Private ruling: Superannuation guarantee & Status of the worker
Published: August 2013

Ruling: Q2: Is Worker 2 engaged by the Principal an employee or independent contractor for the purposes of section 12 of the SGAA? Advice Based on the provided information Worker 2 is not considered to be an employee for the purposes of section 12 of the SGAA. Accordingly, the Principal does not have an obligation under the SGAA to make superannuation guarantee payments on behalf of Worker 2. Please see our 'Reasons for Decision'.

Relevant facts and circumstances: Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice . Worker 1 · Worker 1 is engaged to provide executive support services to the Principal and they also take on the role of secretary. · Worker 1 is paid an annual salary amount. · Worker 1 is required to provide the Principal with an ABN. · Worker 1 is not able to subcontract their duties. · No sick leave or long service leave is provided to Worker 1. · No uniform is required to be worn by Worker 1. · Worker 1 would be reimbursed for any out of pocket expenses as there is an expense account for this. · Worker 1 does not have a choice to accept or reject work but their duties are dictated by the Principal's committee. They have a set remuneration per month. · Worker 1 does not have a fixed term contract. · Worker 1 does not bear the risk of their actions as a worker for the Principal. They are covered by a blanket national insurance cover which is provided by the relevant governing authority. This insurance includes professional indemnity insurance. · Worker 1 has access to duty statements prior to engagement. Workers 2 · The Principal engages Worker 2 in order to make sure that each session runs smoothly. They are engaged on a case by case basis. · Every session Worker 2 is paid an amount for their services. · Worker 2 is required to provide the Principal an ABN when engaged. Some have registered business names. · Worker 2 is generally engaged by a number of other organisations to do similar work. Their contract with the Principal would only represent a part of their income. · Worker 2 is engaged on a case by case basis. If the Principal is not happy there is no obligation to contract them again. · No PAYG withholding is done for Worker 2. · Worker 2 is able to subcontract as long as the person they find is also qualified in the role. This does happen in practice, especially when long tournaments cause Worker 2 to be unable to attend every event. · Worker 2 is to meet expenses themselves. There is no expense account for them to get reimbursed. · Worker 2 provides some of their own equipment and use some equipment provided by the Principal. · Worker 2 is required to be qualified by the relevant governing authority. They are required to pass a relevant exam. · Worker 2 does not bear the risk of their actions as workers for Principal. They are covered by a blanket national insurance cover which is provided by the relevant governing authority. This insurance includes professional indemnity insurance. · The Principal's expectations for Worker 2 cover the following: 1. Personal Qualities. Worker 2 should be: a) well groomed; b) pleasant friendly and welcoming towards all players; c) fair , firm, decisive and calm at all times. 2. Professionalism. Worker 2 is to: a) properly and fully carry out their duties b) take responsibility for the tasks

Relevant legislative provisions: Superannuation Guarantee Administration Act 1992 subsection 12(1) | Superannuation Guarantee Administration Act 1992 subsection 12(3)

Reasons for decision: Detailed Reasoning - Worker 1: The facts and evidence indicate Worker 1 is an employee for the purposes of the SGAA under both the common law definition and the expanded definition as set out in subsection 12(3) of the SGAA. Therefore there is an obligation to pay superannuation guarantee contributions on behalf of the Worker 1. | Detailed Reasoning - Worker 2: The facts and evidence indicate Worker 2 is not an employee for the purposes of the SGAA under either the common law definition or the expanded definition as set out in subsection 12(3) of the SGAA. Therefore there is no obligation to pay superannuation contributions on behalf of Worker 2. | Detailed Reasoning - Detailed reasoning: The SGAA states that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the Superannuation Guarantee Charge (SGC). While the term 'employee' which is defined in section 12 of the SGAA, includes common law employees, it also extends to include workers who are engaged under a contract wholly or principally for their labour. This employment relationship is often referred to as a 'contract of service'. This relationship is distinguished in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? from a 'contract for service' which is typically a contractor and principal type of relationship and does not attract an SGC liability. Therefore, it is necessary to consider not only whether there is a common law relationship of employer/employee between the parties, but also, if the common law test is not met or is inconclusive, whether the expanded definition of 'employee' in subsection 12(3) of the SGAA applies. If a worker is not an employee under subsections 12(1) or 12(3) of the SGAA, their status is described as an independent contractor and there is no SG obligation. The task of defining the characteristics of the contract of service - the employment relationship - has been the subject of much judicial consideration. As a result, some general tests have been developed by the courts to assist in the determination of the nature of the relationship. However, defining the contractual relationship between the employer and employee can be difficult and will depend on the facts of each case. Accordingly it is necessary to determine the true nature of the whole relationship between the principal and the workers, as to whether there was a common law employer and employee relationship, or whether the workers meet the expanded definition of employee under subsection 12(3) of the SGAA. | Detailed Reasoning - Common law employee: The relationship between an employer and employee is a contractual one. It is often referred to as a contract of service. Such a relationship is typically contrasted with the independent contractor relationship that is referred to as a contract for services. An independent contractor typically contracts to produce the contracted result in return for an agreed payment, whereas an employee contracts to provide their labour (typically to enable the employer to achieve a result). The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts. As a result, a substantial and well-established body of case law has developed on the issue. Consideration should be given to the various indicators identified in judicial decisions. No list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor. In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors we have considered are discussed below. | Detailed Reasoning - 1. Terms of engagement: The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. For this test, we must determine the nature of the contract between the parties. We will consider whether the contract is written or verbal and whether the terms and conditions are express or implied. These factors are important in characterising the relationship between the parties. It might be argued that the parties' intention in forming a contract is not subjective, but an objective one; that is, the task is not to discover the intention of the parties involved but to decide what each could reasonably conclude from the actions of the other. In the observation made by Isaacs J in Curtis v. The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17: 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. Therefore, simply defining someone as a contractor does not necessarily lead to the conclusion that the individual is providing services as part of an operation of their own independent business. In Hollis v. Vabu Pty Ltd (2001) 207 CLR 21 ( Hollis v. Vabu Pty Ltd ) it was noted that although no payments of annual leave or sick leave were given, and no superannuation deductions were made by Vabu in respect of the bicycle couriers, the relationship between the parties was found not merely from these contractual terms. The system which was operated under and the work practices imposed by Vabu went to establishing 'the totality of the relationship' between the parties and it is this which is to be considered. | Detailed Reasoning - Worker 1: Worker 1 is not engaged on a fixed term contract they are paid an annual salary amount and have a set remuneration amount paid on a monthly basis. Worker 1 does not have a choice to accept or reject work as their duties are dictated by the Principal's committee. In addition to this Worker 1 is not able to subcontract the role to others. They are not provided with sick leave or long service leave provisions and should they be considered to be underperforming they can be disengaged by the Principal. Some facts, such as Worker 1 being required to provide an ABN and no annual/sick leave provisions indicate a principal/independent contractor relationship. However the fact that the role of Worker 1 is highly prescribed, are remunerated on a monthly basis and they are engaged knowing their duties indicates an employer/employee relationship. This together with the fact that they are unable to subcontract their role to others further indicates that there is an employer/employee relationship. However based on the information provided we have found that the terms of engagement test in isolation were inconclusive. | Detailed Reasoning - Worker 2: In the case of Worker 2 there is no written contract and verbal agreements are used upon engagement. Therefore there is no clear definition of whether a principal/independent contractor relationship exists, this needs to be established by the facts of this particular case. Worker 2 is required to provide their own ABN to the Principal when they are engaged. They are engaged on a case by case basis depending on the need of a particular event. Worker 2 has registered business names and would work at other organisations doing the same work. The terms of engagement allow Worker 2 to subcontract and require them to meet their own expenses. The fact that Worker 2 would possibly only be employed for an event precludes the provision of annual or sick leave. The engagement is understood to be for only a set event and not for an ongoing employment arrangement. The remuneration of Worker 2 is calculated based on the size of the event they will manage rather than a salary. These facts indicate a principal/independent contractor relationship. Overall, we are satisfied that the terms of engagement test in isolation is more in favour of the notion that the relationship between the Principal and Worker 2 was one of principal and independent contractor. | Detailed Reasoning - 2. Control: The extent to which the employer has the right to control the manner in which the work is performed is the classic test for determining the nature of a working relationship. 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. The mere fact that a contract may specify in detail how the contracted services are to be performed does not necessarily imply an employment relationship. A high degree of direction and control is common in contracts for services because the payer has the right to specify in the contract how the services are to be performed. Similarly, the right to supervise how the work is to be performed does not constitute a contract of service where the essence is one of independent contractor. Paragraphs 36 and 37 of Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? provides that while control is important, it is not the sole indicator of whether or not a relationship is one of employment. The approach of the Courts has been to regard it as one of a number of indicia which must be considered in determination of that question. Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb ((1986) 160 CLR 16 at 36) ( Stevens v. Brodribb) , where they state: In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. | Detailed Reasoning - Worker 1: Worker 1 is engaged to provide executive support services to the Principal and they also take on the role of secretary of the Principal. Worker 1's duties are highly prescribed, the duty statement outlines exactly the role and duties required to be performed. Although the role of Worker 1 is performed without direct supervision the Principal reserves the right to determine if the quality of the work is suitable. Monthly meetings are held by the Principal and should Worker 1 not be performing well a warning would be issued, if performance issues persist then Worker 1 would be replaced. As stated above the list of duties required to be performed by Worker 1 would be completed without supervision. However, on inspection of all the circumstances the Principal reserves the right of control for the work that Worker 1 does through the detail in the list of duties, the performance management of Worker 1 and the freedom to add duties at any time, for example Worker 1 may be required to carry out additional public duties as defined by the Principal's Management Committee. Overall, we have found that the control test in isolation is more in favour of the notion that the relationship between you and the worker was one of principal/employee. | Detailed Reasoning - Worker 2: Worker 2 is engaged by the Principal on a case by case basis. The Principal's expectations of Worker 2 cover two areas, personal qualities and professionalism. Worker 2 is to properly and fully carry out the duties detailed and take responsibility for the tasks as detailed. Worker 2 is required to be qualified by the relevant governing authority and the duties outlined require the specialist knowledge of Worker 2 to be completed successfully. Though their duties are prescribed they are completed without supervision and trusted to ensure the success of any given tournament. The facts that Worker 2 is trained in specialist skills requiring qualifications and that in practice they operate autonomously without supervision of the Principal suggests that the Principal does not exercise a great degree of control over them. Overall, we are satisfied that the control test in isolation is more in favour of the notion that the relationship between you and the worker was one of a principal and independent contractor. | Detailed Reasoning - 3. Integration: Another significant factor in establishing the nature of a contractual relationship at common law is to determine whether the worker's services are an integral part of the employer's business (under a contract of service as an employee) or providing services as an individual carrying on his or her own business (under a contract for services as an independent contractor). This is known as the 'integration' test. If the worker's services are an integral and essential part of the employer's business that engages them, they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business, they are an independent contractor. It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer. The worker needs to be running their own business or enterprise and have independence in the conduct of their operations. In Montreal v. Montreal Locomotive Works [1947] 1 DLR 161, Lord Wright said: ...it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior. Similarly, in Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans [1952] 1 TLR 101 Denning LJ said: ...under a contract of service, a man is employed as part of the business, and his work is done as a integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it. The professional skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills. This was highlighted in Hollis v. Vabu Pty Ltd at paragraph 48, where the court said in relation to bicycle couriers hired by Vabu: The couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any 'goodwill' as a bicycle courier… Consideration may also be given to whether the worker could be expected to generate goodwill in their own right. If the benefits from the creation of goodwill flow to the worker then this would indicate that they are an independent contractor. Alternatively, if goodwill flows to the principal, this suggests an employer/employee relationship. It is therefore necessary to consider whether the worker is providing services as part of the principal's business (under a contract of service as an employee) or providing services as part of their own business (under a contract for services as an independent contractor). | Detailed Reasoning - Worker 1: Worker 1 is engaged to provide executive support services to the Principal and they also take on the role of secretary. They are required to provide the Principal with an ABN upon engagement. However other than the ABN requirement there is no evidence to suggest that that Worker 1 is operating their own business independently of the Principal. They do not have their own trading name and do not appear to advertise their services to the general public. Worker 1's list of duties implies that they work for the Principal, this is evidenced by management of the Principal's events, management of the Principal's marketing plan and Principal's assets, and other general administration duties associated with the common employment of Worker 1 by an organisation. Overall, we are satisfied that the integration test in isolation is more in favour of the notion that the relationship between Principal and Worker 1 is one of a principal/employee relationship. | Detailed Reasoning - Worker 2: In the case of Worker 2 there is no written contract and verbal agreements are used upon engagement. Worker 2 is required to provide their own ABN to the Principal when they are engaged. Some have registered business names and would work at other organisations doing the same work. Worker 2 has to be qualified in their role by the relevant governing authority and they are required to pass a relevant exam. They can operate completely independently of the Principal if they chose to. Overall, we are satisfied that the integration test in isolation is more in favour of the notion that the relationship between the Principal and Worker 2 is that of principal and independent contractors. | Detailed Reasoning - 4. 