Private ruling: PAYG Withholding
Published: August 2017
Ruling period: Year ending 30 June 2017 | Year ending 30 June 2018 | Year ending 30 June 2020 | Year ending 30 June 2021 | Year ending 30 June 2022
Date scheme commenced: 1 April 2017

Ruling: Questions and Answers | Is there an obligation on the recreational organisation to withhold from payments made to officials under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)? | No | Is there an obligation on the recreational organisation withhold from payments made to coaches (excluding the Head Coach) under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953)? | No


Relevant legislative provisions: Taxation Administration Act 1953 Section 12-35 of Schedule 1

Reasons for decision: Summary: Section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA 1953) states an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). Taxation Ruling TR 2005/16 Income Tax: Pay As You Go - withholding from payments to employees provides guidance as to whether an individual is paid as an employee for the purposes of section 12-35 of Schedule 1 to the TAA 1953. The term 'employee' is not defined in the TAA 1953. For the purposes of withholding under section 12-35 the word 'employee' has its ordinary meaning. Whether a person is an employee of another is a question of fact to be determined by examining the terms and circumstances of the contract between them having regard to the key indicators expressed in the relevant case law. TR 2005/16 also considers the various indicators the Courts have considered in establishing whether a person engaged by another individual or entity is an employee within the common law meaning of the term. These indicators include: The control test: the degree of control which the payer can exercise over the payee. The organisation or integration test: whether the worker operates on their own account or in the business of the payer. The results test: whether the worker is free to employ their own means and is paid to achieve the contractually specified outcome. The delegation test: whether the work can be delegated or subcontracted (with or without the approval or consent of the principal). The risk test: whether the worker bears the legal responsibility and expense of rectification or remedy in the case of unsatisfactory performance. Which party provides tools, equipment and payment of business expenses? | Detailed Reasoning - Control: The 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. The importance of control lays not so much in its actual exercise as in the right of the employer to exercise it. A high degree of discretion or latitude in the manner in which a task is performed does not, of itself, indicate a contract for services. Further, although it is not uncommon for a contract to specify how the contracted services are to be performed, this does not necessarily imply an employment relationship. A high degree of direction and control is not uncommon in contracts of service. In contractual arrangements any control or direction must be expressed in terms of the contract only, otherwise the contractor is free to exercise their own discretion, because they work for themselves. | Detailed Reasoning - Organisation or integration: In an employment relationship, tasks are performed at the request of the employer and the employee is said to be working in the business of the employer. An independent contractor carries on a trade or business of their own. An independent contractor enters into a contract to perform specific tasks and has a high level of discretion and flexibility about how the work is to be performed, even if the contract contains precise terms about methods of performance. An employee works in the business of the employer and the work performed may be said to be integral to that business. An independent contractor works for the payers business but the work is not integrated into the business rather is an accessory to it. | Detailed Reasoning - Results: Where the substance of a contract is for the production of a given result, there is a strong indication that the contract is one for services. 'The production of a given result' means the performance of a service by one party for another where the first-mentioned party is free to employ their own means (such as third party labour, plant and equipment) to achieve the contractually specified outcome. Satisfactory completion of the specified services is the 'result' for which the parties have bargained. The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to hours worked. If remuneration is payable when, and only when, the contractual conditions have been fulfilled, the remuneration is usually made for producing a given result. | Detailed Reasoning - Delegation: The power to delegate or subcontract 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. Whereas if an individual has unfettered power to delegate the work to others (with or without approval or consent of the principal), this is a strong indication that the person is engaged as an independent contractor. The contractor is free to arrange for their employees to perform all or some of the work or may subcontract all or some of the work to another service provider. In these circumstances, the contractor is the party responsible for remunerating the replacement worker. A common law employee may frequently 'delegate' tasks to other employees, particularly where the employee is performing a supervisory or managerial role. However, this 'delegation' exercised by an employee is fundamentally different to the delegation exercised by a contractor outlined above. 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 workers have merely organised a substitution or shared the work load. This is not delegation consistent with that exercised by a contractor. | Detailed Reasoning - Risk: An employee bears little or no risk of the costs arising out of injury or defect in carrying out their work. An independent contractor bears the commercial risk and responsibility for any poor workmanship or injury sustained in the performance of work. An independent contractor is usually expected to take out their own insurance and indemnity policies. Whether the worker is contractually obliged to accept liability for the cost, in terms of time or money, for the rectification of faulty or defective work is a relevant consideration in determining if that worker should be regarded as an employee or independent contractor. Commonly, an independent contractor or entity would solely bear the risk and responsibility of liability for their work if it does not meet an agreed standard and would be required to either rectify this defective work in their own time or at their own expense. An employee on the other hand, would bear no such responsibility and the liability for any defective work of the employee, either to a third party or otherwise, would fall to the employer in terms of the burden of cost or time for rectification. | Detailed Reasoning - Provision of tools and equipment and payment of business expenses: 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. However, the provision of necessary tools and equipment is not necessarily inconsistent with an employment relationship. The provision and maintenance of tools and equipment and payment of business expenses should be significant for the individual to be considered an independent contractor. There are situations where very little or no tools of trade or plant and equipment are necessary to perform the work. This fact by itself will not lead to the conclusion that the individual engaged is as an employee. The weight or emphasis given to this indicator (as with all the other indicators) depends on the particular circumstances and the context and nature of the contractual work. Further, an employee, unlike an independent contractor, is often reimbursed (or receives an allowance) for expenses incurred in the course of employment, including for the use of their own assets such as a car. In this case the recreational organisation uses officials to officiate in matches. The officials are only told the time and venue of the game they are required to officiate in. They are not told how to officiate the match. Officials are paid for a given result, i.e. the satisfactory officiating of a match. The official is chosen to officiate in a match because they have the requisite skills so it is assumed that the official cannot sub-contract their officiating role in any game. After comparing the facts against the above factors it is considered that officials are not employees of the recreational organisation therefore there is no obligation to withhold from payments made to them under section 12-35 of Sch 1 to the TAA. In this case the recreational organisation uses coaches to assist in the development of current officials. These coaches are told the time and venue of the training. They are not told how to provide that training. Coaches are paid for a given result, i.e. the satisfactory development of current officials. The coach is chosen because they have the requisite skills so it is assumed that they cannot sub-contract their coaching role. After comparing the facts against the above factors it is considered that coaches are not employees of the recreational organisation therefore there is no obligation to withhold from payments made to them under section 12-35 of Sch 1 to the TAA.

