Private ruling: Superannuation guarantee - status of the worker
Published: March 2013

Ruling: Q1: Was the Worker, considered a common law employee of the Principal as defined in subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Relevant facts and circumstances: Your advice is based on the facts stated in the description of the scheme that is set out below. Content from the Principal and Worker questionnaires was extracted, summarised and considered under each of the common law elements and a consideration of the extended definition under section 12(3) of the SGAA. 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. A request for a private ruling was lodged by the Applicant on behalf of the Principal in respect of whether a superannuation guarantee liability arises for the sole proprietor Worker. The Principal questionnaire comprised of X questions. In summary, the Applicant advised that: · the Worker was engaged by word of mouth · a detailed verbal offer from the Worker was accepted by the Principal · the Worker was paid on the basis of an outcome · the Worker offered fixed price rates which could be reasonably renegotiated · the Worker was to meet his/her own expenses in relation to public liability insurance, purchase of associated equipment, vehicle and running costs · the Worker could provide services to other individuals or businesses, and · the Worker had the right to delegate the services required

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 section 12.

Reasons for decision: Summary: Was the Worker an employee of the Principal by virtue of subsection 12(3) of the SGAA? | Detailed Reasoning - This advice applies for the following period:: 30 June 2007 to 31 March 2012 | Detailed Reasoning - The arrangement commenced on:: 1 April 2007 | Detailed Reasoning - Relevant facts and circumstances: Your advice is based on the facts stated in the description of the scheme that is set out below. Content from the Principal and Worker questionnaires was extracted, summarised and considered under each of the common law elements and a consideration of the extended definition under section 12(3) of the SGAA. 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. A request for a private ruling was lodged by the Applicant on behalf of the Principal in respect of whether a superannuation guarantee liability arises for the sole proprietor Worker. The Principal questionnaire comprised of X questions. In summary, the Applicant advised that: · the Worker was engaged by word of mouth · a detailed verbal offer from the Worker was accepted by the Principal · the Worker was paid on the basis of an outcome · the Worker offered fixed price rates which could be reasonably renegotiated · the Worker was to meet his/her own expenses in relation to public liability insurance, purchase of associated equipment, vehicle and running costs · the Worker could provide services to other individuals or businesses, and · the Worker had the right to delegate the services required | Detailed Reasoning - Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 section 12. | Detailed Reasoning - Reasons for decision: 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 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 ? (SGR 2005/1) 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 - Question 1: Was the Worker, considered a common law employee of the Principal as defined in subsection 12(1) of the SGAA for the quarters ended 30 June 2007 to 31 March 2012 inclusively? | Summary: The facts and evidence lead to the conclusion that the Worker was not your employee for the purposes of the SGAA under the common law definition as defined under subsection 12(1) of the SGAA and therefore under this subsection you did not have an obligation to pay superannuation contributions on behalf of the Worker. | Detailed Reasoning - Common law employee: The relationship between an employer and employee is a contractual one. It is often referred to as a contract of service. Such a relationship is typically contrasted with the independent contractor relationship that is referred to as a contract for services. An independent contractor typically contracts to produce the contracted result in return for an agreed payment, whereas an employee contracts to provide their labour (typically to enable the employer to achieve a result). The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts. As a result, a substantial and well-established body of case law has developed on the issue. Consideration should be given to the various indicators identified in judicial decisions. No list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor. In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors we have considered are discussed below. | Detailed Reasoning - 1. Terms of engagement: The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. For this test, we must determine the nature of the contract between the parties. We will consider whether the contract is written or verbal and whether the terms and conditions are express or implied. These factors are important in characterising the relationship between the parties. It might be argued that the parties' intention in forming a contract is not subjective, but an objective one; that is, the task is not to discover the intention of the parties involved but to decide what each could reasonably conclude from the actions of the other. In the observation made by Isaacs J in Curtis v. The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17: Where parties enter into a bargain with one another whereby certain rights and obligations are created, they cannot by a mere consensual label alter the inherent character of the relations they have actually called into existence. Many cases have arisen where Courts have disregarded such labels, because in law they were wrong, and have looked beneath them to the real substance. Therefore, simply defining someone as a contractor does not necessarily lead to the conclusion that the individual is providing services as part of an operation of their own independent business. In Hollis v. Vabu Pty Ltd (2001) 207 CLR 21 ( Hollis v. Vabu Pty Ltd ) it was noted that although no payments of annual leave or sick leave were given, and no superannuation deductions were made by Vabu in respect of the bicycle couriers, the relationship between the parties was found not merely from these contractual terms. The system which was operated under and the work practices imposed by Vabu went to establishing 'the totality of the relationship' between the parties and it is this which is to be considered | Detailed Reasoning - Application of the common law to your case:: You advised that the Worker was engaged