Private ruling: Administratively binding advice
Published: June 2012

Ruling: We received a request for administratively binding advice regarding whether the visiting consultants retained by the payer are considered common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA). | We provided you with a copy of the Superannuation Guarantee Status of the worker questionnaire - Principal/Payer and a copy of the Superannuation Guarantee Status of the worker questionnaire - Worker/Payee . | We received the following information contained in the Superannuation Guarantee Status of the worker questionnaire - Principal/Payer | Worker - used as example for all workers | Describe daily work routine and specific tasks performed for principal/payer | · Daily routine is determined by the number of bookings in any given day. | · Each booking is a 30 minute session. | Terms and the circumstances of the formation of the contract | 1. How did your business first establish the working relationship with the worker/payee? | By word of mouth | 2. Did you enter into a written agreement with the worker/payee? | Yes | 3. Was the worker/payee able to renegotiate their rate of pay or terms and conditions? | Total remuneration would vary depending on the number of sessions but the hourly rate is constant and based on an external bodies Schedule of fees. | 4. Did you have the right to dismiss or terminate the services of the worker/payee? | Yes, termination is accordance with the provisions of the fixed term contract | 5. Were any other workers/payees engaged on the same or a similar basis as the worker/payee? | Yes, approximately 20 | Control Test - the lawful right to command | 6. Did you provide the worker/payee with any training? | Yes, a Workplace Specific Contractor Induction was carried out. | 7. How were the worker/payee's hours of work determined? | The worker/payee chose their own hours/days based on demand - no guarantee of minimum hours and [the] hours may fluctuate during the contact period. | 8. Did you require the worker/payee to attend meetings within your business and/or with your clients? | Yes, they were required to attend staff meetings for quality control purposes; such meetings are generally 3 times a year. However this requirement is not often adhered to by visiting workers and is certainly not enforced. | 9. Was the worker/payee entitled to paid breaks? | No | 10. Did you schedule the jobs/tasks to be carried out by the worker/payee? | No, the payer arranged payment based on hours worked, but the worker was responsible for developing [their] own weekly schedule. | 11. Did you direct where the jobs/tasks were to be performed? | No, some equipment and a room was provided, but under the contract the worker can choose to make alternative arrangements. | 12. Was the worker/payee supervised? | No, there are no checks but any dissatisfaction with a visiting worker's performance would be reported by the client and subsequently investigated by the payer. | 13. Could the worker/payee refuse to do a particular job or task? | Yes, as a contractor, the visiting worker could determine their hours worked; if however a session had been booked which was subsequently cancelled by the contractor there would be an expectation that the session would be rearranged at a different time. | 14. If the worker/payee wanted to take time off, was the worker/payee required to: | Seek your permission? No | Provide prior notice? Yes | As a matter of courtesy the visiting worker is expected to inform the payer of any absence, to ensure that clients are not disrupted unnecessarily or are left unattended. | Integration Test - did the worker/payee work for themselves or in the business of the principal/payer? | 15. Could the worker/payee provide their services to other individuals or businesses? | Yes, the worker/payee operated their own business. and undertook a variety of business ventures outside this arrangement. | 16. Did the worker/payee work alone? | Yes, the worker/payee worked independently of the payer. | 17. Did the worker/payee train, supervise or assess the work of other employees/workers (including apprentices) of your business? | No | 18. Was the worker/payee required to wear or use a name badge, clothing, business card, stationery (for example, pens, notepads, letterhead) or any other item promoting your business name or logo? | Not provided | 19. Did the worker/payee have their own name badge, clothing, business cards, stationery or any other items promoting their business/services? | No | 20. Did you advertise your business on any of the assets/equipment/tools used by the worker/payee? | No | 21. Did the worker/payee advertise their business on any of the assets/equipment/tools they used? | No | Results Test - was the worker/payee paid to achieve a specified result? | 22. Did the worker/payee submit quotes, invoices or any other type of document to you? | Yes, invoices | 23. Did the worker/payee set their own fees for the work/tasks done, or did you set the rates of pay? | Yes, fees set by an external Association | 24. Was their rate of pay ever changed? | Yes, fees are reviewed in accordance with recommendations of the external Association. | 25. Was the worker/payee's payment dependent on the completion of the task/job? | No | 26. Did you do any checks to confirm that the worker/payee had completed their work before you paid them? | No, the visiting worker provides the payer with a timetable and an invoice. The payer then pays the relevant amount. We rely on the visiting worker to undertake the work specified and on the client to alert us to any discrepancy. | 27. How was the worker/payee paid? | Into their bank account. | 28. Did the worker/payee receive payment/reimbursement for anything other than the work they completed? | · Car allowance N o | · Tool allowance No | · Travel allowance No | · Away from home allowance No | · Payment of expenses such as | · petrol, tools, materials, stationery, phone etc. No | · Holiday pay No | · Sick pay No | · Workers compensation No | · Superannuation No | · Training No | · Other No | 29. Did you deduct any amounts from the worker/payee for: | · Income tax No | · Superannuation No | · Any other deduction No | Delegation/Substitution Test - was the worker/payee expected to complete the work personally? | 30. Did you give specific instructions (either in