Private ruling: Status of the Worker
Published: March 2014

Ruling: Q1: Are the workers considered employees of the Principal Contractor, either under common law or as defined in subsection 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? Advice No. Refer to 'Reasons for decision'

Relevant facts and circumstances: The principal is the head contractor. The principal engages the services of the workers, who are operating as sole traders with ABN's. All workers hold all relevant qualifications and licences. All workers sign written contracts. These contracts allow the workers to employ other contractors and/or employees to perform the work. All defects/errors must be corrected by the workers at their own cost. The workers only supply labour and tools and equipment. All workers provide quotes for each job. For those jobs that take several months to complete, the workers are paid by monthly instalments based on the number of hours worked in that month as a ratio of the total estimated hours quoted to complete the job. We received from the principal's authorised representative a completed Status of the worker questionnaire - Principal . A summary of the responses are set out below: Terms and the circumstances of the formation of the contract n The business established the working relationship with the workers by word of mouth or through a third party such as a recruitment agency or a labour hire agency. n A standard contract is used. n The workers set the rate of pay at the commencement of the contract. Contracts are normally for 12 months. n Under the terms of the contract, the principal does have the right to dismiss or terminate the services of the workers. n There are currently workers engaged under the contract who are paid as subcontractors and not employees. Control n The workers are not provided with training and determine their own working hours within the terms of due dates for work completion. n Workers are not required to attend meetings within the business or with clients and are not entitled to paid breaks. n The nature of the business normally requires the work to be done on site. n A review is only done at completion as part of quality control and insurance purposes. n Workers have the right to refuse to do a particular job as long as it does not breach the contract. n The workers are not required to seek permission if they want time off or provide prior notice. Each worker is only required to complete work done by the due date. Integration n The workers are able to provide their services to other individuals or businesses. n Workers would normally work alone, independently of others. n The workers do not train or supervise any work completed by the principal contractor or their employees. n There is no requirement for the workers to wear or use a name badge, clothing, business cards, stationary or any other item that promotes the principals' business. n The workers provide their own clothing and use their own stationary and contact details. n The principal does not advertise their business on any assets, tools or equipment used by the workers. Results n The workers submit quotations and upon completion of the job submit an invoice for payment. n Payments to the workers are normally only made if the work has been performed. On longer jobs some progress payments are made as the job is progressing. n Normally an inspection is done of the work completed prior to payment. n Payment is made into the bank accounts of the workers. n There is no deduction of income tax, superannuation or other deductions from the workers payment. Delegation n No specific instructions are given to the workers in relation to the work being completed personally. n It is the workers responsibility to meet the due dates and if required they are to organise a replacement. n As this arrangement is very recent there have been no instances where a replacement has been required, however you advise that the contract provided clearly states that this is possible. Risk n The principal is responsible for payment of the workers compensation insurance. n The workers are responsible for private accident and public liability insurance. n There is no requirement for the workers to guarantee their work for any period of time. n It is the workers responsibility to correct any mistake in their own time and at their own expense. Provision of tools and equipment and payment of business expenses n The workers are not provided with any assets, equipment or tools in which to complete their work. n The workers are not reimbursed for their assets, equipment or tools. n If any materials are required, the principal would organise and provide them. n If workers were required to wear protective clothing they were to supply themselves.

