Hollis) in this regard:

    The plurality in Hollis v Vabu Pty Ltd (2001) 207 CLR 21, also emphasised that the substance or reality of the relationship needed to be identified. In that respect the plurality stated that the terms agreed between the parties are not of themselves determinative because parties cannot deem their relationship to be something it is not: at [58]. The relationship is to be found not simply from the contractual terms agreed to but by the system operated thereunder and the work practices which establish the “totality of the relationship” (at [24]). The application of a practical and realistic approach by the majority in Hollis is discernible from the conclusions reached in that case, including that viewed as “a practical matter” the bicycle couriers were not independent contractors (at [47]); and that it would be “unrealistic” to describe those persons as other than employees (at [57]).

23. In On Call, Bromberg J (at [193]) also referred to “[t]he trend of Australian courts to look beyond contractual descriptions and at the substance or truth of the relationship”, citing the series of cases concerning Roy Morgan market research interviewers who were labelled and treated as contractors, but found to be employees (see most recently Roy Morgan Research Pty Ltd v Commissioner of Taxation (2010) 184 FCR 448).

24. Bromberg J discussed the process for distinguishing between an employee and an independent contractor in On Call. The first step is to analyse the nature of the relationship (at [201]-[202]):

    201. An analysis of the nature of a legal relationship should commence with a proper identification of the parties to that relationship, their role and function and the nature of the interactions which constitute their relations. The employment relationship classically contains two parties. A worker who provides his or her labour and an entity that receives the benefit of that labour. In an employment relationship, labour (being a combination of time, skill and effort) is traded for remuneration. Like many commercial relationships, there is a provider, a purchaser, an exchange and a contract containing the terms and conditions that regulate that exchange.

    202.The exchange involves a form of hire. In return for payment, the time, skill and effort of the employee (the personal services) are provided to the employer for an agreed time or until the completion of an agreed task.

25. In On Call, Bromberg J noted (at [206]) that “the absence of a simple and clear definition which explains the distinction between an employee and an independent contractor is problematic”. His Honour, at [203]-[207], identified a “multi-factorial” approach which required a “range of indicia” to be examined, but nevertheless attempted to provide a “focal point” around which these indicia can be examined:  

    207.In the pursuit of greater simplicity and clarity it is of assistance that the majority in Hollis, whilst applying a multi-factorial approach, provided a focal point around which relevant indicia can be examined. That focal point has been elsewhere expressed as the “ultimate question” posed by the totality approach… The majority in Hollis (citing Windeyer J) said, the distinction between an employee and an independent contractor is “rooted fundamentally” in the fact that when personal services are provided to another business, an independent contractor provides those services whilst working in and for his or her own business, whereas an employee provides personal services whilst working in the employer’s business: at [40]. Unless the work is being provided by an independent contractor as a representative of that entrepreneur’s own business and not as a manifestation of the business receiving the work, the person providing the work is an employee…

    (Case citations omitted.)

    208.Simply expressed, the question of whether a person is an independent contractor in relation to the performance of particular work, may be posed and answered as follows:

    Viewed as a “practical matter”:

    (i)     is the person performing the work an entrepreneur who owns and operates a business; and,

    (ii)    in performing the work, is that person working in and for that person’s business as a representative of that business and not of the business receiving the work?

    If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an employee.

26. Bromberg J identified the following “indicia of a business” at [217]:

    ·Do the economic activities of the putative business involve the taking of risk in the pursuit of profits?

    ·Does the putative business engage in a repetitive and continuous manner with purchasers of its services?

    ·Does the putative business employ or engage persons other than the owner/operator to carry out its economic activities?

    ·Is goodwill (name, brand and reputation) being created by the economic activities of the putative business?

    ·Is the putative business promoted as a business to the public through advertising or other promotional means?

    ·Does the putative business have tangible assets such as buildings and equipment which are utilised to support its economic activities?

    ·Does the putative business have the basic transactional systems that are common of a business of that kind? For instance: invoicing systems; standard rates and terms and conditions of trade; insurance coverage; payment and debt collection systems; appropriate financial records; budgeting or forecasting systems; business based arrangements with a bank or other financial institution

    ·Do the services provided by the putative business involve the provision of labour of sufficient skill to be suggestive of the pursuance of a profession or trade through a business

    ·Are the regulatory requirements of a business (including business name registration, taxation, GST and ABN registration and compliance) being met by the putative business?

    (Case citations omitted.)

27. In terms of “whose business the economic activity is being performed in and for”, Bromberg J identified the following indicia, based on relevant case law (at [218]):

    The second element – “Whose business is the economic activity being performed in and for?”, raises the following indicia for consideration:

    ·Does the provision of the economic activity provide an opportunity for profit and involve the risk of loss…; or is the payment made largely consistent with the remuneration that an employee would have received for providing the activity?;

    ·In that respect and in relation to profit:

    oto what extent is the reward for the provision of the activity negotiable and negotiated commercially?

    oto what extent does the putative owner/entrepreneur have the capacity to manage the activity so as to maximise the potential for profit?

    ·In that respect and in relation to risk:

    oto what extent is the agreed payment contingent upon the person providing a satisfactory result (i.e. are there financial consequences for poor performance)?

    owho bears the risks associated with providing any equipment or assets required for the performance of the economic activity?

    ·Does the putative business or the putative employer’s business control and direct or have the capacity to control and direct the manner in which the economic activity is carried out?

    ·Is the economic activity represented or portrayed as the activity of the putative business or that of the putative employer’s business?

    ·To what extent is the person providing the economic activity integrated with the business receiving the activity?

    ·To what extent is the person providing the economic activity financially self-reliant from, as opposed to, economically dependent upon or organisationally tied to, the business receiving the activity?...Exclusivity is suggestive of an employment relationship…. However, it does not follow that a person who provides casual or part-time work to multiple purchasers is not an employee…

    ·Is the person providing the economic activity free to employ his or her own means (employees or contracted agents) to produce the activity or must that person personally perform the work?

    ·To whose business does any goodwill created by the economic activity ensure?

    ·In contracting to provide the economic activity has the person agreed to provide an outcome or result?

    ·To what extent is the person providing the economic activity doing so with his or her own tools and equipment?

    ·If the person is providing their own equipment, to what extent can the person be directed in the management and control of that equipment?

    ·Have the parties involved characterised the economic activity as that of the owner/entrepreneur being performed in and for that person’s business, or alternatively as part of the receiving business, and to what extent does that characterisation reflect the reality?

    (Case citations omitted.)

