Trustee for the Kitchen Unit Trust and Commissioner of Taxation (Taxation)

[2023] AATA 2831

Trustee for the Kitchen Unit Trust and Commissioner of Taxation (Taxation) [2023] AATA 2831 (5 September 2023)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2022/6869

Re:Trustee for the Kitchen Unit Trust

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Mr Rob Reitano, Member

Date:5 September 2023

Place:Sydney

The Commissioner’s decision to disallow the objection is affirmed.

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

Mr Rob Reitano, Member

CATCHWORDS

TAXATION – superannuation guarantee charge – whether worker was an employee or a contractor – ordinary meaning – contract wholly or principally for the labour of the person – worker found to be employee – decisions under review affirmed.

LEGISLATION

Superannuation Guarantee (Administration) Act 1992 (Cth)

CASES

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1
WorkPac Pty Ltd v Rossato [2021] HCA 23

ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2

REASONS FOR DECISION

Mr Rob Reitano, Member

5 September 2023

1. This matter is about whether the Trustee for the Kitchen Unit Trust (Trustee) was an ‘employer’ and Mathew Novak (Mr Novak) was an ‘employee’ as defined in the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGAA), and as a result of which the Trustee is liable for superannuation guarantee charges in relation to payments made to Mr Novak between 1 July 2007 to 31 December 2012 (assessment period).

2. On 12 and 13 May 2020 the Commissioner of Taxation (Commissioner) issued 22 assessments under s.36 of the SGAA over each quarter during the assessment period assessing the Trustee’s superannuation guarantee shortfall, and the superannuation guarantee charge payable on that shortfall, arising from payments to Mr Novak over the assessment period.

3. On 9 July 2020 the Trustee objected to all of the assessments. On 17 August 2021 the Commissioner decided to disallow the objection. On 24 August 2022 the Trustee applied to the Tribunal for a review of the Commissioner’s decision.

4. I have decided to affirm the Commissioner decision to disallow the objection. These are my reasons for doing so.

   REGULATORY PROVISIONS

5. There are two regulatory provisions that important for the determination of this matter. The first is found in s.12 of the SGAA and the second is in s.14ZZK of the Taxation Administration Act 1953 (Cth) (TAA). I should say something about why they assume importance, dealing with each of them in turn

6. Sub-sections 12(1) and (3) of the SGAA provide:

   (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.

   …

   (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.

7. The SGAA provides that superannuation guarantees shortfalls and superannuation guarantee charges arise where ‘employers’ as defined in the SGAA have not made the required superannuation contributions to ‘employees’ as defined in the SGAA. The definitions of ‘employer’ and ‘employee’ in the SGAA are wider than their ‘ordinary meaning’. Sub-section 12(1) acknowledges the wider definitions by pointing out that ‘for the purposes of this Act’ the section ‘expand[s] the meaning of those terms’ and ‘make[s] particular provision to avoid doubt as to the status of certain persons’.

8. It will be necessary to consider each alternative, that is whether the ‘ordinary meaning’ of ‘employer’ and ‘employee’ is satisfied under ss.12(1) or, alternatively, whether the extended meaning under ss.12(3) is satisfied. If either definition is satisfied the Trustee is liable to a superannuation guarantee charge.

9. The second regulatory provision is in s.14ZZK of the TAA. Sub-section 14ZZK(b)(i) of the TAA provides that in reviewing an objection decision ‘the applicant has the burden of proving…if the taxation decision concerned is an assessment - that the assessment is excessive or otherwise incorrect and what the assessment should have been’. The effect of the section is that the Trustee has the onus of proving that it was not an ‘employer’ and Mr Novak was not an ‘employee’ within the meaning of s.12 of the SGAA. As will be seen I am satisfied that the Trustee was an ‘employer’ and Mr Novak was an ‘employee’ such that the Trustee has not discharged the burden of proving otherwise.  

   FACTS

10. It is necessary to say something about the facts that underpinned the Commissioner’s decision, noting that most of the events happened more than a decade ago. Despite their antiquity many of the more important facts are relatively uncontroversial. There are some disputes about some of them that require findings to be made. I will deal with them all together making any necessary findings along the way.

11. The Trustee was in the business of the supply and renovation of kitchens and bathrooms. The Trustee had a showroom and a factory where benchtops and cabinets were manufactured. Mr Zappala was the director of the Trustee who represented it in most of its dealings with Mr Novak.