writing or verbally) about whether the worker/payee was to complete their work personally? | In accordance with the written contract 'worker or their suitably qualified agents' are to provide the services. | 31. If the worker/payee was sick or went on holidays, who arranged for their work to be done while they were absent? | If a visiting worker calls in sick the sessions for that day are cancelled | 32. Could the worker/payee organise their work or tasks to be completed by: | An employee of your business? No | Another person engaged by the worker/payee (with or without your approval)? Yes | Risk Test - did the worker/payee bear any commercial or personal risk? | 33. In relation to work performed by the worker, who was responsible for paying: | · workers compensation insurance Worker | · private accident insurance Worker | · public liability insurance Worker | · any other types of insurance | · Blue Card | 24. Did you or the worker/payee ever make a claim against any of these policies? | No | 35. Was the worker/payee required to guarantee their work for any period of time? | Not applicable | 36. If the worker/payee made a mistake or broke something when doing their work, would they: | · have to correct the work in their own time? Yes | · pay for the materials used to correct the mistake? Yes | · pay for the breakage? Yes | Provision of tools and equipment and payment of business expenses | 37. Did you supply the worker/payee with any assets, equipment or tools to complete their work? | Minimum resources of a large not easily movable nature. The visiting worker will provide any other resources. | 38. Did you reimburse the worker/payee for their assets, equipment or tools? | No | 39. Who supplied materials for a job? | Worker/Payee | 40. Who arranged delivery of materials to a job? | Worker/Payee | 41. How was the worker/payee involved in deciding what materials would be used for a job? | It is up to the visiting worker to decide what materials will be used | 42. Was the worker required to wear protective work gear? | No | 43. Who supplied the protective work gear? | Not applicable | You supplied a copy the covering letter to the written contract which stated that: | · The contract will commence on 1 January 2011 and will end on 31 December 2011 | · All workers will operate under the direction of an employee of the payer. | · As a visiting worker you will be paid in accordance with the rates established by the external Association. | In the interests of providing a safe and healthy environment, you are expected and required to adhere to all policies and special instructions, and to bring to the attention of the supervisor any safety matter which is on concern to you. | It will be a condition of contract that any information acquired by you about the payer, its staff, its clients and business generally, and which is judged by the payer to be confidential, will be held as such, and may not be divulged without express authorisation. | You must comply with any government or licensing requirements. | You supplied a copy of the contract for Workers which stated: | · As a visiting worker, your services will be contracted out to those clients who wish to use them. | · You will not be an employee of the payer. | This will allow you to operate your business in such a manner and using such methods that you determine provided that they adhere to the payer standards. | Additionally the payer requires that once contracted, the services be either provided by yourself or your approved suitably qualified agent. | As a provider of services on a contract basis, Workers Compensation insurance will not operate to cover yourself of your agent. | You are responsible for your own sickness and accident insurance. | The payer will not pay superannuation contributions. | The payer will act as an agent in collecting fees on your behalf. | Your fees will be paid on a monthly basis, 14 days after the receipt of your invoice. Unless otherwise required, the payer will provide a suitable serviced room. | The payer will liaise with you and the clients, concerning the timing of sessions and provide administrative assistance. | You will be required to attend staff meetings for quality control purposes and write reports for your clients. | We received eight Superannuation Guarantee Status of the worker questionnaire - Worker/Payee and the relevant information is as follows: | · Trading Name: four workers had trading names. | · ABN: All workers had ABNs | · Describe daily work routine and specific tasks performed for principal/payer | · Workers provide 30 minute sessions to clients either as one on one or in small groups. The timing is decided between the clients and the workers. | Terms and the circumstances of the formation of the contract | 1. How did you secure the work? | Five workers obtained the work by word of mouth, two were contacted by others employed by the payer and one had approached the payer. | Did you enter into a written agreement with the principal/payer? | Six workers stated they entered into written agreement, one said no and the other did not answer. | Were you able to renegotiate your rate of pay or terms and conditions? | Seven workers answered that their rate was set in accordance with the professional association scale of fees. The eighth answered that they received more pay if they performed extra services. | Did the principal/payer have the right to dismiss or terminate your services? | One worker answered no, one did not answer, two answered not sure and four answered yes, for poor or inconsistent performances. | Control Test - the lawful right to command | Did you complete any training with the principal/payer? | Three workers answered no, five answered yes, fire training and basic technology training. | How were your hours of work determined? | Six answered that they set their own hours, one answered supply/demand and one answered by the number of clients. | Were you required to attend meetings within the principal/payer's business and/or with their clients? | Two workers answered no, the other six advised an annual meeting at the start of the year. | Were you entitled to paid breaks? | All workers answered no. | Did the principal/payer schedule the jobs/tasks to be carried out? | Six stated that they were allocated the clients and then the worker set their timetable to suit the