28. With respect to the withholding of tax and leave, Bromberg J stated at [219]:

    Whether or not income tax has been withheld and whether annual, long service or sick leave is afforded are often also used as relevant indicators: Stevens v Brodribb at 37; Yaraka Holdings at [44]-[48]. It is not incorrect to have regard to these factors, but there are differing views as to the inference which should be drawn from such arrangements: Wesfarmers Federation Insurance at [40]-[42]. Reliance on these factors may involve circularity of reasoning particularly where these factors are based upon the self-assessed and objectively incorrect label that the parties have attached to their relations: see Hollis at [37] and Owens and Riley at 140. Further, it is necessary to appreciate that casual employees are not ordinarily entitled to leave or sick pay: Sgobino at 293 and 308; Yaraka Holdings at [50];

1. Bromberg J clarified the need for some flexibility in that the above indicia are not an exhaustive checklist, at [220]:

   The indicia which I have listed reflect various indicators largely taken from the decided cases. In many respects the indicators are differently expressed to accommodate the particular approach that I have taken which, consistently with the approach in Hollis, seeks to emphasise what I have described as the central question in the application of the totality test. The indicators listed are not intended as exhaustive and many of them will be the subject of qualification depending upon the nature of the economic activity in question and the circumstances in which it is being carried out. The task to be undertaken is not to be performed mechanically by checking off against a list of indicia and without recognising that different significance may attach to the same indicators in different cases: Lopez v Deputy Commissioner of Taxation [2005] FCAFC 157 at [82].

2. The SGR 2005/1 summarises “key indicators” of whether a person is an employee or an independent contractor in a more simplified form than Bromberg J (SGR 2005/1, paragraphs [32]-[60]). The SGR 2005/1 was, however, issued prior to Bromberg J’s decision in On Call. These indicators are nevertheless, a useful summary of the indicia that the Tribunal should consider. They include:

   (a)the degree of control which the person who engages another to perform work can exercise over them;

   (b)whether the substance of the contract is to achieve a specified result;

   (c)whether the work can be delegated or subcontracted;

   (d)the degree of risk that the worker bears arising out of injury or defect in carrying out their work;

   (e)the provision of assets, equipment and tools, and the incurring of expenses and overheads; and

   (f)other indicators including the right to suspend or dismiss the person engaged to perform the work, the right to the exclusive services of the person engaged to perform the work, and the provision of benefits including annual, sick and long service leave and other benefits prescribed under an award for employees. The requirement of a worker to wear a uniform may also indicate an employment relationship.

3. Bromberg J clarified that it is the specific evidence pertaining to the individual worker in question that is relevant to the determination of the legal relationship between the worker and the principal, rather than generalisations about workers in general. His Honour stated, at [224]:

   The question of whether or not a person who provides personal services, owns and operates a business is a complex question in relation to which a wide range of indicators are relevant. Those indicators call for evidence personal to the individual. Generalisations and extrapolations from the circumstances attending one individual to those attending the next are likely to be speculative and unhelpful.

   THE EVIDENCE

4. As noted by Mr Walker, for the Respondent, in his oral submissions, the evidence before the Tribunal is somewhat limited. No witnesses were called, and so the evidence consisted of documentary evidence contained in the s 37 documents (Exhibit R1).

5. In his oral submissions Mr Walker submitted that Exhibit A1 (the Applicant’s SFIC signed by his representative Mr Cook) contained some assertions that do not find support in the factual material before the Tribunal. The Tribunal agrees that assertions alone are not evidence, and for this reason, the Tribunal has paid particular regard to the actual evidence before it, being that contained in Exhibit R1. 

6. The Tribunal also observes that the evidence before it, which is contained in Exhibit R1, is somewhat limited. This, as will become evident later in these reasons for decision, makes it difficult for the Tribunal to draw definitive conclusions about some of the indicia. Further, the limitations in the evidence also make it more difficult for the Applicant to meet its burden of proving that the Notices of Assessment were excessive or incorrect. In summary, in addition to the Reviewable Decision, the associated reasons (T2), and the Applicant’s objection (T16), the evidence in Exhibit R1 comprises:

   (a)single page written contract between Mr Wheeler and the Applicant signed and dated 14 May 2013 (Signed contract) (T10);

   (b)handwritten invoices from Mr Wheeler during the Work Periods (T4, T7, T10);

   (c)standard form Australian Taxation Office (ATO) questionnaires completed by the Applicant (T9) and Mr Wheeler (T11);

   (d)emails between the ATO and Mr Wheeler regarding his earnings (T13 and T14);

   (e)Mr Wheeler’s individual tax returns (T18) and his Member Contribution Statement (T19) for the 2012 to 2013 financial years and the 2016 to 2017 financial years;

   (f)case notes of telephone calls between Mr Wheeler and the ATO (T21);

   (g)unsigned contract forwarded to the ATO by Mr Wheeler on 13 June 2017 (Unsigned contract) (T5).  

   The Tribunal will now discuss the evidence that it considers relevant.

   Signed contract

7. The Signed contract (T10, page 63) is relevant to the intentions of the parties. It states:

   I, [Mr Wheeler]

   hereby agree that I contract to KBE Contracting Australia and will pay my own tax.

   I’m not entitled to Holiday pay or Sick leave.

   The hourly rate that I am being paid includes an allowance that I will make my own superannuation contribution and no claim will be made against KBE Australia, Directors or Associated Companies.

   Invoices

8. The handwritten invoices refer to the number of hours worked by Mr Wheeler. They also include references to the locations where he worked and show that he was paid an hourly rate. The invoices in T4 and T7 are handwritten in a ledger book. The invoices at T10 are handwritten onto a pro forma “Tax Invoice/Statement” form.

   ATO questionnaire - Applicant

9. The ATO questionnaire was completed by the Applicant on 14 July 2017 (T9, pages 45-46). As is evident from the wording of some of the answers below, some of the Applicant’s answers referred specifically to Mr Wheeler. Other answers are expressed in more general terms, and it is unclear whether they are specific to Mr Wheeler, or about the collective workers of the Applicant. The Tribunal is cognisant of the comments of Bromberg J in On Call, at [224] (see paragraph [31] above), that generalisations are “speculative and unhelpful”, and that it is evidence relating to the individual worker that is relevant. Again, these generalisations are relevant to whether the Applicant is able to meet its evidentiary burden under s 14ZZK of the TAA.

10. The questionnaire recorded the type of work being undertaken by Mr Wheeler as “Asbestos removal; building renovations”. His daily work routine and specific tasks performed were described as follows:

    Worker makes enquiry with KBE (usually by telephone) advising when he wishes to work.

    On the agreed day(s) worker reports to job-site (client premises).

    At site, worker performs agreed work, either alone or in conjunction with the team.

    Tasks are usually not specified in detail; only in broad terms – i.e. remove asbestos or assist with renovations per client contract.

    Team management is determined on a co-operative basis.

11. The Applicant’s questionnaire further recorded that Mr Wheeler was engaged on “Ad Hoc separate contracts”; that there was no probationary period; and that “Specific tasks were determined by worker based on on-site conditions and requirements.” (T9, page 47).

12. In response to the question, “Was the worker/payee able to renegotiate their rate of pay or terms and conditions?”, the Applicant’s questionnaire stated (T9, page 47):

    While this particular worker did not change his rate from job to job, other workers (verbally) negotiated changes when the worker considered it justifiable.

    KBE understands the worker had several contracts with other parties during the period under review.

    The rate of pay was determined by negotiation in the first instance and was carried forward to subsequent contract by mutual understanding.

    The worker was free at any time to negotiate new rates, terms or conditions.