12. Mr Novak first contacted Mr Zappala sometime in the early 1990’s when, according to Mr Zappala, Mr Novak had moved to Brisbane. Mr Novak told Mr Zappala that he was a kitchen designer in Sydney and was looking for some ‘contract work’ as a designer in Brisbane. Mr Zappala offered Mr Novak work but at that time Mr Novak declined, according to Mr Zappala, because Mr Novak had been offered ‘better commission’ elsewhere.

13. In July or August 1999 before he started working for the Trustee, Mr Novak recalled calling Mr Zappala and then going to the Trustee’s showroom to discuss with Mr Zappala obtaining work. Mr Novak says that he spoke to Mr Zappala who ‘showed [Mr Novak] around and commented that [Mr Novak] had an eye for detail’. It was in that meeting, according to Mr Novak, that Mr Zappala ‘offered [Mr Novak] the job and asked [Mr Novak] to start work the following Monday’. There was no issue that the discussions identified the work Mr Novak was to do as involving the designing, quoting and selling of kitchens and bathrooms for, and to, customers of the Trustee.

14. Mr Novak does not recall discussing ‘the nature of [his] working relationship…prior to commencing work…or while [he] was working for the [Trustee]’. It is a little curious that Mr Novak on his version did not, in the absence of a written agreement, have any discussion that he recalls about the terms on which he would work and, more particularly, the rates at which he would be paid. The fact that the conversation was so long ago might explain his lack of recall of the detail of any conversation, but it does not explain how he does not recall any conversation at all over the subject matter of remuneration.

15. In any event Mr Novak ‘understood’ that he ‘was employed by the [Trustee] on a salary basis from 1999 until the end of June 2017’.  Mr Novak did not recall being asked to provide to Mr Zappala an Australian Business Number (ABN) but conceded it was possible that he was asked for one. Despite possibly having, or having obtained, and giving to Mr Zappala an ABN, Mr Novak denied carrying on a business at any time. There was no evidence that Mr Novak was carrying on a business at that time or at any time. Having or providing to someone an ABN does not, of course, mean a person is carrying on a business. I find that Mr Novak was not carrying on a business at any time relevant to my decision.

16. In relation to remuneration Mr Zappala said that when Mr Novak approached him there were terms agreed about Mr Novak’s engagement, none of which were in writing. It is not clear how the terms were agreed, according to Mr Zappala, but presumably they were agreed in a conversation. Mr Zappala said that it was agreed that Mr Novak would be engaged and would be paid commission: Mr Novak would be paid 10% of the retail price of cabinets and benchtops sold, being those manufactured by the Trustee, and between 2% and 5% of the amount charged to customers for trades and electrical appliances. How the latter percentage was to be arrived at was, it seems, not the subject of discussion.

17. There were some commission statements referred to in Mr Zappala’s evidence that related to a time in 2011. They do not obviously reflect what Mr Zappala said about the calculation of commission: commission was not on the face of those documents calculated as 10% on the retail price of cabinets and benchtops, but rather was calculated as 10% on the retail price of the kitchen, less a host of deductions such as installation, delivery, petrol, appliances, and so on. It is significant that Mr Novak said that he had never seen those commission statements before being shown them by officers of the Australian Taxation Office (ATO) in April 2023 although he recalled seeing one of them in 2018 after he had finished working for the Trustee and had taken proceedings in the Queensland Industrial Relations Commission. Mr Novak said they were not in his handwriting. I accept Mr Novak’s evidence that he had not seen any of the commission statements before 2018.

18. According to Mr Zappala there was an accounting exercise that was undertaken that involved paying Mr Novak a regular amount each week with credits and debits applied against the commission payable to Mr Novak. According to Mr Zappala, rather than Mr Novak being paid all the commission he would generate from his work in one go when a sale was completed, he would receive a regular amount each week with a running tally being kept of what was owed to him, or by him, by the Trustee. That, it was said, explained the times when no payments, or reduced payments, were made. It is not clear whether Mr Zappala said anything to Mr Novak about that in the conversation he says he had with Mr Novak about rates of commission. Mr Novak was unable to recall any conversation about rates of commission, or the kind of system that Mr Zappala referred to concerning the payment of a regular amount each week and the system of debits and credits. Mr Novak said he was paid each week an amount of salary determined by the Trustee.

