Private ruling: Status of the worker for superannuation guarantee legislation
Date of advice: 2 July 2015
Published: July 2015

Ruling: Q2: Are the workers of the Company considered to be employees for the purposes of subsection 12(3) of the SGAA for the relevant periods? Advice No. Refer to 'Why we have made this decision'

Relevant facts and circumstances: Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice. • The Company operates a business. • In April 20AA the Company requested advice regarding whether the workers engaged by the Company are considered to be employees. • The Company has put in place an Agreement which is used for all hired workers. • The Company owns the equipment and advertises for workers. The Company is in the process of hiring workers. It is anticipated that the Company will hire X workers. • The Company will not provide training as the hired workers will have a sufficient performance rating and they will be familiar with the industry. • Workers will indicate their roster preference and the rosters will be constructed taking into account the performance and preference of the workers as well as the needs of the Company. • The Company will provide the workers with a working roster and the workers accept the shift. • The workers will not be training other workers nor supervising or assessing the work of other workers. • Rosters will be constructed taking into account each individual worker preference. The expectation will be that if either party wishes to rearrange rostered times, then this will be communicated on a needs basis. The expectation would be that the worker would give enough notice so that another worker could be arranged. • Workers will not be directly supervised. Their performance will be monitored through customer feedback and ratings provided by clients. • Workers are not entitled to paid breaks. • All jobs are allocated by the Company either by direct instructions or through the worker selecting the jobs. The Company will set the prices, not the workers. • Workers cannot pick or choose jobs without the approval of the Company nor can the worker renegotiate their reward or terms and conditions. • Workers do not collect money as all customer payments are made directly to the Company. • Workers cannot assign the work to others nor can they canvas for work. • The Agreement in part has provisions to include: • The Company has set the price and will pay the worker an agreed fixed percentage of 40% inclusive of GST of the fee for the provision of services that the worker has carried out with the Company retaining 60% inclusive of GST. • The workers recipient created tax invoice, which will be prepared by the Company on behalf of the worker. • The Agreement may be terminated by either party without notice if either party shall have committed any serious breach or repeated or continued any material breach of its obligations. • Workers will only be paid a percentage of monies taken and no retainer is in place. • Workers will be paid directly into their bank account after submitting a recipient created tax invoice. • Workers cannot delegate their work to anyone else. • The Company will not be paying any of the following to its workers: • Car allowance • Tool allowance • Travel allowance • Living away from home allowance • Payment of expenses such as petrol, tools, materials, stationary or phone etc. • Holiday pay • Sick pay • Workers compensation • Superannuation; or • Training.