    Rate changes were not initiated by KBE and there was no periodic review.

13. Regarding the right to dismiss or terminate the services of the worker/payee, the Applicant’s questionnaire answer stated (T9, page 48):

    KBE could not terminate a worker, but could only refuse to accept a worker on site.

    Each individual worker contract was “terminated”:

    * at the end of each client contract, and/or

    * when the contract worker chose.

    No notice was required by either party before terminating a worker contract.

    Examples of where KBE might refuse a worker’s services include unsafe work practices, fighting with other contractors or ongoing unacceptably [sentence appears to cut off here]

14. For the question, “Did you provide the worker/payee with any training?”, the Applicant recorded (T9, page 49):

    KBE does not provide an induction course for contractors or workers.

    Contractors are usually experienced operators and trained in all aspects of their work.

    KBE workers are sometimes required to attend the client’s induction course as a pre-requisite to working on the client’s site.

    If it is essential, KBE sometimes provides a contract worker with specialised third party training such as plant operator, working at heights or first aid.

15. For the question, “How were the worker/payee’s hours of work determined?”, the Applicant recorded (T9, page 49):

    All workers chose their own working hours and days.

    Wet days (no work due to rain) are decided by the worker alone or in conjunction with his team (not by KBE).

    Workers can start and finish at the times of their choice.

    If they fail to show, the remaining team members simply perform the work with whomever is in attendance.

    The same applies for early departure from site.

16. Regarding the scheduling of jobs and tasks to be carried out by the worker, the Applicant recorded, “not apart from the allocation to a client contract” (T9, page 50). It recorded that the worker decided which jobs or tasks he performed on a daily basis and that the worker was not required to follow a plan. In terms of whether the worker determined the priority or sequence of jobs and tasks, the answer recorded was, “Yes. Often in conjunction with other team members” (T9, page 50).

17. As to whether the worker was supervised, the Applicant’s questionnaire recorded that the jobs and tasks undertaken by the worker were not checked, and that quality control checks were not completed by the Applicant. Further, the worker’s attendance was not monitored, and the worker was not required to report to the Applicant. The Applicant went on to explain (T9, page 50):

    Workers advised KBE when they considered the client contract complete and this advice was accepted by KBE as adequate to proceed to invoice the client.

    Workers were paid on the basis of the worker’s advice as to hours spent and were not checked or otherwise verified.

18. In response to the question, “could the worker/payee refuse to do a particular job or task?”, the Applicant recorded the following response:

    As described above, the worker was entirely free to choose whether he accepted an available contract, which tasks in the contract he performed (on-site), how those tasks were performed and when they were done.

    As discussed below, the worker was also free to determine whether the jobs were performed by his representative.

    This freedom was available to all KBE contractors.

19. The Applicant’s questionnaire also recorded that workers were not required to seek permission or to provide prior notice if they wanted to take time off. The following explanation was given (T9, page 51):

    If the worker had indicated they would attend on a particular day, they would usually (but not necessarily) advise KBE of the change of plan.

    In the workers absence, work proceeded on site with the remaining team of workers

20. In response to the question, “Could the worker/payee provide their services to other individuals or businesses?”, the Applicant’s questionnaire stated (T9, page 51):

    KBE believes the worker did take contracts with other businesses during the period under review, but has no details of those separate contracts.

    The worker’s attendance was always at his own choice and no explanation of his whereabouts was required by KBE.

21. In response to the question, “Did the worker/payee work alone?”, the Applicant’s questionnaire stated (T9, page 52):

    The worker was frequently a member of various loose-knit teams which changed according to the contracts and the available contractors.

    As an experienced contractor, the worker also worked alone on many occasions.

22. The questionnaire also recorded that the worker did not train, supervise, or assess the work of others; and that a name badge, clothing, business cards, stationery or any other item promoting the Applicant’s business name or logo was not provided (T9, page 52). Further, another of the Applicant’s questionnaire answers stated that, “KBE placed no restriction on workers promoting their own businesses while on KBE client sites” (T9, page 52).

23. The Applicant’s questionnaire also recorded that neither party advertised their business on any of the assets, equipment, or tools they used (T9, page 53).

24. Regarding payment, the Applicant’s questionnaire recorded that the “Worker provided tax invoices as required” (T9, page 53). It recorded that the “Fees [charged by the worker] had to be mutually acceptable before a contract could be made” but that the “Worker was free to negotiate a different rate of pay”.

25. In response to the question, “Was the worker/payee’s payment dependent on the completion of the task/job?”, the Applicant’s questionnaire recorded an answer of “yes”, with the following explanation:

    Payment was only made for labour provided on site.

    If work could not be performed for whatever reason - no materials; rain etc - the contractor was not paid.

26. The Applicant further recorded that no checks were undertaken on a regular basis to confirm that the worker/payee had completed their work before they were paid (T9, page 54).

27. Additionally, the Applicant’s questionnaire answers indicated that the worker was not paid or reimbursed for any allowances including car, tool, travel or away from home allowance; the payment of any expenses such as petrol, tools, materials, stationery, phone et cetera; holiday pay; sick pay; workers compensation; superannuation; or training (T9, page 55).

28. The Applicant also indicated in its answers that no income tax, superannuation, or other deductions were made from the worker’s pay (T9, page 55). Further, the worker was responsible for paying his own insurances (T9, page 57), however the explanation went on to clarify that, “Although the contractors were responsible for their own workers compensation, as the primary contractor KBE was required at law and by its client contracts to provide its own workers compensation coverage”. The Applicant also stated that, to its knowledge, Mr Wheeler had not made a claim against any of their insurance policies (T9, page 57).

29. Additionally, the worker was not required to guarantee his work for any period of time (T9, page 57), but if he made a mistake or broke anything, he would have to correct it in his own time, and at his own expense (T9, page 58).

30. If the worker was absent, the Applicant’s questionnaire recorded that “other existing or additional contractors would perform the remaining client-contract work on terms and conditions similar to those of the worker” (T9, page 56).

31. Regarding delegation, the Applicant’s questionnaire recorded that the worker could engage any other person to undertake their work or tasks “ad hoc and occasionally”, and recorded that these arrangements were made “Verbally - Replacement usually became a new KBE contractor”, but that “…KBE could veto” (T9, page 56). The following explanation was given, which appears to confuse delegation with organising a separate contract specifically for the worker’s son:

    The worker approached KBE to use the worker’s son as a replacement for another worker. Following discussion, the worker’s son entered into a separate contract with KBE and currently continues with contracts with KBE.

    KBE Contractors usually acted responsibly and these arrangements were sorted out to everyone’s satisfaction with minimum discord.

32. The Applicant’s questionnaire answers indicate that he was not supplied with any assets, equipment or tools to complete his work, nor was he reimbursed for any (T9, page 58). However, with respect to supplying materials for a job, the explanation stated (T9, page 59):

    Materials required for the worker’s job were usually provided by the worker.

    Materials for the client contract were provided by KBE

33. The Applicant’s response to the question, “who arranged delivery of materials to a job?” was somewhat ambiguous. The box marked “not applicable” was marked and the explanation given was “i.e materials for the workers’ jobs” (T9, page 59). The questionnaire further recorded that the “Worker was responsible for determining any materials used in his job”.