19. There is no documentary or other objective evidence known to both parties about payment by commission during the assessment period. There were, on the other hand, some pay slips concerning part of the assessment period. Mr Novak said the pay slips reflected what he consistently received over the whole of the assessment period, and in fact, from the time he started his relationship with the Trustee. The payslips produced related to a large part of the assessment period, in particular the months of May to December 2009, January to November 2010, February to May 2011 and March and April 2012.

20. The payslips are all in the same format. The description of the rate of payment on the payslips referred to ‘Annual salary: $52,000’ and ‘Hourly rate: $26.3158’. The latter figure corresponds to almost exactly $1,000 when multiplied by 38 which is, of course, a common number of hours that employees work as ordinary hours each week. Under the heading ‘Type’ on each payslip the word ‘Wages’ appears. For the most part those pay slips show that Mr Novak was paid $1,000 less pay-as-you-go tax amounts that were withheld each week. There were some pay slips that showed amounts slightly more than gross payments of $1,000 and in some cases less than that, a matter to which I will return. The pay slips came from the Trustee, were given to Mr Novak by the Trustee, and did not at all refer to commission or any system relating to the payment of commission. Mr Zappala offered no explanation for them or what was recorded on them other than to suggest the accounts lady had for some reason got things wrong.

21. There were also some of Mr Novak’s bank statements in evidence which included the weekly payments made to Mr Novak by the Trustee. Other than confirming the consistent pattern of regular weekly payments and a fairly consistent amount in much the same way as the payslips showed they contained various descriptions of those payments with words such as ‘invoice’, ‘pay’, ‘payment’, ‘retainer’, ‘commission’, ‘HoK wages’ or in some cases no description at all. It is important to remember that the origins of the descriptions in the bank statements are from the Trustee. Again, references to ‘salary’ and ‘HoK wages’ at the very least do not sit neatly with hat Mr Zappala says about payment by commission.

22. As I noted earlier, Mr Novak was paid weekly, although there were some weeks when he was not paid at all. Those appear to be the exception rather than the rule. Mr Novak did not know why he was not paid in some weeks or was paid a reduced amount, but at times when he enquired, he says he was told by Mr Zappala things like ‘the bank was slow to process’ or ‘he forgot’ or ‘times [are] hard’. There is nothing so far as payments to suggest that Mr Novak was paid any other kinds of employee related remuneration such as allowances, sick pay, holiday pay and, of course, superannuation payments.

23. The objective evidence contained in the pay slips supports a finding that Mr Novak was paid for his work a weekly amount of $1,000 gross per week which was more probably that not paid as wages or salary. 

24. I should deal with other aspects of the relationship which will be seen to be important. Mr Zappala said that it was agreed that Mr Novak was to supply any tools and equipment including a car, measuring tapes and drawing equipment, but the Trustee was to provide graph paper and stationery to present designs and quotes to customers. According to Mr Zappala it was agreed Mr Novak would not be provided with a uniform but was ‘free to use’ the Trustee’s stationery and business cards. The business cards had Mr Novak’s name on them with the livery of the Trustee. They were provided to him by the Trustee. Mr Novak could, according to Mr Zappala, decide on his own designs, but to be paid commission he was always required to use the Trustee’s cabinetry and benchtops.

25. As to hours and the way work would be allocated, there was some agreement between Mr Zappala and Mr Novak about those facts. Mr Zappala said he explained to Mr Novak when he started that he would be allocated ‘leads’ by the Trustee. ‘Leads’ were the Trustee’s potential customers who had come to the Trustee’s attention in one way or another, such as through marketing, advertising or had just walked in off the street and into the Trustee’s show room. These were recorded in a book by one of the Trustee’s employees, usually the receptionist, who would also arrange a time with the customer for Mr Novak to visit the customer at their home. Potential customers would be allocated to Mr Novak by the Trustee and according to Mr Zappala this depended on when Mr Novak had indicated he was available. Mr Zappala said Mr Novak was able to choose when he would be available for appointments and therefore determine his own hours of work. The appointment was usually made by the receptionist, but if Mr Novak was not available at the time appointed, it was remade either by Mr Novak or by the receptionist. Mr Zappala said that he expected that Mr Novak would attend at appointments at the times that the Trustee had arranged them. Mr Novak said he would call into the show room each day to see the potential customers allocated to him and follow up with them by attending an appointment with the potential customer, usually in their home, but sometimes in the Trustee’s show room.