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

Reasons for decision: Summary: The facts and evidence suggest that the workers are not employees 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. The principal therefore does not have an obligation to pay superannuation contributions on behalf of the workers. | 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. Application of the common law to your case The principal has engaged workers who are paid as subcontractors and not employees. The relationship was formed by both the principal and the workers entering into a written agreement which is a standard contract. The workers set their rate of pay at the commencement of the contract. The contracts are normally for 12 months. The contracts provided show that each worker agrees to quote for jobs and each contract has been set for six months from the date of agreement. Based on the above terms of engagement, considered individually and together, it is clear that it was the principals' intent to engage the workers as independent contractors. Therefore it is considered that the relationship between the principal and the workers is 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. Application of the common law to your case The principal advises that the workers were not provided with training and determined their own working hours within the due dates for job completion. The workers were not required to attend meetings within either the business or with clients. Due to the nature of the business normally all work is done on site. This is considered to be a neutral factor in this case as this is a common condition in the particular industry, and both employees and independent contractors would be required to complete the jobs at the location specified by the end client. As far as work scheduling goes the principal does not normally schedule the jobs or tasks to be carried out. This has only occurred if deadlines were tight or if work needed to be completed at a particular time for project management purposes. Reviews are done upon completion of the jobs as part of quality control and for insurance purposes. The workers have the right to refuse to do a particular job as long as it did not breach the contract. The principal further states that the workers are not required to seek permission or provide prior notice if they wanted to take time off. However, as per the Contract, the work must be completed to keep up with the program. If too much time is taken off causing the workers to fall behind then the Contract could be terminated. The Contract sets out the workers' obligations when carrying out and completing the works. The work must be completed in accordance with specifications and to the reasonable satisfaction of the principal. This Contract also imposes the obligation upon the workers to complete the job in accordance with any direction from the principal. Based on the responses to the questionnaire together with the Contract it is clear that the workers must complete the works to the satisfaction of the principal and that the tasks required and anticipated completion times are discussed with the workers because for sequencing reasons, some other works are dependent on certain jobs being completed before they can complete their tasks This in itself indicates that the principal exercises a degree of actual control and supervision over the workers. We are satisfied that the control test in isolation is more in favour of the notion that the relationship between the principal and the workers is that of 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 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 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). Application of the common law to your case The workers are able to provide their services to other individuals or business when not working for the principal. The workers would normally work alone independently of others, however on occasions they have completed some tasks as a team. They do not train any employees of the principal or supervise any work completed by the principal's employees. There is no requirement for the workers to wear or use a name badge, clothing, business cards, stationary or any other item that would promote your business. They provide their own clothing and use their own stationary and contact details. The principal does not advertise their business on any assets, tools or equipment that is used by the workers. Both workers have their own Australian Business Numbers (ABN), are registered for GST and maintain their own public liability, workers compensation and personal sickness and accident insurance. This is an indicator that the relationship between the principal and the workers is that of principal and independent contractor. However, no one of these factors is a determining factor. Some of these factors are often found in contracts with the common law employees such as casual employees. ABN registration is not necessarily indicative of the existence of a contract relationship, nor of running one's own business. A person may hold an ABN and carry on a business or trade in their own right and in their own name (for example, a tradesperson performing work as a sole trader), while also working for another as an employee at the same time. In this situation, the fact that they work in their own business will not alter their employment status. Consequently, the quoting of an ABN by the worker is a relevant consideration, but is not determinative of whether the workers are employees or independent contractors. If the worker's services are an integral and essential part of the business that engages them (under a contract of service), 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 (under a contract for services), 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 workers are engaged under a standard contract. The contracts are normally for 12 months, but could be shorter terms if jobs required this. Based on the above individual factors and all of the factors considered together, it is not possible to determine conclusively whether the worker's services are an integral part of the business (a contract of service as an employee) or whether the workers are carrying on their own respective business's (under a contract for services as an independent contractor). However as the integration test is not the sole determinative factor in determining the relationship between two parties, we will consider the other relevant factors. | 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. In a contract for services whether written, oral or implied, the contract specified 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. Accordingly, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties. Application of the common law to your case The workers submit quotations for jobs and upon completion of the job would submit an invoice for payment. Payments made to the workers are normally only made if the work has been performed, however on larger projects some progress payments (based on the proportion of the job completed) with the balance of the 'contract' being payable upon completion of the job. The principal advises that a check of the work is completed prior to making payment. The sample of quotations and invoices provided in relation to each of the workers indicate that each worker quoted and was paid for particular works undertaken. These quotations and subsequent invoices show a final figure for each particular job which correspond. In relation to the results test, we are satisfied that the workers are paid for a result, they are paid for their skills and labour in which to complete each job, therefore this test in isolation is more in favour of the notion that the relationship is that of principal/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. Application of the common law to your case It is the workers responsibility to meet the due dates and if required they also need to organise a replacement or assistance to complete the job. The Contract permits the worker to subcontract out the works. The use of subcontractors does not relieve the worker from liability under the contract. Generally speaking, in the absence of a contract which specifically outlaws the right to delegate, a right to delegate is considered to exist. Delegation is not simply the delegation of task 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. 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. It is clear from the Contract that the workers may engage others to complete the works, overall we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between is one of principal and independent contractor. | 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. Application of the common law to your case The principal is responsible for payment of workers compensation insurance. The worker's themselves are each responsible for their own private accident and public liability insurance. A 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. There is no requirement that the worker's need to guarantee their work for any period of time. It is the worker's responsibility to correct any mistake in their own time and expense. Taking into account that the workers' have their own insurance, the nature of the tasks performed, the circumstances under which they are performed, the tools and equipment used to perform the tasks it is considered that the worker is exposed to commercial risk. The risk of making a profit is solely dependent upon the worker. Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between the principal and the workers is one of principal and independent contractor. | 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… Independent contractors carrying on a business for themselves, often pay and provide for their own assets, tools, equipment, maintenance costs and other expenses. Usually they will have factored these costs into their overall fee or will seek separate payment for such expenses from the principal. Application of the common law to your case The workers are not provided with any assets, equipment or tools in which to complete their work and they are not reimbursed for their own assets, equipment or tools. There is also a requirement for the workers to wear any protective work gear required which they are to supply themselves. The Contract specifies that the worker must supply all necessary tools to complete the jobs. The workers are not provided with any vehicle or other transportation leading to an assumption they have a large capital expense in the provision of that. The expenditure incurred in relation to the provision and maintenance of tools and equipment and payment of business expenses must be significant for the individual to be considered an independent contractor. The Commissioner finds evidence to suggest that the workers have invested significant capital into their own business due to the provision of tools, equipment, and other assets and expenses. Therefore we are satisfied that the capital test in isolation is more in favour of the notion that the relationship between the principal and the workers is one of principal and independent contractor. | Detailed Reasoning - Our conclusion regarding the common law definition of employee: In summary the Commissioner, when looking at the relationship as a whole is satisfied that the facts and evidence are indicative that the workers are not common law employees under subsection 12(1) of the SGAA. As our decision is negative, we are required to consider the extended definition in subsection 12(3) of the SGAA. The extended definition has been considered and is discussed below. | 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: n the individual is remunerated (either wholly or principally) for their personal labour and skills; n the individual must perform the contractual work personally (there is no right to delegate); and n 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 - Application of subsection 12(3) of the SGAA in your case: In this case, it is clear from the facts and evidence that the intention was to engage the workers under a contract for services. The evidence provided by the quotes and subsequent invoices show that the workers are remunerated primarily for their personal labour and skills, rather than for the provision or hire of equipment or materials in which to complete a job. Any tools and equipment provided by the workers is incidental to the work performed under the contract. Accordingly, it is considered that the contract between you and the workers is principally for labour. However, in the absence of any evidence to the contrary, it is considered that the workers have the right to delegate their tasks. We are satisfied that the workers are paid for a result, that is, the amount quoted and subsequently invoiced on completion of each individual job. Accordingly, as the workers do 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 - Conclusion - overall: Upon considering of all the available facts and evidence, the Commissioner concludes that with respect to work performed for you, the workers do 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 the workers under the SGAA.