by word of mouth. You referred to a meeting at which the Worker made an offer in respect of the provision of his/her services for an outcome based payment. There was no written contract formed. In your completed principal questionnaire (PQ), you have referred to a detailed range of essential terms and the inclusion of further terms, all being express terms. The terms approximate Y in number. You have provided evidence of contract negotiations in the form of a price list of contract rates (price list). Apart from meeting the obvious need to have a basis for costing jobs and the provision of the Worker's remittance details, the price list has no further detail in respect of the terms you have itemised. As such the terms must have been offered on a verbal basis. The Worker makes no reference to a verbal offer based on such comprehensive terms. You advised further that you accepted the Worker's offer by commencing to notify the Worker of jobs available to him/her. Contrary to your advice, the Worker advised that he/she approached you for an interview. He/she advised further that there was no written contract formed and he/she has made no reference to the comprehensive verbal terms as detailed in your completed questionnaire. The word of mouth manner in which the Worker was engaged could be used to form either an employer and employee relationship or a principal and independent contractor relationship. However, in this case you have advised that you accepted a comprehensive set of terms offered by the Worker. Those terms were clear in their intention to establish a principal/ independent contractor relationship. No evidence was provided that provisions regarding benefits such as annual, sick and long service leave formed part of the terms negotiated. You have provided a copy of a contract rates letter from the Worker which confirms that the Worker acted in accordance with terms of the original offer which allowed for renegotiation of contract rates. The letter referred to the need to increase prices due to the increases in essential business costs. In the PQ you advised that you had the right to dismiss or terminate the services of the Worker, by simply severing the relationship through not offering any further work to the Worker. The lack of any terms in respect of benefits or allowances, the terms allowing the Worker to perform work for other entities and to delegate work, the ability for the Worker to renegotiate rates, and your right to dismiss the Worker are all indicative of a principal and independent contractor relationship. Overall, we are satisfied that the terms of engagement test in isolation is more in favour of the notion that the relationship between you and the Worker was one of principal and independent contractor. | Detailed Reasoning - 2. Control: The extent to which the employer has the right to control the manner in which the work is performed is the classic test for determining the nature of a working relationship. A common law employee is told not only what work is to be done, but how and where it is to be done. With the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it. The mere fact that a contract may specify in detail how the contracted services are to be performed does not necessarily imply an employment relationship. A high degree of direction and control is common in contracts for services because the payer has the right to specify in the contract how the services are to be performed. Similarly, the right to supervise how the work is to be performed does not constitute a contract of service where the essence is one of independent contractor. Paragraphs 36 and 37 of Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? provides that while control is important, it is not the sole indicator of whether or not a relationship is one of employment. The approach of the Courts has been to regard it as one of a number of indicia which must be considered in determination of that question. Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb ((1986) 160 CLR 16 at 36) ( Stevens v. Brodribb) , where they state: In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. | Detailed Reasoning - Application of the common law to your case:: The following detail is relevant to your working relationship with the Worker and the extent to which you had the right to control the manner in which the work is performed. You provided detail about the degree of control exercised over the Worker in the PQ. You advised that you did not provide any training for the Worker, there were no set hours, the Worker was not required to attend meetings, and the Worker took breaks when and where he/she liked. You provided job locations and scheduled jobs to be carried out by the Worker, which he/she could accept or reject. The Worker was not supervised and his/her work was only checked by exception when a customer complaint was raised. The Worker was free to take time off. The Worker has advised that he/she completed scheduled jobs at various sites and that work was occasionally performed at the factory. The PQ states that you had no right to control either 'the way in which the Contractor performed the jobs' or' the number of jobs accepted or rejected by the Contractor'. The Worker has advised of the on-site presence of employees but only to the extent of providing assistance for a particular job. In summary, although the nature of the work required you to detail where the work was to be performed, the terms of the contract refer explicitly to your lack of any right to exercise control over the number of jobs accepted by the Worker and the way in which those jobs were to be performed. Incidental support by your employees, and occasional work performed in the factory does not represent a right by you to exercise control over the process for which the Worker was engaged. Overall, we are satisfied that the control test in isolation is more in favour of the notion that the relationship between you and the worker was one of principal and independent contractor. | Detailed Reasoning - 3. Integration: Another significant factor in establishing the nature of a contractual relationship at common law is to determine whether the worker's services are an integral part of the employer's business (under a contract of service as an employee) or providing services as an individual carrying on his or her own business (under a contract for services as an independent contractor). This is known as the 'integration' test. If the worker's services are an integral and essential part of the employer's business that engages them, they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business, they are an independent