34. Finally, the Applicant’s questionnaire records that the worker was required to wear protective gear, and that it was provided by both the Applicant and the worker.

    
    

    The following explanation was given (T9, page 59):

    Workers are free to use their own personal safety gear and sometimes choose to do so.

    For KBE quality control purposes and in terms of KBE-client contracts, all safety equipment was made available but remains the property of KBE.

    ATO questionnaire – Mr Wheeler

35. The ATO questionnaire dated 17 July 2017 completed by Mr Wheeler (T11, page 76) recorded the type of work that he completed for the principal/payer as being, “Carpentry - Roof Plumbing and Asbestos Removal” with the daily work routine and specific tasks being stated as:

    Would vary. It may be go to w/shop and pick-up truck with another employee and go and remove Asbestos from houses.

    Or on-site starts for longer jobs e.g re-roof.

36. On the questionnaire Mr Wheeler indicated that he secured the work by advertisement (T11, page 77), and with respect to his conditions of engagement he stated:

    I signed a waiver of holiday Pay sick pay - superannuation as at the time I thought I was going to do contract work. This never eventuated so worked on hrly rates and was given instruction on jobs to be done with other employees.

37. Mr Wheeler indicated that he was not able to renegotiate his rate of pay or terms and conditions (T11, page 77).

38. With respect to whether the principal/payer had the right to dismiss or terminate his services, Mr Wheeler ticked the box marked “yes”, and provided the explanation that, “For what ever [sic] he chooses. Eg. lack of work” (T11, page 78).

39. In the “Control test” section of the form, in response to the question, “Did you complete any training with the principal/payer?”, Mr Wheeler explained:

    Inductions were completed to do work for certain sites we visited regularly. Yes were always provided with verbal instruction on how the job is to be done.

40. With respect to how his hours of work were determined, Mr Wheeler stated (T11, page 78):

    Usually start 6.30 – 7am sometimes work to completion of job e.g. 5 hrs or 10 hrs could vary a lot. 5 days a week and sometimes weekends.

41. He answered “yes” in response to the question, “Were you required to attend meetings with the principal/payer’s business and/or with their clients?”, and gave the explanation that, “To discuss works in process. Or measure for quote” (T11, page 79).

42. Mr Wheeler answered “yes” to the question “Were you entitled to paid breaks?” (T11, page 79).

43. With respect to whether the principal/payer scheduled the jobs or tasks to be carried out, Mr Wheeler answered “Yes all scheduling and work direction came from payer” (T11, page 79). Regarding where the jobs or tasks were to be performed, Mr Wheeler explained, “All jobs were directed by payer manager from there [sic] office/ w/shop” (T11, page 80).

44. Mr Wheeler also ticked the “yes” box in response to the question, “Were you supervised?” and stated:

    The manager of the company was responsible for checking. The payer/manager would control all hrs allocated for job - Recording our hrs as well.

1. In response to the question, “Could you refuse to do a particular job or task?”, Mr Wheeler answered “no” and stated (T11, page 80):

   The situation never arose. But it would not be good for employment to refuse unless a really credible reason e.g safety.

2. Mr Wheeler answered if he wanted to take time off he would “Provide notice as a courtesy” (T11, page 81).

3. In the “Integration Test” part of the form, Mr Wheeler answered that he did not advertise his services, and indicated that he could not provide services to other individuals or businesses independently of the principal/payer (T11, page 81).

4. He indicated that he sometimes worked alone, but was “Normally part of a team” and that he “…would sometimes supervise others work” (T11, page 82).

5. Mr Wheeler indicated that he was provided with, but not required to wear or use “shirts with names on and company name. Not compulsory” (T11, page 82), and that he did not have his own name badge, clothing, business cards, stationery or any other items promoting his business/services (T11, page 82).

6. In response to the question, “Did the principal/payer advertise their business on any of the assets/equipment/tools used by you?” Mr Wheeler explained: “Yes name on truck that I would drive for certain jobs”. He answered “no” to the question, “Did you advertise your business on any of the assets/equipment/tools used by you?” (T11, page 83).

7. Mr Wheeler indicated that he submitted invoices for payment (T11, page 83) and that the principal/payer set the fees for his work and that his rate of pay was not changed.

   
   

   Mr Wheeler answered “no” to the question, “Was your payment dependent on the completion of the task/job?” (T11, page 84).

8. Mr Wheeler indicated that he was not paid or reimbursed for any allowances, including car, tools, travel or away from home allowance; the payment of any expenses such as petrol, tools, materials, stationery, phone et cetera; holiday pay; sick pay; or superannuation. However, he indicated that the Applicant paid for training which he explained as, “Training Working at Heights. Paid by KBE done on my time” (T11, page 85).

9. Regarding delegation, Mr Wheeler answered “yes” to the question, “Did the principal/payer give specific instructions (either in writing or verbally) about whether you were to complete your work personally?”. He explained: “He would arrange the job for me to complete pick-up materials and do job”. He indicated that if he was away another employee would undertake the work: “we were a group of 4 employees” (T11, page 86).

10. In contrast to the Applicant’s ATO questionnaire answers, Mr Wheeler indicated that he could not engage another person (with or without approval from the principal/payer) to complete his work. This included not being able to organise for another employee of the principal/payer to complete his work (T11, page 86).

11. In relation to the “Risk Test” part of the questionnaire, Mr Wheeler indicated that the Applicant was responsible for paying Workers’ Compensation insurance and public liability insurance. However, the boxes regarding who was responsible for paying private accident insurance were un-ticked. Mr Wheeler indicated that he had not made a claim against any of the stated policies, explaining: “No but when I injured my eye they paid for doctors and prescription” (which was not mentioned in the Applicant’s questionnaire) (T11, page 87).

12. Mr Wheeler also indicated that he was not required to guarantee his work for any period of time (T11, pages 86-87), and that if he made a mistake or broke something when doing his work he would not have to pay for the materials used to correct that mistake or pay for the breakage (T11, page 88).

13. The final section of the questionnaire concerned the provision of tools and equipment and payment of business expenses. Mr Wheeler answered “yes” to the question, “Did you supply your own assets, equipment or tools?” and answered that he supplied his own car on weekends, phone and laptop for emails, but that “Hand tools and ladder sometimes mine sometimes theirs”. He indicated that he was not reimbursed for any of his assets, equipment or tools (T11, page 88).

14. Mr Wheeler also explained that, “Principal supplied all materials for all jobs” and that the principal/payer also arranged the delivery of materials to jobs (T11, page 89). This answer differed slightly from the Applicant’s answer which, in summary, was that some materials were supplied by the worker and others by the Applicant (see paragraph [60] above).

15. Mr Wheeler was required to wear protective work gear which he explained as “standard industry hard hats/gloves/safety glass [sic]/earplugs etc”, which he supplied himself (T11, page 89).