'Results' test: Under a results based contract, payment is often made for a negotiated contract price, as opposed to an hourly rate. The meaning of the phrase 'producing a result' means the performance of a service by one party for another where the first mentioned party is free to employ their own means (that is, third party labour, plant and equipment) to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not to do work. Satisfactory completion of the specified services is the result for which the parties have bargained. That is, a payment becomes payable when, and only when, the contractual conditions have been fulfilled. Where the substance of a contract is to achieve a specified result, there is a strong indication that the contract is one for services. In World Book (Australia) Pty Ltd v. FC of T 92 ATC 4327 ( World Book (Australia) Pty Ltd v. FC of T) Sheller JA said: Undertaking the production of a given result has been considered to be a mark, if not the mark, of an independent contractor. While the notion of 'payment for a result' is expected in a contract for services, it is not necessarily inconsistent with a contract of service. For example, the Full Court of the Supreme Court of South Australia in the decision of Commissioner of State Taxation v. Roy Morgan Research Centre Pty Ltd (2004) SASC 288 ( Commissioner of State Taxation v. Roy Morgan Research Centre Pty Ltd) , found that interviewers who were only paid on the completion of each assignment not on an hourly basis, were employees and not independent contractors. It was found that the workers were paid for their time spent and labour, and not to produce a result. Having regard to the true essence of the contract, the manner in which payment is structured will not of itself exclude genuine result based contracts. For example, there are results based contracts where the contract price is based on an estimate of the time and labour cost that is necessary to complete the task, or may even be calculated on that basis, subject to reasonable completion times. Generally, where a worker submits quotes or issues invoices for each job to the principal, this would be consistent with operating their own business. Nonetheless, the issuing of invoices is not necessarily determinative of the nature of the relationship. Accordingly, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties. | Detailed Reasoning - Worker 1: Worker 1 is engaged to provide executive support services to the Principal and they also take on the role of secretary. Worker 1 is paid an annual salary. Their list of duties is split into three categories; events coordination; providing publicity for the organisation and; general administration. The event duties are based around a specific event. However, 'event' duties extend beyond the time spent on that specific event. There are additional administrative duties in relation to before and after the event such as managing the budget and coordinating ad hoc events. This suggests an ongoing duty rather than working towards a specific result. Both the 'publicity' and the 'general administrative' duties are ongoing duties rather than work done for a specified result. Furthermore, Worker 1 does not provide the Principal with an invoice for a particular completed task but rather draws a monthly salary. Overall, we are satisfied that the 'results' test in isolation is more in favour of the notion that the relationship between the Principal and Worker 1 is one of employer and employee. | Detailed Reasoning - Worker 2: Worker 2 is generally engaged by a number of other organisations to do similar work and their contract from the Principal would only represent a part of their income. The duties they undertake are entirely centred on the specific events. They are required to be at the event and ensure the success of the event. There are a few duties required by Worker 2 which are not necessarily required to be performed at the event, including the posting of results on the internet and sending off result reports to various parties. However these duties are all closely tied to the delivery of a successful event. Furthermore Worker 2 is required to provide to the Principal an invoice within two weeks after the end of the final session of each event for which their services were provided. Overall, we are satisfied that the 'Results' test in isolation is more in favour of the notion that the relationship between the Principal and Worker 2 is one of principal and independent contractor. | Detailed Reasoning - 5. Delegation: The power to delegate or subcontract (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. If the contract does not expressly require the worker to personally perform the services, an independent contractor has the capacity to delegate or subcontract all (or some) of the work to others. Where the worker delegates, they are responsible for remunerating that worker. In the case of Neale (DFC of T) v. Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 425; 6 AITR 201 at 202, the High Court interpreted the words 'a contract which is wholly or substantially for the labour of the person to whom the payments are made' to decide that if a contract leaves a person completely free, if he or she chooses, to engage others to perform the work on his or her behalf means that the payments are not payments under a contract for labour. That is so even if the contractor actually does perform the work personally and had no intention of doing otherwise. If the contract leaves the contractor free to do the work himself or employ other persons to carry it out the contractual remuneration when paid is not a payment made wholly or at all for the labour of the person to whom the payments are made. It is a payment made under a contract whereby the contractor has undertaken to produce a result... When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker, rather the employee has merely substituted or shared the workload. However, a clause in the contract may permit the worker to delegate the task to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site or who may not be suitably qualified. In the case of Bowerman v. Sinclair Halvorsen Pty Ltd [1999] NSWIRComm 21, Bishop J said: The fact that any substitute driver had to be approved by the company does not give the respondent [the principal] control over that delegation… the company surely had the right to be confident that any substitute driver was competent to do the job and maintain the "integrity" of the company as Mr Coomb put it. Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). A person who has a right to delegate work (whether or not that right is exercised in practice) does not work under a contract wholly or principally for their labour. Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider. | Detailed Reasoning - Worker 1: Worker 1 is engaged to provide executive support services to the Principal and they also take on the role of secretary. There is no written contract between the Principal and Worker 1; verbal agreements are used upon engagement. Under the agreement Worker 1 is not allowed to delegate their duties to others. Overall, we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between the Principal and Worker 1 is that of employer and employee. | Detailed Reasoning - Worker 2: In the case of Worker 2 there is no written contract, verbal agreements are used upon engagement. In this case the verbal agreement allows Worker 2 to subcontract as long as the person they find is also qualified in the role. Overall, we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between the Principal and Worker 2 is one of principal and independent contractors. | Detailed Reasoning - 6. Risk: Generally speaking, employers are vicariously liable for negligence and injury caused by their employees. However a principal will not be liable for negligence or injury caused by an independent contractor. The higher the degree to which a worker is exposed to the risk of commercial loss (and the chance of commercial profit), the more they are likely to be regarded as being independent. Typically, a worker who derives piece rate payments and sustains large outgoings would be so exposed. The higher the proportion of the gross income of the worker which is required to be expended in deriving that income, and the more substantial the assets which the worker brings to the tasks, the more likely that the contract is for service, or a contract with an independent contractor. As stated by McKenna J in Ready Mixed Concrete (South East) Limited v. Minister Pensions and National Insurance [1968] 2 QB 497 at 526: …the owner of assets, the chance of profit and risk of loss in the business of carriage are his and not the company's. Another consideration of risk is the liability for the cost of rectifying faulty work. That is, the key underlying consideration is whether the individual is exposed to commercial risk in terms of a liability to cover the cost of rectifying defective work. This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business. Carrying their own insurance and indemnity policies is an indicator that a worker is engaged as an independent contractor. | Detailed Reasoning - Worker 1: Worker 1 does not bear the risk of their actions as workers for the Principal. They are covered by a blanket national insurance cover which is provided by the relevant governing authority. Included in the insurance is professional indemnity insurance. As the risk associated with Worker 1's actions is borne by the relevant governing body of the Principal we therefore consider this factor to be in favour of an employer/employee relationship. Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between the Principal and Worker 1 is that of an employer and employee. | Detailed Reasoning - Worker 2: Worker 2 does not bear the risk of their actions as workers for the Principal. They are covered by a blanket national insurance cover which is provided by the relevant governing authority. Included in the insurance is professional indemnity insurance. As the risk associated with Worker 2's actions is borne by the Principal we therefore consider this factor to be in favour of an employer/employee relationship. Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between the Principal and Worker 2 is one of an employer and employee. | Detailed Reasoning - 7. Capital - Provision of tools and equipment and payment of business expenses.: A worker who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required for his work by the employer. Furthermore, the employer is often also responsible for the business expenses incurred by the worker, since the worker has been integrated into the employer's business. Independent contractors carrying on their own business often provide and pay for their own assets, tools, equipment, maintenance costs and other expenses. Usually, they will have factored these costs in their overall fee or will seek separate payment for such expenses from the principal. In Stevens v. Brodribb at 36-37, the High Court observed that working on one's own account (as an independent contractor) often involves: The provision of him by his own place of work or of his equipment, the creation of him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion… | Detailed Reasoning - Worker 1: Worker 1 is required to provide some of their own equipment, but other office equipment such as a photocopier needed in the job is provided by the Principal. No indication was given as to who provided the majority of equipment. The Principal advises that there is an expense account in existence and that expenses incurred by Worker 1 are reimbursed by the Principal from this account, Worker 1 does not have any out of pocket expenses as part of the role. Tools and equipment is provided by both Worker 1 and the Principal and this on its own is inconclusive. However, there is an expense account for Worker 1 which supports a conclusion that an employer and employee relationship exists. Overall, we have found that the 'Capital' test