clients. The other two stated that when they were involved in tasks for the payer then the payer set the hours, for other work they set their schedule. | Were you directed where the jobs/tasks were to be performed? | All workers answered that a room was provided. | Were you supervised? | Six answered no supervision, the other two answered minimal checking of work and reports. | Could you refuse to do a particular job or task? | Six workers answered yes, one answered not relevant and one answered unsure. | If you wanted to take time off, were you required to: | · Seek the principal/payer's permission? | · Provide prior notice? | Two workers answered no, one said not sure and five said yes. | All eight workers said yes. | Most stated that sessions would need to be made up and that they were not paid if they did not work. | Integration Test - did the worker/payee work for themselves or in the business of the principal/payer? | During the period you worked for the principal/payer, did you advertise your services? | Seven workers answered no, one answered yes. | Could you provide your services to other individuals or businesses independently of the principal/payer? | All workers answered yes. | Did you work alone? | Four answered alone, the other four answered they work as part of a team. | Did you train, supervise or assess the work of other employees/workers (including apprentices) of the principal/payer's business? | Seven workers answered no, one answered that they mentored and helped train a new employee. | Were you required to wear or use a name badge, clothing, business card, stationery (for example, pens, notepads, letterhead) or any other item promoting principal/payer's business name or logo? | Two answered nothing provided, the other six answered that they wore a name tag for security reasons. | Did you have your own name badge, clothing, business cards, stationery or any other items promoting their business/services? | Six workers answered no, one had their own business cards and one did not answer. | Did the principal/payer advertise your business on any of the assets/equipment/tools used by you? | All workers answered no | Did you advertise your business on any of the assets/equipment/tools you used? | All workers answered no | Results Test - was the worker/payee paid to achieve a specified result? | Did you submit quotes, invoices or any other type of document to you? | All workers advised they submit invoices. | Did you set their own fees for the work/tasks done, or did you set the rates of pay? | All workers answered that the principal/payer set the fees. | Was your rate of pay ever changed? | Two answered no, the other six all stated that as the professional association recommended fees increased so did their rates | Was your payment dependent on the completion of the task/job? | All workers answered yes. | How were you paid? | All workers answered that they were paid into their bank accounts. | Did you receive payment/reimbursement for anything other than the work you completed? | · Car allowance | · Tool allowance | · Travel allowance | · Away from home allowance | · Payment of expenses such as petrol, tools, materials, stationery, phone etc. | · Holiday pay | · Sick pay | · Workers compensation | · Superannuation | · Training | · Other | All workers answered no. | Delegation/Substitution Test - was the worker/payee expected to complete the work personally? | Did the principal/payer give specific instructions (either in writing or verbally) about whether you were to complete your work personally? | Two workers answered no, three answered yes, and three stated that they understood that they were to personally give the sessions. | If you were sick or went on holidays, who arranged for your work to be done while you were away? | Six workers answered that no one did the work if they were absent, two answered that they organised a replacement. | Could you organise their work or tasks to be completed by: | · an employee of principal/payers business? | · another person engaged by the worker/payee (with or without your approval)? | · any other person | Seven answered no to an employee of the payer, one answered yes; six answered no to another person engaged by the worker, two answered yes; and eight answered no to any other person. | Risk Test - did the worker/payee bear any commercial or personal risk? | In relation to work performed by you, who was responsible for paying: | · workers compensation insurance | · private accident insurance | · public liability insurance | All workers advised that they paid the insurances themselves. | Did you or the principal/payer ever make a claim against any of these policies? | All workers answered no. | Were you required to guarantee their work for any period of time? | Seven workers answered no, one answered yes. | If you made a mistake or broke something when doing your work, would you: | · have to correct the work in your own time? | · pay for the materials used to correct the mistake? | · pay for the breakage? | Three answered yes to correct the work in their own time, Five answered no; All answered no to the other questions. | Provision of tools and equipment and payment of business expenses | Did you supply your own assets, equipment or tools? | Seven answered yes and one answered no. the workers that answered yes implied that the only minimal equipment and assets were provided by the payer. | Were you reimbursed by the principal/payer for any of your assets, equipment or tools? | Seven answered no, one answered that they were reimbursed for certain purchases and tools. | Who supplied materials for a job? | Four answered not applicable, one did not answer, two answered the worker and one answered the payer. | Who arranged delivery of materials to a job? | Five answered not applicable, two answered payer, one answered the worker. | How were you involved in deciding what materials would be used for a job? | This question was not answered by any worker. | Were you required to wear protective work gear? | All workers answered no | Who supplied the protective work gear? | All answered not applicable | Other information | Six workers provided no other information. One stated that they do many hours of unpaid work and another stated that they are expected to be available for 36-40 weeks a year although they only get paid for 32 weeks.


Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 section 12 , | Superannuation Guarantee (Administration) Act 1992 subsection 12(3) , | Superannuation Guarantee (Administration) Act 1992 subsection 12(8).

Reasons for decision: Summary: The SGAA states that an employer must provide the prescribed minimum level of superannuation support for its employees (unless the employees are exempt employees) or they must pay the 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. The 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? (SGR 2005/1) from a 'contract for service' which is typically a contractor and principal type of relationship and does not attract any 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 extended definition of 'employee' in subsection 12(3) of the SGAA applies. 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 a difficult task and will depend on the facts of each case. 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 extended definition of employee in subsection 12(3) of the SGAA applies. In this case it is also appropriate to consider whether the workers are employees under subsection 12(8) of the SGAA. | Detailed Reasoning - Common law employee: The courts have developed a method for applying the ordinary, or 'common law' meaning of an 'employee'. Their approach is to look at a wide range of factors, which indicate whether a person is an employee. For example, if the employer provides the place of work, this might indicate an employment relationship, while the absence of holiday pay might suggest the opposite. The courts' decisions tend to be taken on balance, after considering the relevant factors. The common law meaning of the term 'employee' was stated by the High Court in Stevens v. Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16. It is clear from that case that there is no single objective test which will give the answer: …it is the totality of the relationship between the parties which must be considered...the question is one of degree for which there is no exclusive measure. While various factors have been identified by the courts as indicators of the true nature of the relationship, those features are only ever a guide to answering that question. It is necessary in each case to examine all the terms of the contract and to determine whether, on balance, the person is working in the service of another (as an employee) or is working on his or her own behalf (as an independent contractor). A clause in a contract that purports to characterise the relationship between the parties as that of principal and independent contractor and not that of employer and employee must be considered with all the other terms of the contract. Such a clause cannot receive effect according to its terms if it contradicts the effect of the agreement as a whole. That is, the parties cannot deem the relationship between themselves to be something that it is not. The parties to an agreement cannot alter the true substance of the relationship by simply giving it a different label. Subsequent conduct of the parties may demonstrate the relationship has a character contrary to the terms of the contract. In deciding whether the workers are common law employees of the principal/payer there are a number of factors to consider. These factors are considered below. | Detailed Reasoning - Terms of engagement: The fundamental task is to determine the nature of the contract between the parties. The terms and conditions of the contract whether expressed or implied, in the light of the circumstances surrounding the making of the contract will always be of considerable importance to the proper characterisation of the relationship between the parties. Some conditions of engagement are closely associated with employment and may be persuasive factors. For example: · provision of benefits such as annual or sick leave · provision of benefits prescribed under an award · payer prescribed times and locations for the performance of the work · remuneration in the form of salary and wages · the worker uses assets and materials provided by the payer or is reimbursed for expenses incurred in respect of use of their own assets and materials · payer discretion in respect of task allocation and termination of engagement. However, this list is not exhaustive and it must be emphasised that there is not a standard set of conditions applicable to an employee and another (different) set applicable to an independent contractor. It might be argued that the parties' intention in forming a contract is not a 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 at 25: 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. In Hollis v. Vabu (2001) 207 CLR 21 ( Hollis v Vabu ) the High Court determined that an indicator of an employer/employee relationship was that the workers were presented to the public and to those using the courier service as representatives of Vabu, as they wore uniforms bearing Vabu's logo. Additionally in Hollis v Vabu it was noted that although no payments of annual leave or sick leave were given, and no superannuation deductions were made in respect of the bicycle couriers, the relationship between the parties is to be found not merely from these contractual terms. The system which was operated there under and the work practices imposed by Vabu go to establishing the 'totality of the relationship' between the parties and it is this which is to be considered. | Detailed Reasoning - Application of the test to the facts provided: The circumstances surrounding the formation of the contract may assist in determining the true character of the contract. In determining the intention of the workers, the Commissioner must decide what could reasonably be concluded from their actions. Typically, an individual will only register for an ABN if it is their intention to establish a business enterprise, but this of itself will not establish that this was the intention. Observing business related deductions and the declaration of Personal services income (PSI), among other things, may be viewed by the Commissioner as confirmation of an individual's intention. However, having a worker