    Mr Wheeler’s individual tax returns

16. In Mr Wheeler’s tax returns for the 2012 and 2013 financial years, he stated that he satisfied the results test for the personal services income (PSI) that he derived for those years (T18, pages 154, 172). Mr Wheeler also claimed the income from the Applicant as business income for these years, and claimed associated business-related tax deductions (T18, page 156 and 174; see also T21, page 255). Mr Wheeler’s tax returns show that in the 2013 financial year he worked for two other employers who deducted tax (T18, page 143) and in the 2014 financial year, he worked for one other employer who deducted tax (T18, page 161). 

17. Mr Wheeler’s tax returns for the 2016 and 2017 financial years stated that he was not in receipt of PSI (T18, pages 193 and 218).

    Case notes

18. These case notes (T21) are records of conversations between the ATO and Mr Wheeler and the ATO and the Applicant’s representative, Mr Cook. As a consequence of this correspondence with the ATO, the Applicant and Mr Wheeler completed the ATO questionnaires which were outlined above. They also indicate how Mr Wheeler perceived his legal relationship with the Applicant at that time. This includes the following, which was part of a telephone conversation between the ATO officer and Mr Wheeler on 1 June 2017 at 3.40pm AEST (T21, page 254):

    He [Mr Wheeler] gave me some background information:

    ·started working as a contractor about 4 years ago

    ·was paid an hourly rate

    ·I left for about 18 months and then went back

    ·I approached the employer and said we are employees

    ·I couldn’t delegate work to anyone because I was paid on an hourly rate

    ·he (employer) provided everything, machinery etc

    ·I suggested why don’t you make us all permanent casuals - he said no and said it would cost you (drop in hourly rate)

    ·he wanted us to sign this agreement and I wouldn’t which is why I left…

    ·He submits invoices and gets paid less now as he’s being paid super (coming out of invoice)

    ·I wasn’t prepare to put my invoices in and be paid less (he wanted to take super out of S&W)

    ·KBE has a copy of my first contract (I don’t have it)

    ·I ended my employment January 2017

    ·he said he completed the ATO’s are you an employee or contractor survey and he believes he’s is an employee

19. Another telephone call between the ATO officer and Mr Wheeler on the same day at 12.20pm AEST (14 June 2017) states, in part (T21, page 255):

    … I asked him what was the nature of his work. He said [sic] drove the truck, he is a carpenter, asbestos removal, main road work, worked in warehouse. He said it was purely for labour. We went through the invoice copy he sent me, he confirmed he is paid $45/ph…

    I explained to [Mr Wheeler] the issue we have is that his ITRs are not reflective of him being an employee, based on the level of deductions he is claiming against the business income he is reporting. I went through some of his deduction %... He got quite upset and kept asking me about what he should be claiming and that the amounts he is claiming were small amounts and allowable as an employee…

    I asked him what he was claiming and he said, tools, safety glasses, boots, car, parts of this computer. And he said these are normal deductions for an employee.

    We were going back and forward about the agreement he had with the employer and I said we will have to take this to the next level and I will send him a Status of the Work Questionnaire…

20. Another note was made of a telephone call between the ATO and the Applicant’s representative, Mr Cook, on 20 June 2017 (T21, page 257). The note is, however, of limited relevance because of its generality. For example, it offers the opinion that “he [Mr Cook] believes that [Mr Wheeler] was a contractor” and that “he [Mr Cook] says some workers come and go and have their own hours and some have their own equipment.” The note stated that the relevant questionnaire would be sent for completion to help the ATO establish the relationship between the Applicant and Mr Wheeler (T21, page 257).

21. The notes also recorded that Mr Wheeler “worked from 14/5/2013 to 8/2/2017 (with a break in between of about 18 months - did not declare any income in the 2015FY” (T21, page 259).

    Unsigned contract

22. As mentioned above, the Unsigned contract was forwarded to the ATO by Mr Wheeler on 13 June 2017 (T5, page 16), which was after the Work Periods ended. It states:

    I, [Mr Wheeler]

    hereby agree that I am employed by KBE Contracting Australia as a Permanent Casual and will pay my own tax.

    I am not entitled to sick leave or holiday pay.

    My superannuation will be deducted from my wage each week and paid into my nominated superannuation account.

    No claim will be made against KBE Australia, Directors or Associated Companies.

    (Original emphasis.)

    WAS MR WHEELER A COMMON LAW EMPLOYEE?

    The nature of the relationship

23. In On Call, Bromberg J stated (at [201]-[202]) that the first step in establishing the nature of the legal relationship is to identify the parties to the relationship, their role and function, and the nature of their interactions. The Tribunal’s preliminary observations in this regard are that the Applicant has a business in which it contracts with various clients to undertake, amongst other things, roofing and asbestos removal from buildings. Mr Wheeler was engaged to undertake this work on behalf of the Applicant, pursuant to the Signed contract, set out above at [36] (T10, page 63). That is, he was providing “personal services” to the Applicant, which could be described (to use the language of Bromberg J) as a “form of hire”. That is, Mr Wheeler was hired by the Applicant to undertake such tasks as removing asbestos, roofing, and transporting materials to undertake this work, in return for payment at an hourly rate (as evidenced by the invoices provided by Mr Wheeler). However, before the Tribunal can reach any conclusions as to whether the relationship between Mr Wheeler and the Applicant was a contract for services or a contract of service, the practical questions identified by Bromberg J in On Call at [208] need to be considered. In the current application, these are whether Mr Wheeler was performing the work as an entrepreneur who owns and operates a business; and in performing the work, whether Mr Wheeler was working in and for his own business rather than the Applicant’s business.

    Did Mr Wheeler perform the work as an entrepreneur operating his own business?

24. The next question, identified by Bromberg J in On Call at [207]-[208], and taking into account the indicia of a business at [207], is whether Mr Wheeler was providing personal services as an entrepreneur who owns and operates his own business and as a representative of his own business (and not as a representative of the business receiving the work, being the Applicant’s business). Mr Wheeler had an ABN and claimed certain business deductions (as can be seen from his tax returns for the Work Periods) which are an indication that he was operating his own business. Mr Wheeler issued invoices to the Applicant for his work, which may be indicative of a basic transactional system which is part of operating a business. However, there is no evidence of other transactional systems such as payment and debt collection systems, financial records, budgets and forecasting systems (Bromberg J at [217]). Also, Mr Wheeler appears not to have standard terms and conditions of trade (which would tend to suggest the operation of a business) in that he accepted the hourly rate offered to him by the Applicant, and did not attempt to negotiate any increase in his hourly rate during the Work Periods.

25. Also, undertaking a business as an entrepreneur involves an element of risk in the pursuit of profits (On Call at [217]). The evidence tends to indicate an absence of risk on the part of Mr Wheeler. In both ATO questionnaires, the parties both indicated that Mr Wheeler was not required to guarantee his work. This suggests that the risks of defective work were in fact borne by the Applicant. The Applicant and Mr Wheeler did, however, provide contrary responses to whether he would have to correct mistakes or remedy breakages at his own expense, and as such this is inconclusive.