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 workers operating under the terms of the Agreement are not employees of the Company for the purposes of the SGAA. Therefore the Company does not have an obligation to pay superannuation contributions on behalf of the workers. | Detailed Reasoning - Ordinary meaning of employee under subsection 12(1) of the SGAA: 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). Where the substance of a contract is to achieve a specified result, there is a strong (but not conclusive) indication that the contract is one for services. In World Book (Australia) Pty Ltd v. FC of T 92 ATC 4327; (1992) 27 NSWLR 377 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'. Similarly, the couriers in Vabu Pty Limited v FC of T 96 ATC 4898; 33 ATR 537, were engaged to perform a result, the delivery of parcels, etc, rather than engaged to perform labour. They were thus employed in their own business, on their own account, and were not employees of the business conducted by the appellant in that case. Their contracts were not contracts wholly or principally for their labour. Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? (SGR 2005/1) explains when an individual is considered to be an 'employee' under section 12 of the SGAA. The question of whether someone is an employee is one of fact, and is determined by examining the terms and circumstances of the contract, in conjunction with the key indicators expressed in common law. The totality of the relationship must be considered to determine whether, on balance, the worker is an employee. No one indicator is in itself determinative of the relationship. SGR 2005/1 discusses at a paragraphs 105 and 106 lease or bailment relationships in which workers are neither employees or independent contractors for the purposes of the SGAA: 105. There are circumstances in which the relationship between a person who engages another to perform work and the person engaged does not give rise to a payment for services rendered or provision of labour but rather a payment for something entirely different, such as a lease or 'bailment'. In these circumstances, a person enters into a lease or bailment for the use of property owned by another person, and the payments are made from the lessee or bailee to the lessor or bailor. Consequently, the lessee or bailee, rather than being a provider of services to the owner of the asset, acquires a right to exploit that asset for their own benefit in return for a 'rental' payment to the owner. 106. A common form of bailment relationship is that of owner and taxi driver. In the taxi industry, some taxi drivers who operate under a bailment arrangement make a payment to the owner allowing them to use the taxi to drive. These payments may take the form of lease payments or a percentage of shift takings. In FC of T v. De Luxe Red and Yellow Cabs Co-operative (Trading) Society Ltd & Ors , the Full Federal Court held that a taxi licence owner and taxi drivers were not in a relationship of employer and employee within the meaning of those terms in section 12 of the SGAA. The relationship was rather one of 'bailment', even though the licence owner had a degree of control over the drivers' work. The dictionary meaning of bailment is: the temporary placement of control over, or possession of Personal Property by one person, the bailor, into the hands of another, the bailee, for a designated purpose upon which the parties have agreed. During the specific period a bailment exists, the bailee's interest in the property is superior to that of all others, including the bailor, unless the bailee violates some term of the agreement. A bailment involves only a transfer of possession or custody, not ownership. For example, a bailment is created when a parking garage attendant, the bailee, is given the keys to a motor vehicle by its owner, the bailor. The owner, in addition to renting the space, has transferred possession and control of the vehicle by relinquishing its keys to the attendant. | Detailed Reasoning - In your case: In summary, under subsection 12(1) of the SGAA, when looking at the relationship as a whole, the facts and evidence provided indicate that the relationship between the Company and workers under the terms of the Agreement is a bailment relationship. The Company has a degree of control over the workers, for example, the Company will provide the workers with a working shift roster. After accepting the shift, the workers must take any work allocated to them by the Company. However, at other times they select of their own accord from available Company work displayed in an online application. The Company will pay the worker an agreed fixed percentage of 40% inclusive of GST of the fee for the provision of services that the worker has carried out with the Company retaining 60% inclusive of GST. The Company and the worker may agree to vary the fixed fee for the provision of all or any part of the services. Under the terms of the Agreement, the workers acquire a right to use the Company's equipment for their own benefit in return for the Company taking a fixed 60% of the income generated. As the payment is based on the number of jobs a worker completes, it is clear that the payment is made on a results basis. Regardless of the fact that the Company exercises a degree of control over how their equipment is used, the fact remains that the workers rent equipment from the Company and the right to utilise this equipment for income earning purposes. It is clear from the definition of 'bailment', the nature of the work and the working arrangement that it is a bailment arrangement. As such, workers hired by the Company are not considered to be common law employees for superannuation guarantee purposes in this arrangement. | Detailed Reasoning - Employee under subsection 12(3) of the SGAA: The Commissioner's view, as expressed in SGR 2005/1, is that some contracts for service will be wholly or principally for labour of the individual contracted even though the individual is not a common law employee. As the facts and evidence indicate that the workers are not your employees under common law, we are required to consider the expanded definition of employee under subsection 12(3) of the SGAA. The expanded definition of employee within section 12(3) of the SGAA, 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. To determine whether the contract is wholly or principally for the labour of the person, we examine the terms of the contract, in light of the subsequent conduct of the parties. We consider whether: • 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. In this context, the word 'principally' assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil. A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour. Delegation is generally implied in a contract for services where the emphasis is on the result rather than the 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 are merely self-serving statements. 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 his/her own means to achieve the contractually specified outcome. The essence of the contract has to be to achieve a result and not to do work. | Detailed Reasoning - In your case: As established above, the relationship between the Company and the workers is a bailment agreement and the workers are paid for a result. The workers have a right to utilise the equipment assets of the Company for their own benefit, in return for providing the Company with a percentage of the income. The workers are not remunerated for wholly or principally for their efforts or skills. Accordingly, the workers do not meet the expanded definition of employee as set out under subsection 12(3) of the SGAA. | Detailed Reasoning - Conclusion: Upon considering all the available facts and evidence we are satisfied the workers are not employees of the Company under the terms of the Agreement for the purposes of the SGAA under either the common law or the expanded definition provided under subsection 12(3) of the SGAA. Accordingly the Company does not have an obligation to pay superannuation contributions for the benefit of the workers under the SGAA.

Question 1: Are the workers of the Company considered to be employees for the purposes of subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA) for the years ended 30 June 2015, 30 June 2016, 30 June 2017, 30 June 2018, and 30 June 2019 (the relevant periods)?