acknowledge that their status is one of independent contractor cannot alter the true substance of the relationship if the underlying reality is one of employment. Most of the parties involved confirmed that there was a written agreement entered into. In their responses to the questionnaire, the workers have confirmed that they established their working relationship by word of mouth and the decision whether to accept the job was decided on the basis of their work schedules and commitments in relation to other clients. The payer has stated that the workers do not receive any benefits usually associated with employment, such as leave, workers compensation or superannuation and the evidence reveals that the workers agree that they are not reimbursed for any expenses they incur. Accordingly, based on the evidence available, the Commissioner concludes that with respect to the terms of engagement test, the facts are indicative of a principal/independent contractor relationship. | Detailed Reasoning - Control Test: A prominent factor in determining the nature of the relationship between parties is the degree of control which the employer has over the employee, as it goes to the root of the classical view of the master-servant relationship. The degree of control varies with the type of job, as the increasing usage of skilled labour has seen a consequential reduction in supervisory functions. The issue of control does not always rely on whether the employer exercises it, although this is clearly relevant, but rather whether they have the right to exercise it. Traditionally, a common law employee is told what work needs to be done, how it is to be done, and where it is to be done. However 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 and a high degree of direction and control is not uncommon in contracts for services. It is not necessary for the employer to exercise day to day control over the worker. What is important is that the employer has the legal right of control. In Zuijs v.Wirth Brothers Pty Ltd (1955) 93 CLR 561 ( Zuijs ) the High Court articulated the significance of control in an employment relationship in the following way: What matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters. Additionally, Dixon J in Humberstone v. Northern Timber Mills (1949) 79 CLR 389 stated : The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in performance of his work resided in the employer so that he was subject to the latter's orders and directions. The right to control versus actual control is particularly relevant where the nature of the employment requires a considerable degree of experience, knowledge or skill. In these circumstances, it is to be expected that the employer will leave the performance of the activity up to the employee. In Hollis v. Vabu (2001) 207 CLR 21 ( Hollis ), where the decision was that bicycle couriers were considered to be employees, Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ observed that: Vabu's whole business consisted of the delivery of documents and parcels by means of couriers. Vabu retained control of the allocation and direction of the various deliveries. Their work was allocated by Vabu's fleet controller. They were to deliver goods in the manner in which Vabu directed. In this way, Vabu's business involved the marshalling and direction of the labour of the couriers, whose efforts comprised the very essence of the public manifestation of Vabu's business. In consideration of the type of work performed by the workers and the skills they possessed, the Commissioner believes that telling the workers what was required to be done is a basic minimum of information required for them to determine whether they could/would accept the job, and did not amount to an exercise of control over how they were to perform the work. Due to 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 question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over an individual in the performance of their work resided in the employer so that they were subject to your orders and directions. A payer has a right to specify how the contracted services are to be performed, but such control must be expressed in the terms of the contract. However, the mere fact that a contract may specify in detail where the contracted services are to be performed does not necessarily imply an employment relationship, and a high degree of direction and control is not uncommon in contracts for services. While it is traditionally more indicative of an employer/employee relationship, the issue of seeking permission or providing prior notice for taking time off, is not especially conclusive in determining the true nature of the relationship. In an ongoing relationship between an independent contractor and principal, it is reasonable to conclude that a worker would need to provide adequate notice to the payer to organise a replacement if the work needed to continue. | Detailed Reasoning - Application of the test to the facts provided: We acknowledge the contention that any suggestions that the payer is actively involved in controlling the activities of the workers and/or their schedules and obligations are incorrect as each worker has the opportunity to advise the payer of their availability, i.e. how many days they are available; what days in particular, what hours they are available. It is accepted from the evidence provided that the workers exerted control by virtue of their ability to advise the days and times they were available to work. The workers were not subject to direction or control with respect to their sessions or the methods in which they chose to complete the sessions. However, the payer also exerted control by virtue of the fact that sessions were performed at their premises within a band of hours set by them. The payer also had control over the number of sessions and clients allocated to each worker. In addition, the fact that the payer exerted little control over workers with respect to session plans could be seen as a reflection of the specialist nature of the work performed, rather than a reflection of the relationship between the parties. Furthermore, the responses