26. Both parties’ questionnaires indicated that the Applicant provided Workers’ Compensation insurance to Mr Wheeler. Mr Wheeler’s questionnaire indicated that he thought the Applicant was responsible for public liability insurance as well. However this was contradicted by the Applicant’s questionnaire response. If Mr Wheeler was, however, running his own business, and undertaking a genuine commercial enterprise which involves an exposure to risk, it is likely that he would be fully insured. Additionally, when Mr Wheeler’s eye was injured, the Applicant paid for medical expenses (see above paragraph [80]), which is suggestive of some risk being with the Applicant.

27. Additionally, the evidence before the Tribunal indicates that Mr Wheeler performed all of his work personally. He did not employ anyone, nor did he delegate his work. A right to delegate was not mentioned in Mr Wheeler’s contract with the Applicant. That is, there was no prohibition on delegation in his Signed contract and it also did not expressly permit it. The Applicant has suggested that Mr Wheeler delegated to his son. This appears inaccurate because Mr Wheeler’s son replaced another worker. Also, his son entered into a separate contract with the Applicant. However, as noted by Bromberg J in

    
    On Call

    at [283]: “The mere right to delegate in the absence of the likelihood or actuality of delegation occurring may be of little consequence.” In this case, the fact that Mr Wheeler did not employ anyone and did not delegate, tends to suggest that he was not operating his own business.

28. The evidence also suggests that Mr Wheeler did not advertise or promote his business to the public. He did not have his own name badge, clothing, business cards, stationery or any other items promoting his business or services. This tends to suggest that he was not operating his own business. Mr Wheeler was provided with, but not required to wear, shirts with the Applicant’s company name on them, and would drive a truck to some jobs with the Applicant’s company name on it, so the extent that any branding was used, it was the Applicant’s branding.

29. There is also no other evidence of any goodwill being built up by Mr Wheeler in his own business that could later be sold. For example, as submitted by the Respondent in Exhibit R3, the work was performed for clients of the Applicant and there is no evidence of any client relationships being formed with Mr Wheeler, or of independent offers of work or other commercial opportunities accruing to Mr Wheeler from any goodwill being built up.

30. Based on the above discussion, the evidence before the Tribunal does not support a finding that Mr Wheeler was performing the work as an entrepreneur operating his own business.

    Did Mr Wheeler perform the work in and for the business of the Applicant?

31. The next consideration was identified by Bromberg J as “whose business the economic activity is being performed in and for” at [218]. There is some overlap between the indicia identified by Bromberg J with respect to this question, and the indicia above as to whether a person is performing the work as an entrepreneur operating their own business including considerations of whether the work must be personally performed (delegation), and goodwill. However, the other relevant indicia will now be discussed including: the control test; the results test; integration and representation; exclusivity; delegation and risk; assets, equipment and tools; and other indicators.

    Control Test

32. The SGR 2005/1, at paragraph [33], explains the control test:

    The classic 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. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it.

    (Footnotes omitted.)

33. The contract is unhelpful with respect to control because it only deals with payment, tax and leave.

34. Mr Wheeler, in his questionnaire (T11), provided answers indicating some degree of control by the Applicant over his work. For example, he stated that:

    (a)His tasks “would vary”;

    (b)“Inductions were completed to do work for certain sites we visited regularly”;  

    (c)“Yes were always provided with verbal instruction on how the job is to be done”.

    (d)“…all scheduling and work direction came from payer”;

    (e)“All jobs were directed by payer manager from there [sic] office/ w/shop”; and

    (f)that he was supervised, “The manager of the company was responsible for checking. The payer/manager would control all hrs allocated for job - Recording our hrs as well”.

35. The Applicant’s answers in its questionnaire (T9) with respect to control differed from those of Mr Wheeler. For example, the Applicant stated:

    (a)“Tasks are usually not specified in detail; only in broad terms – i.e. remove asbestos or assist with renovations per client contract”;

    (b)“Specific tasks were determined by worker based on on-site conditions and requirements”;

    (c)“KBE does not provide an induction course for contractors or workers”, but that “KBE workers are sometimes required to attend the clients induction course as a prerequisite to working on the clients site”. Further, “If it is essential, KBE sometimes provides a contract worker with specialised third-party training such as plant operator, working at heights or first-aid”;

    (d)“All workers chose their own working hours and days”, “can start and finish at the times of their choice” and “If they fail to show, the remaining team members simply perform the work with whomever is in attendance” and that “The same applies for early departure from site”;

    (e)Boxes were also ticked in the questionnaire indicating that the worker decided what jobs or tasks he performed on a daily basis and that the worker was not required to follow a plan; and that the worker’s work was not checked and that no quality control checks were done.

36. The evidence before the Tribunal regarding control is an example of the issue identified by the Tribunal above that the evidence in the questionnaire completed by the Applicant is sometimes expressed in general terms (for example, the answers set out in paragraphs (c) and (d) of the preceding paragraph), whereas the questionnaire completed by
    Mr Wheeler relates to his personal experience as a worker. Accordingly, the Tribunal prefers the explanations given by Mr Wheeler, which do indicate a degree of control by the Applicant.

37. Additionally, the evidence of Mr Wheeler better accords with the nature of the business of the Applicant which, as submitted by the Applicant, consisted of approximately one third asbestos removal (T16, page 118). It is difficult for the Tribunal to accept the Applicant’s account that the worker decided his work; that there was no plan; that work was not checked; that there were no quality control checks; and that the worker was free to work when they pleased and if they failed to show up, their work would be done by others. Such a relationship seems unlikely, given the dangerous nature of asbestos; the potential liability of the Applicant if asbestos was not properly removed (as indicated by their legal and contractual requirement to provide Workers’ Compensation insurance (above paragraph [56]); the obligations of the Applicant under health and safety laws; the contractual relationship between the Applicant and the client; and the practical reality that such a flexible working structure may result in a lack of workers creating health and safety issues, or which may otherwise compromise the delivery of a client contract.

1. At a general level, as a matter of practicality, the Applicant’s tasks “would vary” which would necessarily require him to be directed as to which tasks he would perform by the Applicant. However, even if the Applicant did give some autonomy to Mr Wheeler as an experienced worker, the above factors tend to indicate a right to control on the part of the Applicant, and that the Applicant retained ultimate control.

   Result

2. The SGR 2005/1 states, at paragraph [42] that: “Where the substance of the contract is to achieve a specified result, there is a strong (but not conclusive) indication that the contract is one for services.”

3. The Applicant submits that Mr Wheeler was paid on a results basis, which is suggestive that he was an independent contractor, and not an employee. More particularly, the submission was (Exhibit A1, paragraph [67]):

   Mr Wheeler was engaged to complete individual jobs and many of those jobs were completed within a few days or even within a few hours. At the conclusion of each job, if no new job was available, Mr Wheeler was effectively stood down pending a new assignment. Payments for such smaller jobs were payments on a result basis.