26. Other than the procedure for the allocation of work there appears to have been no conversation about working hours. Mr Zappala and Mr Novak were in dispute about the hours worked by Mr Novak. Mr Zappala said Mr Novak indicated his availability for hours and was allocated jobs in those hours, which were usually between 8.30am and 3.30pm. Mr Zappala said that Mr Novak often worked Saturdays in the show room, but he was not required to do so. He suggested Mr Novak did this for the purpose of generating more leads for himself such that allowed him to make more money.  That statement ignores the obvious benefit to the Trustee in having Mr Novak in its show room on a Saturday, which according to Mr Zappala was the busiest day of the week for the showroom, actively engaging in securing customers for the Trustee, and therefore sales from them. The benefit suggests that the Trustee had an interest in seeing Mr Novak in its show rooms on Saturdays such that the Trustee may well have required Mr Novak to work Saturdays. Mr Novak said he was required to work 8.30am to 5.00pm Monday to Friday and 9.00am to 4.00pm Saturday, although at times he finished early. The difference between the two versions is a little stark, but both versions refer to an identifiable and consistent spread of hours of work.

27. When he provided quotes, Mr Novak used the Trustee’s price list. Mr Zappala said Mr Novak was expected to use that price list in providing quotes. Mr Novak said that if he was asked to discount a price or increase a price, he would include Mr Zappala in that decision. According to Mr Novak, changes to listed prices could only be made with Mr Zappala’s approval. Mr Zappala said that Mr Novak frequently charged ‘overs’ which was a price over the listed price so he could generate more commission. Mr Zappala said he did not like ‘overs’ and did not encourage the practice but was happy to take the benefit that accrued to the Trustee of charging a higher price. The more telling evidence about prices concerns the training Mr Novak received about them. Although Mr Zappala suggested there was no training provided to Mr Novak, he said that when Mr Novak first started working, Mr Zappala spent time with Mr Novak ‘going through [the Trustee’s] product range how they related to the pricing he was giving a particular client so that he could quote the correct prices based on [the Trustee’s] pricing’. Mr Zappala also occasionally checked that quotes were made according to the price list. These things were done because the expectation was that, generally speaking, Mr Novak was required to quote based on the Trustee’s price list. I am satisfied that Mr Novak was expected to quote in accordance with the Trustee’s price list.

28. Mr Zappala also said in answer to questions from the ATO that Mr Novak was at times required to undertake training by the Trustee in computer design/software programmes. The suggestion that no training was provided was not quite right and what is significant about the training that was provided is that it was integral to the Trustee’s business, that is concerned with its products, its pricing, and its computer system.

29. Mr Novak and Mr Zappala agreed that Mr Novak was not permitted to sub-contract his work or delegate it to someone else. When Mr Novak was away, for example when he was on holidays, the Trustee would arrange other designers to do the work. Mr Novak was not permitted to arrange someone to do his work for him. Mr Novak, according to Mr Zappala, was able to work for others, including competitors to the Trustee’s business. Mr Zappala said he could do so, although if he was allocated customers by the Trustee he was bound to quote, design and sell only the Trustee’s products. Mr Novak did not consider that he was able to work for others. There was no conversation about the matter, and nothing was ever raised by either party about it.

30. Mr Novak said that he took two weeks of annual leave in the middle of each year and two weeks of leave at Christmas when the Trustee’s factory was closed. Mr Novak says he was ‘mostly paid for the annual leave [he] used’. Mr Zappala did not disagree with the fact that Mr Novak took that time off or that he was paid for that time. In answer to a question from the ATO, Mr Zappala confirmed that Mr Novak was required to be given permission by the Trustee to take time off and was required to notify of his intention to take time off even though he very often did neither of those things.

1. Mr Novak was provided with what he described as an office at the Trustee’s premises. There was a computer that belonged to the Trustee in the office. Mr Zappala said that Mr Novak used a storeroom space that was made available to him when seeing the Trustee’s customers. Again, both parties agreed at least that a space was provided for Mr Novak to do some of his work at the Trustee’s premises.

2. Mr Novak said he was provided with various pieces of equipment and stationery such as a tape measure, a design pad, pencils and rubbers to do his work. He said he was provided with rulers but used both the Trustee’s and his own to do work. Mr Zappala disputed this, saying that Mr Novak provided his own equipment. Mr Novak used his own motor vehicle to drive to customers’ homes, where he would do some of his work.