of each workers indicates that there was an expectation that they would attend staff meetings at the beginning of the year for planning purposes and that fire training and equipment training was provided by the payer to the workers. It is also acknowledged that the payer contends that there is a contract in place between the payer and the worker, the necessity to communicate with the payer in relation to sick leave, annual leave, or any other inability to attend on a particular occasion are addressed between the payer and the workers in most instances as a matter or courtesy. Accordingly, the Commissioner considers that with respect to the control test, the facts indicate that an principal/contractor relationship existed. | Detailed Reasoning - Integration Test - does the worker operate on their own account or in the business of the payer?: 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 otherwise known as the 'business' or 'integration' test. Whether the worker operates on their own account or as part of a business of the payer is sometimes viewed as a consideration of whether the worker would be viewed by a third party as carrying on their own enterprise as an independent contractor or operator and whether they could be expected to generate goodwill in their own right. 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 an 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 Full Bench of the High Court in Hollis endorsed the proposition stated by Windeyer J in Marshall v. Whittaker's Building Supply Co (1963) 109 CLR 210 that the distinction between an employee and independent contractor is: …rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own. This factor was given significant prominence by the High Court as an aid to determining the common law contractual relationship between the parties to the dispute in the context of vicarious liability. In arriving at the conclusion that the bicycle courier was a common law employee of the courier company (which then became vicariously liable for the bicycle courier's negligence), Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ stated that, 'Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations.' The 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 skill 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 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… With the introduction of ABNs and the GST under The New Tax System, there were no amendments to the definition of employee in the SGAA. The fact that an individual has an ABN and is registered for GST will not alter the essence of the relationship between the payer and the worker. In other words, quoting an ABN does not automatically mean the person is not an employee for purposes of the SGAA. Moreover, the mere fact that an individual possesses an ABN does not automatically make them an independent contractor as the ABN and GST registration does not alter the substance of the relationship between the payer and the worker. The Commissioner also acknowledges the payers contention that both the payer and the workers agreed between themselves that they were hired as independent contractors. However as Gray J stated in Re Porter: Re Transport Workers Union Australia (1989) 34 IR 179: Although the parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive, A court will always look at all the terms of the contract, to determine its true essence, and will not be bound by the express choice of the parties as to the label to be attached to it. | Detailed Reasoning - Application of the test to the facts provided: The responses from all parties indicate that the workers were able to advertise their service and were able advertise their service to other customers independently of the principal/payer. The Commissioner acknowledges the contention that the payer and workers had agreed between themselves that the workers were independent contractors, evidenced by the workers application for, and granting of, an Australian Business Number with the Tax Office, and that the workers operated as business owners. The workers generally operated independently of the payer. They provided their own resources, were able to work in a similar capacity for other entities. Conversely, by the nature of the work the workers were generally required to perform the work from the payers premises, and were not able to influence their profit by virtue of the fact that they did not set the rate of remuneration, could not influence the number or frequency of sessions apart from being available for more days. The Commissioner also considers it possible that the payers clients would have seen the workers as being integrated into the payers business rather than operating as a business in their own right. This is reinforced by the comments from the workers that they were required to wear a name badge and comply with the payers dress code. The fact that a reasonable person may view the workers as being integrated within the payers business bears considerable weight when making a decision with respect to the integration test. This conclusion is supported by the responses of the workers who generally considered that they worked within a department and with others rather than as individual contractors. Accordingly, with respect to the integration test, the Commissioner is satisfied that the facts support the existence of an principal/contractor relationship. | Detailed Reasoning - 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. The production of a given result is considered to be a mark of independent contractor status ( World Book (Australia) Pty Ltd v. FC of T (1992) ATC 4327). 