Relevant facts: Officials provide their services to the recreational organisation. | The annual completion of an online registration form is the only mandatory requirement to be able to officiate. The registration form records the member's name, DOB and contact details. | Officials undertake approximately 6 to 8 weeks of pre-season training and then train weekly throughout the regular season, formally consisting of 2 hours a week but are expected to do another 2 hours of training a week to improve their fitness. | Officials do not receive any direct form of payment to attend training, but will receive a training allowance calculated as 20% of their Match Payments for the calendar month if they attend 75% or more training sessions during that calendar month. | Individual official performance is evaluated on a regular basis. | Appointment of officials to specific matches is the responsibility of the Head Coach. The recreational organisation is responsible for the appointment and employment of the Head Coach. The Head Coach then appoints the other coaching staff and appoints the observer panel. | Officials are formally assessed on regular basis to monitor their competencies and suitability for matches. They are provided with formal feedback (both written and verbal) and as such constantly undertake coaching for their continual improvement in performance to make the game both safer, an improved spectacle and encourage others to participate. Officials are required to be currently accredited or actively undertaking accreditation, at all times to ensure a minimum level of competency while officiating. | Umpiring appointments are made on the basis of merit, such that the best available officials are appointed to the most important games. If an official advises, at short notice, that they are unavailable, the Head Coach finds a suitable replacement. | Clubs registered with the recreational organisation pay affiliation fees to the organisation, of which part is attributable to the provision of officials for matches. | Officials are paid a match fee for each match they officiate. | The official officiates the match as required, and at the conclusion of the match the officiate completes the required paperwork. | An official is permitted a travel allowance if they are appointed to officiate a match that is above a certain distance from their normal place of residence. | Officials are paid directly by recreational organisation. | The maximum an official would receive for a standard rostered match is currently not greater than $X. Current match fees are such that officials are unlikely to receive more than $Y in a season. | Match payments are not intended to, nor do they usually cover expenses. The purpose of payments is to encourage members of the community to participate in local sporting activities by subsidising their participation. | Officials are required to incur expenditure in order to officiate, the recreational organisation supplies one uniform free of charge. | The recreational organisation has coaches to improve the performance of officials. They are experienced former officials who educate the current officials. | Except in rare circumstances, they do not officiate any matches, their primary roles involves teaching and educating current officials. | The recreational organisation provides and honorarium to each coach, (field, boundary and goal) of up to $Z per year designed to reimburse them for some, but not all expenses incurred during the year. | A match day coach receives a gratuity of $W per game from the recreational organisation. These are experienced former officials who review and assess officials performance during and after the match. Their review is in the form of verbal and written feedback. | They attend and review up to 12 games per year. They do not officiate matches. | They incur travel and miscellaneous expenses. The gratuity is designed to reimburse them for some but not all expenses hey incur during the year.