4. The Tribunal notes that Mr Wheeler stated in his tax returns for the 2013 and 2014 financial years that he satisfied the results test in connection with personal services income that he derived during those years. However, by the time Mr Wheeler completed the questionnaire he no longer believed that he satisfied the results test. The Tribunal agrees with the Respondent’s submission that the statements made by Mr Wheeler in his tax return are statements of opinion by Mr Wheeler. However, the question for the Tribunal is not what Mr Wheeler believed to be the position when he prepared his tax return and filled out the questionnaire, but rather the question is about the “real substance” of the relationship, determined objectively (see Bromberg J in On Call, at [190]). Thus, the Tribunal does not regard Mr Wheeler’s statements in his tax returns that he satisfied the results test as having any significant weight.

5. With respect, the evidence does not support a finding that Mr Wheeler was paid to achieve a particular result. The contract between Mr Wheeler and the Applicant states that he was paid an hourly rate. It does not contain any contractual condition that had to be fulfilled, for example the completion of a project, before Mr Wheeler would be paid. Further, Mr Wheeler’s handwritten invoices state the names of worksites, the number of hours worked, and the monetary calculation based on those hours. Additionally, by the Applicant’s own admission, if a worker was absent from work or had to leave early, the other contractors would complete the work. All of these factors tend to suggest payment at an hourly rate instead of the payment being conditional upon an end result, which is an indicator of an employment relationship.

   Integration and representation

6. In On Call, at [218], one of the indicia identified by Bromberg J was that of representation. That is, “Is the economic activity represented or portrayed as the activity of the putative business or that of the putative employer’s business?” The Tribunal has already noted above that, based on the evidence before it, Mr Wheeler did not advertise his own business, nor is there evidence that he built up any goodwill in any business he was operating. This tends to suggest that he was not an independent contractor working in his own business.

7. Bromberg J also stated that integration was a relevant indicator. His Honour stated, at [218] that, “To what extent is the person providing the economic activity integrated with the business receiving the activity?” More specifically, regard must be given to the economic activity engaged in (which in this case is roofing and asbestos removal), and how those activities are portrayed. More specifically, Bromberg J found in On Call, at [270] that:

   The findings I have made in relation to the representation of On Call by the panel interpreters, substantiate my clear view that the economic activities engaged in by panel interpreters were represented and portrayed as the activities of On Call, and not of the activity of the businesses of the interpreters. Given the particular emphasis placed upon this indicator by the majority in Hollis, I regard it as of particular importance.

   (Emphasis added.)

8. His Honour continued on to state (at [272]):

   The fact that the work performed by panel interpreters was integral to the business of On Call is also of some importance in supporting the conclusion that I have just expressed

   : Hollis at [57]; Stevens v Brodribb at 26-27 and 35. It would commonly be the expectation of those with whom a business deals, including its clients, that the businesses’ functions which are integral to that business would be the activities of the business rather than the activities of another business. A different expectation may attend the performance of peripheral functions, which common experience would suggest may sometimes be provided for the business in question, rather than by that business. In this respect, the contention of On Call that its primary function is that of an agency fulfilling requests for interpreting and translation and not actually doing the interpreting and translation itself, is without any evidentiary foundation and is rejected. The evidence was unequivocal that On Call is not an agency and that On Call itself contracts with its clients as a provider of interpreting and translating services, and that the provision of those services was the core activity of On Call’s business.

   
   

   On Call’s business involved “the marshalling and direction of the labour of the [interpreters], whose efforts comprised the very essence of the public manifestation” of On Call’s business: Hollis at [57].

   (Emphasis added.)

9. These observations are also relevant to the current application before the Tribunal.
   The on-site work performed by Mr Wheeler could be regarded as “integral to the activities” of the Applicant’s business. It was Mr Wheeler (and other like workers) who performed the on-site work (including roofing and asbestos removal) necessary to fulfil the performance of the Applicant’s contractual obligations with its clients. In this regard, Mr Wheeler was part of the “very essence of the public manifestation of… [the Applicant’s] business”, and the activities he undertook were largely represented and portrayed as those of the business of the Applicant. This tends to suggest that Mr Wheeler was an employee of the Applicant, rather than an independent contractor.

   Exclusivity

10. In On Call at [218], Bromberg J stated that “Exclusivity is suggestive of an employment relationship…. However, it does not follow that a person who provides casual or part-time work to multiple purchasers is not an employee”. The Applicant referred to Mr Wheeler’s tax returns indicating that he carried out work for some other entities during the Work Periods (see, for example Applicant’s written closing submissions, paragraph [47]). However, there is very little evidence before the Tribunal as to the frequency and nature of this work, and, in any event, as noted by Bromberg J, a person can still be an employee even though they undertake casual or part-time work to multiple employers at once.

    
    

    As such, the Tribunal does not afford any weight to this consideration, which it regards as neutral.

    Delegation and risk

11. The SGR 2005/1 explains, with respect to delegation, at paragraphs [48]-[49] that:

    48. The power to delegate or sub contract (in the sense of the capacity to engage others to do the work) 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.

    49. If an individual has unlimited power to delegate the work to others (with or without the approval or consent of the principal), this is a strong indication that the person is being engaged as an independent contractor.

    (Footnotes omitted.)

12. Regarding risk, the SGR 2005/1 provides the following summary, at paragraph [51]):

    Where the worker bears little or no risk of the costs arising out of injury or defect in carrying out their work, they are more likely to be an employee. On the other hand, an independent contractor bears the commercial risk and responsibility for any poor workmanship or injury sustained in the performance of work. An independent contractor often carries their own insurance and indemnity policies.

    (Footnotes omitted.)

13. These indicia have already been discussed above in the context of whether Mr Wheeler was performing the work as an entrepreneur operating his own business. In summary, the Tribunal noted above that the contract was silent with respect to delegation, but found that as a matter of practicality, Mr Wheeler did not delegate his jobs or tasks. The Tribunal also found above that the evidence (including with respect to insurances) tended to suggest that risk was primarily borne by the Applicant, and not by Mr Wheeler. Both of these factors tend to suggest an employment relationship.

    Assets, equipment and tools

14. The SGR 2005/1 states, at paragraph [52] that:

    It has been held that 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.

    (Footnotes omitted.)

15. The evidence regarding the provision of materials differed slightly between the Applicant and Mr Wheeler. To the extent that it does, the Tribunal prefers the answers of Mr Wheeler as being more accurate, given the generality of some of the Applicant’s answers. The Applicant’s questionnaire answers indicated that, “Materials required for the worker’s job were usually provided by the worker”, and that the “Worker was responsible for determining any materials used in his job”.  The questionnaire further stated that, “Materials for the client contract were provided by KBE”. That is, materials were supplied by both the Applicant and Mr Wheeler. However, Mr Wheeler answered that the Applicant “supplied all materials for all jobs”.

16. Mr Wheeler’s questionnaire answers were that he supplied his own car, phone and laptop for emails, but that “Hand tools and ladder sometimes mine sometimes theirs” and that he did not receive any reimbursement from the Applicant for his assets, equipment or tools.

17. Mr Wheeler indicated that he supplied his own safety equipment. This is consistent with the Applicant’s generalised answer that, “Workers are free to use their own personal safety gear and sometimes choose to do so”, but that the Applicant would also make safety equipment available for “quality control purposes”, which remained the property of the Applicant. Mr Wheeler also referred to driving a truck belonging to the Applicant for certain jobs which displayed the Applicant’s branding (see above paragraphs [62], [77]).  