'Results' contracts describe traditional principal/independent contractor arrangements where a specific identifiable task is performed. The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to the hours worked. In a contract for services (whether written, oral or implied), the contract specifies the services to be performed in return for an agreed payment. Satisfactory completion of the specified services is the result for which the parties have bargained. Conversely, under a contract of service, payment is not necessarily dependant on, or referable to, the completion of the specified services. While the notion of 'payment for result' is expected with a contract for services, it is not necessarily inconsistent with a contract of service. The High Court in Hollis considered that the payment to the bicycle couriers per delivery, rather than per time period engaged, was a natural means to remunerate employees whose sole purpose is to perform deliveries. Accordingly, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties and what the worker was hired to do. Generally where a worker is paid a set amount per task, this is a clear indicator of a contract for result, typical of a principal and independent contractor relationship. However, it should be also noted at this point that payment for result it is not necessarily inconsistent with a contract of service . Conversely, giving the nature of the industry a payment per completed file may be a convenient or natural way to measure and remunerate work performed by agents/workers (a piece rate basis). This is similar in nature to Hollis v. Vabu where bicycle couriers sole purpose is to perform deliveries. These types of arrangements are more common when engaging employees to perform work on a casual, non-full-time, basis. Additionally, a contract to achieve a specified result would generally be formulated on an individual basis. In his original decision, the Commissioner found that the workers were paid to achieve a result. | Detailed Reasoning - Application of the test to the facts provided: As the condition of remuneration refers both to a result (the completion of a session) and a time (per half hour), this does not make it easy to make a clear decision as to whether or not the payment is reflective of any employer/employee or principal/independent contractor relationship. Where it is not clear whether workers are remunerated for a result or otherwise, the Commissioner believes it relevant to consider whether the workers were engaged to work for the payer providing sessions or were they engaged to provide sessions for the payers clients. The responses to the questionnaires from all parties confirm that the workers were not required to submit a quote for each session, as remuneration was set by the payer and not open to negotiation. All parties have agreed that they were paid on a monthly basis upon receipt of the invoices provided by the worker. The Commissioner acknowledges that the payer contends that the fact that workers were renumerated on occasions where sessions did not take place (for example, where a session is not attended by a client who has not given any prior notice of absence), lends credence to the view that payment was not reliant on the result of a session having been completed. On the facts provided, it is concluded that the workers were not engaged on the basis of providing a result; rather they were engaged for the purpose of completing sessions which contributed to the fulfilment of the payers obligations to its clients. Accordingly, with respect to the results test, the Commissioner considers the facts support the existence of an employer/employee relationship. | Detailed Reasoning - Delegation Test - whether the work can be delegated or subcontracted: The unlimited power to delegate or subcontract work is an important factor in deciding whether the worker is an employee or independent contractor. If an individual has unlimited power to delegate the work to others (with or without the approval or consent of the Principal), this is a strong indication that the person is being engaged as an independent contractor. Delegation is generally implied in a contract for services where the emphasis is on result rather than person. However, delegation clauses are considered in the context of the contract as a whole to determine if they are consistent with the apparent essence of the contract or if they are merely self-serving statements. Delegation is not simply the delegation of tasks from one employee to another or the ability to swap shifts or request a fellow employee to perform some duties; it is the ability to freely subcontract or employ others to perform the work. Generally the right to delegate is assumed to exist unless it is expressly forbidden in a contract. In this case the information provided by you and the absence of any evidence fail to conclusively determine whether or not delegation did actually exist | Detailed Reasoning - Application of the test to the facts provided: Based on information supplied by the payer, the workers had the right to subcontract or delegate work to others. In practice, the workers would not arrange a replacement unless they would be absent for a considerable length of time, and it is the payer which takes responsibility for paying the replacement, however the contract is quite clear that the workers could delegate to another appropriately qualified worker. Accordingly, with respect to the delegation test, the Commissioner considers that a right to delegate did exist, and therefore the facts support the existence of a principal/contractor relationship. | Detailed Reasoning - 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 services, or a contract with an independent contractor. 