3. The parties disagreed about who was responsible for organising workers’ compensation insurance; presumably there was no insurance, as each of them pointed to the other having responsibility.

   CONSIDERATION

4. It is next necessary to deal with each of the libs of the definition of ‘employer’ and ‘employee’ in s.12 of the SGAA. I will deal with them in turn.

   ‘…employee and employer in their ordinary meaning…’

5. The first issue arises because ss.12(1) of the SGAA catches within the definition of ‘employer’ and ‘employee’ the ordinary meaning of those words. That issue involves a consideration of what the ordinary meaning of those words is, which in turn involves a consideration of the principles relevant their ordinary meaning.

6. The approach to determining whether there was a relationship of ‘employer’ and ‘employee’ has most recently been dealt with in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1 (Personnel Contracting) and in ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (Jamsek). Personnel Contracting was involved a labour hire arrangement where it was said that the putative employee was conducting their own business as an independent contractor when he undertook work for a construction company to which the labour hire company had sent him. Jamsek was concerned with putative employees who were truck drivers involved in transporting goods by truck for the putative employer.

7. Both cases considered the principles applicable to resolving the question concerned with the ordinary meaning of the word’s ‘employer’ and ‘employee’. Both cases were concerned with circumstances where there were ‘written agreement[s] which comprehensively regulated [the] relationship.’[1] That, of course, is not this case because in this case none of the agreement was in in writing. Nonetheless Personnel Contracting and Jamsek provide considerable guidance as to the approach to be taken to determining whether parties are ‘“employee” and “employer” [in] their ordinary meanings’.[2]

   [1] Jamsek at [8].

   [2] Personnel Contracting at [173].

8. In Personnel Contracting Keifel CJ, Kean and Edelman JJ emphasised that in context and where validity was not an issue ‘the characterisation of [the parties’] relationship as one of employment or otherwise proceeds by reference to the rights and obligations of the parties under the contract.’[3] Their Honours went on to observe that there was no suggestion that ‘it is not appropriate, in the characterisation of a relationship as one of employment or of principal and independent contractor, to consider “the totality of the relationship between the parties” by reference to the various indicia of employment that have been identified In the authorities’[4] but ‘for a matter to bear upon the ultimate characterisation of a relationship, it must be concerned with the rights and duties established by the parties’ contract, and not simply an aspect of how the parties’ relationship has come to play out in practice but bearing no necessary connection to the contractual obligations of the parties.’[5] Further, their Honours held that there was ‘no reason in principle why the approach taken in Rossato[6]’ should not be applied, which approach contemplated that the ‘the resolution of the question whether a person engaged to work for another is an employee or an independent contractor "may depend upon the extent to which it can be shown that one party acts in the business of, and under the control and direction of, the other”’.[7]

   [3] Personnel Contracting at [59].

   [4] Ibid at [61].

   [5] Personnel Contracting at [61].

   [6] WorkPac Pty Ltd v Rossato [2021] HCA 23.

   [7] Personnel Contracting at [62].

9. Gageler and Gleeson JJ held that the ‘true principle’ that emerged from the authorities was such that a court was permitted to examine not just the contract or any subsequent variation to it, but also the manner of performance of the contract, in order to determine whether a relationship established and maintained under the contract was one of employment.[8]

   [8] Ibid at [143].

10. Gordon J, with whom Steward J agreed on the expression of the test to determine whether a person is an employee, held that it was ‘“the totality of the relationship” which must be considered’ which required ‘the character of a legal relationship between the parties only by reference to the legal rights and obligations which constitute the relationship.’[9] The construction and character of the contract was to be ascertained  at the time the contract was entered into[10] with recourse to objective matters known to the parties at the time of making their contract which ‘assist in identifying the purpose or object of the contract.’[11] Significantly, the approach taken by Gordon J permits regard to conduct subsequent to the making of the contract where a contract was not wholly in writing in order to establish the existence of contractual terms or to demonstrate some variation to the original contract.[12] But the purpose for which the subsequent conduct can be viewed was always ‘to objectively determine the point at which the contract was formed, the contractual terms that were agreed or whether the contract has been varied or discharged.’[13] So far as the relevance of ‘business’ was ‘[t]he better question to ask is whether, by construction of the terms of the contract, the person is contracted to work in the business or enterprise of the employer.’[14]

    Was the Trustee an ‘employer’ and Mr Novak an ‘employee’ in the ordinary meaning?