18. In summary, the evidence is equivocal. On the one hand, Mr Wheeler supplying his own car, phone, laptop and (albeit sometimes) hand tools and safety equipment is suggestive of a contract for services. However, the Applicant supplying materials, sometimes supplying hand tools, its branded truck, and making safety equipment available, indicates an employment relationship. As the evidence is equivocal, the Tribunal does not afford weight to it, and regards this indicator as being neutral.

    Other indicators

19. The SGR 2005/1 at paragraph [58] explains that, “Those [other indicators] suggesting an employer-employee relationship include the right to suspend or dismiss the person engaged.”

20. There is conflicting evidence regarding the right to suspend or dismiss the worker, with the Applicant stating in its questionnaire that “KBE could not terminate a worker, but could only refuse to accept a worker on site”, and that, “Examples of where KBE might refuse a worker’s services include unsafe work practices, fighting with other contractors…”. The Applicant stated that in effect, that there was a practical termination after each contract was completed (see above paragraph [41]). However,

    
    

    Mr Wheeler stated that he could be terminated, “For what ever [sic] he [the Applicant] chooses. Eg. lack of work”.

21. On the one hand, the Applicant’s evidence was that it did not have the right to suspend or dismiss the worker, which suggests a contract for services. On the other hand, given the dangerous nature of asbestos removal, and the Tribunal’s findings above that the Applicant had a degree of control suggestive of an employment relationship, the Applicant perhaps understated its ability to terminate the worker. Consequently, the Tribunal prefers the evidence of Mr Wheeler, and finds that this indicator tends to suggest an employment relationship. 

    Uniform

22. The requirement to wear a uniform can be an indicator of an employment relationship. The answers in the questionnaires completed by Mr Wheeler indicated that Mr Wheeler was provided with, but not required to wear shirts with the Applicant’s company name on them. The Applicant’s answer in the ATO questionnaire included that branded clothing or other promotional items, were not provided to workers (T9, page 52). If Mr Wheeler’s more specific answer is accepted, it is, in the Tribunal’s opinion, only a slight indicator of an employment relationship.

    Benefits/How the parties defined their relationship

23. As noted by the High Court in Hollis, “the terms agreed between the parties are not of themselves determinative because parties cannot deem their relationship to be something it is not”. Thus, intention can be a relevant factor to consider, but it is not determinative. In this regard, the Tribunal notes the Case notes of conversations between the ATO and Mr Wheeler indicate Mr Wheeler’s belief, at that time, that he was an employee. 

24. The Signed contract between the parties does not contain express provisions about how the parties characterised their relationship. However, it does contain some characteristics suggestive of a possible intention of the Applicant and Mr Wheeler that their legal relationship would be a contract for services. This includes the provision for

    
    

    Mr Wheeler to pay his own tax, and Mr Wheeler not being entitled to the benefits (which would normally accrue to an employee) of holiday pay or sick leave, which is suggestive of a contract for services. The Signed contract also refers to Mr Wheeler receiving an hourly rate that includes an allowance so that Mr Wheeler will pay his own superannuation. Payment of one’s own superannuation is also suggestive of a contract for services. Objectively speaking, the Tribunal observes that the Signed contract that was applicable during the Work Periods does contain some features of a contract for services, although, given the above discussion, it is difficult to ascertain the exact intentions of the parties with any certainty.

25. However, as noted by Bromberg J in On Call (at [219]), some care needs to be afforded because reliance on the absence of tax being withheld and leave entitlements as indicators of a lack of an employment relationship can be somewhat circular. This is particularly if, after an objective assessment of the totality of the relationship, they are based on the parties’ incorrect self-assessment of their relationship. The same could also be said of Mr Wheeler’s statements in his tax returns that he satisfied the results test for the personal services income he derived in the 2012 and 2013 financial years.

    
    

    The Tribunal is of the opinion that, whilst the absence of benefits and withholding of tax can be relevant, in this case they are most likely based on incorrect self-assessment (given that, overall the other indicia before the Tribunal tend to suggest an employment relationship). Further, the Tribunal also notes Bromberg J’s observation that casual employees are not entitled to leave or sick pay (in On Call at [219]).

26. In its SFIC (paragraphs [43]-[46]), the Applicant made some submissions with respect to the Unsigned contract received by Mr Wheeler at the end of the Work Periods under which he was stated to be “a Permanent Casual”. The submissions appear somewhat incomplete, but appear to suggest that it was the parties’ intention to change their contractual relationship from a contract for services to a contract of service (that is, from an independent contractor relationship to an employment relationship). The Tribunal observes that except for the payment of superannuation by the Applicant, the terms as to holiday pay and sick leave not being available are the same in both contracts. In response, the Respondent made the “limited point” (transcript, page 26) that, given the similarities between both contracts, it could be suggested that the Applicant must have been satisfied with the new Unsigned contract in that the relationship between the parties during the Work Periods could be readily characterised as one of employment. In the Tribunal’s opinion, the Unsigned contract is equivocal and it is difficult to draw conclusions from it regarding the parties’ intentions without speculating.

27. Overall, the Tribunal finds that the evidence regarding the parties’ intentions is equivocal. The Signed contract contains some features of a contract for services, and so do Mr Wheeler’s tax returns. On the other hand, it was Mr Wheeler’s belief at the time he spoke with the ATO that he was an employee. As noted above, it is difficult to draw conclusions regarding the parties’ intentions from the Unsigned contract without speculating. Consequently, the Tribunal does not afford any weight to this consideration, which it regards as neutral.

    CONCLUSION

28. Based on the evidence before it, the Tribunal finds that the Applicant has not met the burden of proving that the Notices of Assessment were excessive or otherwise incorrect. Specifically, the Applicant has not met the burden of proving that Mr Wheeler was not a common law employee, pursuant to s 12(1) of the SGAA, during the Work Periods.

29. The Tribunal finds that, based on an objective assessment of the totality of the parties’ relationship with reference to the relevant indicia, the evidence is not sufficient to establish that Mr Wheeler was an independent contractor during the Work Periods. The evidence tends to suggest, and therefore the Tribunal finds that, Mr Wheeler was a common law employee because he:

    (a)did not perform the work as an entrepreneur operating his own business; and

    (b)he performed the work in and for the business of the Applicant.

30. Accordingly, it is unnecessary to consider whether Mr Wheeler was also an employee within the extended definition of that term under s 12(3) of the SGAA.

    DECISION

31. For the reasons set out above, the correct or preferable decision is to affirm the Reviewable Decision.

I certify that the preceding 140 (one hundred and forty) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans

........................[sgd]................................................

Associate

Dated: 20 November 2019

Date of hearing: 14 June 2019

Date of decision:   20 November 2019

Representative for the Applicant:       Mr L A Cook, CCY Tax Services Pty Ltd

Representative for the Respondent:   Mr P A Walker

Solicitor for the Respondent:            Mr M Sunits, Australian Government Solicitor