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. | Detailed Reasoning - Application of the test to the facts provided: The workers bore exposure to commercial risk in that they had control over the number of hours that they made themselves available for work, were generally required to provide their own resources (with the exception of large difficult to move resources) and could use these resources when completing work for others. They bore expense in the acquisition, maintenance and development of resources. The payer also bore minimal exposure to commercial risk in that the rate paid to workers was that set by the external Association and this was the rate charged to clients. The payer also bore minimal risk in relation to the provision of resources used by the workers. With respect to the issue of negligence and the rectification of faulty work, the Commissioner acknowledges that the payer has stated that the workers would bear liability, however in the absence of any written agreement, or practical example to support the statement, the Commissioner has not considered these issues with respect to this test. Accordingly, with respect to the risk test, the Commissioner is satisfied that the facts support the existence of a principal/contractor relationship. | Detailed Reasoning - 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 pay and provide for their own assets, tools, equipment, maintenance costs and other expenses. As stated by McKenna J in Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497 at 526, '…the ownership of assets, the chance of profit and risk of loss in the business of carriage are his and not the company's.' The investment of capital, the maintenance of capital and risk of loss of capital in the event of an unsuccessful venture must be of a significant nature to deem a worker not an employee. | Detailed Reasoning - Application of the test to the facts provided: The workers bore most capital expenses in that they were generally required to provide their own resources (except as noted above) and could use these resources when completing work for others. They bore the expense in the acquisition, maintenance and development of resources. The payer provided rooms where the workers would conduct sessions and provided IT resources that could be used by the workers. Accordingly, with respect to the risk test, the Commissioner is satisfied that the facts are inconclusive of a principal/contractor relationship or an employee/employer relationship. | Detailed Reasoning - Conclusion - Common Law: In conclusion, in considering the totality of the relationship, the Commissioner is satisfied that the arrangement between the payer and the workers is one of principal/contractor. However, in order to leave no doubt as to the Commissioners view of this matter, the extended definitions in subsections 12(3) and 12(8) have been considered and are discussed below. | Detailed Reasoning - 2) Extended Definition of Employee under subsection 12(3) of the SGAA: Where the common law test is not conclusive, we must consider whether the worker satisfies the definition of 'employee' under the extended definition under 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 provides further assistance as to who is considered an employee. | Detailed Reasoning - SGR 2005/1 states:: '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 or principally for the labour of the individual engaged and he or she will be an employee under subsection 12(3) [of the SGAA].' As stated earlier, the payer provided information that the workers remuneration was for their expertise, or skill, and for recompense for their services. Therefore the first test is satisfied. The second requirement of subsection 12(3) of the SGAA is that it requires the labour of the individual personally. That is, the worker does not have the right to delegate or subcontract the work to another party. Even if the contractor has no intention to delegate or subcontract the work and actually performs the work personally, the contract itself is still not for the labour of the person if there is a possibility of delegating the work to another person. As it has been concluded earlier, the evidence supports the view that a true right to delegate did not exist. Therefore the second test is failed. The third and last requirement of subsection 12(3) of the SGAA is that the payments received by the worker must not be in relation to the production of a given result, but instead should be for their labour. As discussed earlier, the Commissioner has determined the workers were not paid for result. The third test is therefore passed. Accordingly, for the purpose of subsection 12(3) of the SGAA, the Commissioner is satisfied that the workers are not employees of the payer as all tests have not been passed. | Detailed Reasoning - 3) Extended Definition of Employee under Subsection 12 (8) of the SGAA: Subsection 11(1) of the SGAA provides an inclusive definition of the term 'salary or wages'. Under paragraph 11(1)(d) payments to a person for work referred to in subsection 12(8) are specifically included in salary or wages. | Detailed Reasoning - Paragraph 12(8)(a) includes as employees: a person who is paid to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills is an employee of the person liable to make the payment.' What is significant in the language of these provisions is the use of terms such as ' work', '…to perform services in', and '…in the making of … ' This is consistent with the common law interpretation of salary or wages which is normally uses terms such as services, labour, or work performed for an employer for reward. Therefore, for a payment made to a worker to be considered salary or wages, it must be for the work performed, services provided or labour provided 'in the performance or presentation' of the music, otherwise the payment would not satisfy either the common law definition or the definition of salary or wages in the SGAA. From the evidence provided, the workers are not directly involved in the performance or presentation of the music; rather they were engaged for the purpose of completing sessions for the payers clients. As the workers are not directly involved in the performance or presentation of the music it is considered that subsection 12(8) of the SGAA is not applicable in this instance. | Detailed Reasoning - Conclusion: Having considered the nature of the working relationship between principal and worker and the relevant case law, and putting in balance the relevant indicators it has been determined that a common law employment relationship does not exist between the principal and workers . As the workers are able to delegate their services they are not considered to be employees under the extended definition of an employee in subsection 12(3) of the SGAA. Finally, it is considered that as the workers are not directly involved in the performance or presentation of the music subsection 12(8) of the SGAA is not applicable in this instance.

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