    [9] Ibid at [172].

    [10] Ibid at [174].

    [11] Ibid at [175].

    [12] Ibid at [177].

    [13] Ibid at [183].

    [14] Ibid at [183].

11. There is no written agreement of any kind between the Trustee and Mr Novak, so it is necessary to ascertain the terms of the agreement by having regard to the objective matters known to the parties when they formed their agreement and any subsequent conduct that objectively casts light on the terms of their agreement when it was formed.

12. First, it is instructive to identify the terms of the agreement so far as the performance of work by Mr Novak were concerned at the time he commenced working for the Trustee. Mr Novak was required to design, quote and sell kitchens and bathrooms for and to the Trustee’s customers. In performing that work he was required to use the Trustee’s cabinetry, benchtops and price list. He was required under the agreement to attend upon the Trustee’s customers who were allocated to him by the system developed and implemented by the Trustee and its employees who had sourced the customers in the first place and then allocated them to Mr Novak and others. The training or instruction that Mr Novak received from Mr Zappala about the Trustee’s products and the Trustee’s price list for those products served only to confirm that Mr Novak was obliged to do his work with the Trustee’s products, price list and customers. These things all indicated terms of the agreement between Mr Novak and the Trustee that Mr Novak was working under the control of, and within the business of, the Trustee.

13. Second, it is apparent from the circumstances known at the time the agreement was made that Mr Novak could not delegate his work to someone else to perform. It was his service, that is his work, that was required. That he could not delegate his work elsewhere and, for example, enter a period of leave without giving notice and without permission even though he did not conform to that, suggests again that it was intended that he be under the control of the Trustee and working within its business. Further, it seems counterintuitive to suggest that upon being allocated customers by the Trustee, Mr Novak would have been free to sell products produced by the Trustee’s competitors. That would have been inimical to the training that Mr Novak received from the Trustee about how he was to do his work. The objective position suggests that he was bound to sell and only the Trustee’s products in doing his work.

14. Third, as I have already observed, the objective evidence known to both parties from the beginning of the relationship was that Mr Novak would be paid by the Trustee a weekly amount as salary or wages for his work. It was a term of the agreement that Mr Novak would be paid an annual salary and weekly wage for the work he did. There is nothing that objectively supports the existence of a commission scheme, especially given that Mr Novak at no time had such a scheme brought to his attention. In any event the payment of commission is not on its own indicative of a relationship other than employment. 

15. Fourth, is the fact that Mr Novak was required to work regular hours. The existence of a pattern of regular hours, even though the parties disagreed as to whose pattern had applied, over five or six days between certain times, is the kind of term that is indicative of an employment relationship because it informs the kind of control one party has over the other. Further, the hours that Mr Novak worked, at least so far as attending upon customers, were laid down by the Trustee, or one of its employees, the receptionist. It may well have been that the hours that were worked were what suited Mr Novak but that does not detract from the fact that they also suited the Trustee, rather obviously so because that were the hours it was booking in appointments for its customers.

16. Fifth, although the evidence about equipment was in some respects equivocal, both parties agreed that Mr Novak used stationery and in particular business cards that identified him with the Trustee. Although Mr Zappala suggested Mr Novak was ‘free to use’ those business cards, the fact that Mr Novak was handed business cards for his use when doing his work for the Trustee suggests that it was a term of the agreement that he was required to hold himself out as part of, and a representee of, the Trustee’s business.

17. Sixth, that Mr Novak had a regular place, whether it be called an office or not, at the Trustee’s showroom with a computer where he would do work or meet with customers again suggests that there was a term of the agreement about where he would perform at least some of his work that reflected his being an integral component of the Trustee’s business.

18. I should say something about Mr Zappala’s ‘complaint’ that Mr Novak spent time at work looking at internet sites that related to the purchase of real estate. Mr Zappala said that conduct grounded a suspicion that Mr Novak was conducting some sort of real estate business. There was no evidence at all that would support such a conclusion. Mr Zappala also suggested that it demonstrated that Mr Novak did as he pleased when at the Trustee’s showroom. Absent direct evidence about the frequency and periods over which that happened it is not sufficient to displace the finding I have made about employment; employees too often access internet sites not relevant to their work whilst at work. I am unable to make any finding about a contractual term concerning the matter.