in isolation is more in favour of the notion that the relationship between the Principal and Worker 1 is one of an employer and employee. | Detailed Reasoning - Worker 2: Worker 2 is required to provide some of their own equipment. They also utilise some equipment provided by the Principal such as a photocopier. No indication was given as to who provided the majority of equipment. Expenses incurred by Worker 2 are not reimbursed as there is no expense account. There is no evidence to suggest that Worker 2 invests or provides any capital into the Principal's events. This factor indicates more of a principal and independent contractor relationship. Tools and equipment are provided by both Worker 2 and the Principal and this on its own is inconclusive. However, there is no expense account which supports a conclusion that the relationship is that of principal and independent contractor. Overall, we have found that the 'Capital' test in isolation is more in favour of the notion that the relationship between the Principal and Worker 2 is one of principal and independent contractor. | Detailed Reasoning - Worker 1: With respect to the relationship between the Principal and Worker 1 the facts and evidence provided points to the conclusion that Worker 1 is a common law employee of the principal. As the facts and evidence indicate that Worker 1 is an employee under common law, we are not required to consider the extended definition in subsection 12(3) of the SGAA. However, in order to leave no doubt as to the Commissioner's view of this matter, the extended definition has been considered and is discussed below. | Detailed Reasoning - Worker 2: With respect to the relationship between the Principal and Worker 2 the facts and evidence provided points to the conclusion that Worker 2 is not a common law employee of the Principal. As the facts and evidence indicate that Worker 2 is not an employee under common law, we are required to consider the expanded definition of employee under subsection 12(3) of the SGAA. | Detailed Reasoning - Expanded definition of employee for SGAA purposes: The expanded definition of employee within subsection 12(3) of the SGAA, which states: 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. SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA. Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that: · the individual is remunerated (either wholly or principally) for their personal labour and skills; · the individual must perform the contractual work personally (there is no right to delegate); and · the individual is not paid to achieve a result. The contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA. | Detailed Reasoning - Wholly or principally for labour: In this context, the word "principally" assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil. A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour. | Detailed Reasoning - Worker 1: Based on the available facts and evidence, we consider that Worker 1 is paid primarily for their own labour and skills. The equipment that Worker 1 needs to provide for their duties is minimal compared to the labour component of the job and there are no expenses incurred by Worker 1 in the course of their duties. | Detailed Reasoning - Worker 2: Based on the available facts and evidence, we consider that Worker 2 is also paid primarily for their own labour and skills. Though they do provide some equipment it only constitutes a small percentage of the remuneration for their work. Furthermore there was no evidence that Worker 2 had any ongoing expenses which was incorporated into their rate of remuneration. | Detailed Reasoning - Worker 1: As discussed earlier, we consider that the facts and evidence indicate that Worker 1 did not have the right to delegate work to others. | Detailed Reasoning - Worker 2: As discussed earlier, we consider that the facts and evidence indicate that Worker 2 had the right to delegate work to others as long as they held the relevant qualifications. | Detailed Reasoning - Worker 1: As discussed earlier, we consider that the facts and evidence indicate that Worker 1 is not paid for a result. | Detailed Reasoning - No 2 Worker: As discussed earlier, we consider that the facts and evidence indicate that Worker 2 is paid for a specific result. | Detailed Reasoning - Worker 1: Accordingly, the facts and evidence indicate that Worker 1 also meets the extended definition of employee as set out under subsection 12(3) of the SGAA. | Detailed Reasoning - Worker 2: Accordingly, as Worker 2 does not satisfy all three components of the expanded definition under subsection 12(3) of the SGAA, they do not meet the expanded definition of employee as set out under subsection 12(3) of the SGAA. | Detailed Reasoning - Worker 1: After considering all available facts and evidence relating to the working relationship between you and Worker 1, the Commissioner concludes that Worker 1 meets the definition of an employee for the purposes of the SGAA under both the common law definition and expanded definition as set out in subsection 12(3) of the SGAA. Therefore the Principal does have an obligation to provide superannuation support in accordance with the SGAA. . | Detailed Reasoning - Worker 2: Upon considering of all the available facts and evidence, we conclude that with respect to work performed for the Principal, Worker 2 does not meet the definition of an employee for the purposes of the SGAA under either common law or the expanded definition provided under subsection 12(3) of the SGAA. Accordingly the Principal does not have an obligation to pay superannuation contributions for the benefit of Worker 2 under the SGAA.

Question 1: Is Worker 1 engaged by the Principal an employee or independent contractor for the purposes of section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? | Based on the provided information Worker 1 is considered to be an employee for the purposes of section 12 of the SGAA. | Accordingly, the Principal does have an obligation under the SGAA to make superannuation guarantee payments on behalf of Worker 1.