19. The totality of the relationship having regard to the fact that the Trustee controlled the customers whom Mr Novak would see, the way he would quote (by reference to pricing), the products he would use for his quotes, designs and sales; that he was required to use the Trustees graph paper in presenting designs, the fact that he was required to perform the work personally; his need for permission to take time off and to notify any absence; the fact that he worked regular hours over set days of the week; the fact that he worked at the Trustee’s place of business (in its show room and offices) and where the Trustee’s customers were to be found (in their homes); the fact that he was required to represent himself as part of the Trustee’s business; and the fact that he was to be paid a fixed amount each week all lead fairly firmly to a conclusion that the relationship was one of employer and employee. Viewed another way, the terms of the agreement to which I have referred firmly point to the fact that Mr Novak was at all times acting in the business of the Trustee according to the terms and conditions upon which he was engaged.

20. It follows that the Commissioner was correct to decide that Mr Zappala was an employer under ss.12(1) of the SGAA and, so, was liable to make superannuation contributions in respect of payments made to Mr Novak.

    ‘…works under a contract that is wholly or principally for the labour of the person’

21. Next, it is necessary to consider whether the definition in ss.12(3) applies, namely whether Mr Novak worked ‘under a contract that is wholly or principally’ for his labour. Strictly speaking, having decided that Mr Novak was an employee within the ordinary meaning of that word, this issue does not arise, but for completeness I will deal with it.

22. In Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 (Dental Corporation) the Full Court of the Federal Court of Australia identified the components of ss.12(3) as requiring ‘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.’[15] I shall approach the matter by dealing with each of those three components.

    [15] Dental Corporation at [82].

23. The first element concerns the existence of a contract, which is relevantly not in dispute: Mr Novak performed work under an oral contract for the Trustee.

24. The second element involves an inquiry about what the purpose of the contract was ‘from the perspective of the person obtaining the benefit of the labour (ie the quasi-employer)’[16].  That directs attention to the question of what the Trustee received for entering into the agreement. Again, the answer is reasonably obvious: Mr Novak’s design, quoting and selling work. That was what the Trustee was paying Mr Novak to do. Further, there was no dispute that Mr Novak was to personally perform that work and it could not be delegated by him to someone else.

    [16] Ibid at [84].

25. Mr Novak did incur some expenses of his own doing that work, mainly petrol and vehicle expenses in performing work under the agreement, but the main or substantial object of the agreement was for the Trustee to secure Mr Novak’s labour in designing, quoting and selling kitchens. True, Mr Novak was at times required to drive to the Trustee’s customer’s homes to do that work, but driving there was incidental to the principal purpose, which was to do the work that was required. The contract was wholly or principally - that is, mainly or substantially - for the provision of Mr Novak’s labour.

26. Nor is it relevant if, contrary to my finding that it was agreed that Mr Novak would be paid a regular amount each week, Mr Novak would be paid commission depending upon a successful sale. The inquiry, as Dental Corporation emphasises, is what the benefit to the quasi employer is, which is in this case, irrespective of whether a sale was executed or not, was Mr Novak’s labour in designing, quoting and selling kitchens. The fact that a payment to Mr Novak was only made upon a sale being concluded did not in any way mean that the quasi employer did not obtain the benefit for which it had contracted, which was Mr Novak’s labour. It simply meant that the remuneration to be paid for all of that work was to eb calculated on particular basis, namely successful sales

27. The third element is that the person must in fact work under the contract. Mr Novak did work under the contract over the assessment period.

28. It follows that the Commissioner was correct to decide that Mr Novak was an employee under the definition in ss.12(3) of the SGAA and, so, the Trustee was liable to make superannuation contribution is respect of payments made to Mr Novak.

    DECISION

29. For these reasons I affirm the Commissioner’s decision to disallow the objection.

I certify that the preceding fifty-nine (59) paragraphs are a true copy of the reasons for the decision herein of Mr Rob Reitano, Member

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

Associate

Dated: 5 September 2023

Date(s) of hearing:	16 and 24 August 2023
Advocate for the Applicant:	Mr F Zappala, non-legal advocate
Solicitors for the Respondent:	Mr A Dekkers, Australian Taxation Office