contractor. It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer. The worker needs to be running their own business or enterprise and have independence in the conduct of their operations. In Montreal v. Montreal Locomotive Works [1947] 1 DLR 161, Lord Wright said: ...it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior. Similarly, in Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans [1952] 1 TLR 101 Denning LJ said: ...under a contract of service, a man is employed as part of the business, and his work is done as a integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it. The professional skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills. This was highlighted in Hollis v. Vabu Pty Ltd at paragraph 48, where the court said in relation to bicycle couriers hired by Vabu: The couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any 'goodwill' as a bicycle courier… Consideration may also be given to whether the worker could be expected to generate goodwill in their own right. If the benefits from the creation of goodwill flow to the worker then this would indicate that they are an independent contractor. Alternatively, if goodwill flows to the principal, this suggests an employer/employee relationship. It is therefore necessary to consider whether the worker is providing services as part of the principal's business (under a contract of service as an employee) or providing services as part of their own business (under a contract for services as an independent contractor). | Detailed Reasoning - Application of the common law to your case:: The Worker's ABN status, GST registration, and business name, all of which are publicly available information, were active at the time you formed a contract with the Worker. In the PQ you have advised that the Worker provided his/her services to others at least 2 to 3 time per month, mainly worked alone, and did not train or supervise your employees. The Worker was not provided with any benefits such as annual, sick and long service leave and the work was for the greater part performed using the Worker's assets and equipment. The Worker advised that you provided him with work clothes identifying your business. You have advised that no dress standards were imposed on the Worker, but you did provide T shirts with your logo. You acknowledge that the Worker may have worn those T shirts and that he may have represented himself as being from your organisation. You have provided reasons why you believe that the Worker was not held out to be your representative; however the situation may be viewed differently by third parties. You have confirmed that the Worker was a skilled tradesperson and as such he/she could be expected to generate goodwill in his/her own right. As indicated in the PQ you engaged the Worker originally on the basis of the goodwill he/she had already generated. In this case it is reasonable to conclude that goodwill would be generated for both you and the Worker on the basis that your products and the Workers skills were on display. 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 this case, although the Worker was engaged mainly by you the Worker had the skills that would enable him/her to conduct his/her own business using those skills. Your website content is suggestive of an integral process inclusive of the installation process. This does not appear to support the ancillary and core business delineation expressed as part of the circumstances of the offer in the PQ. In summary the commencement date of business registrations, the provision but non-mandatory use of clothing, the lack of leave benefits, the use of the Worker's assets and equipment, the skills provided and the ability of the Worker to generate goodwill are all indicative of a principal and independent contractor relationship. On the other hand the worker's use of clothing which identified your business, his representation as one of your workers, and the end-to-end inference that is conveyed by your website are indicative of a principal and independent contractor relationship. On this basis the integration factor in isolation is considered neutral in determining whether the relationship between you and the worker was one of employer and employee or principal and independent contractor. | 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) (Roy Morgan case) , found that interviewers who were only paid on the completion of each assignment not on an hourly basis, were employees and not independent contractors. It was found that the workers were paid for their time spent and labour, and not to produce a result. Having regard to the true essence of the contract, the manner in which payment is structured will not of itself exclude genuine result based contracts. For example, there are results based contracts where the contract price is based on an estimate of the time and labour cost that is necessary to complete the task, or may even be calculated on that basis, subject to reasonable completion times. Generally, where a worker submits quotes or issues invoices for each job to the principal, this would be consistent with operating their own business. Nonetheless, the issuing of invoices is not necessarily determinative of the nature of the relationship. Accordingly, the contractual relationship as a whole must still be considered to determine the true character of the relationship between the parties. | Detailed Reasoning - Application of the common law to your case:: The PQ refers to essential terms of the offer accepted as including the condition that you would pay for a service provided, that service being for the completed outcome and not the labour required to produce that result. Schedules of contract rates (SCR) charged by the Worker were provided. The contract rates referred to the fixed costs for the service. An hourly rate for labour was also included in the rates. The tax invoices, issued by the Worker reveal that they were issued weekly and costing was based on the quantity of items installed rather than an hourly rate. The essential term, and as such the basis for bargaining, that you would pay for a service provided, appears to reconcile with the actual operation in that the Worker who was using his own assets, tools and equipment, was paid on the basis of the contractual obligations being fulfilled. These obligations related to the provision of services at different job locations. In these respects the payments made to the Worker differ to those made to a Worker being paid on a piece rates basis for completion of homogeneous tasks on the principal's premises. Your answer in the PQ confirms that you made no payments for holiday pay, sick pay, workers compensation, car, tool, travel, or any other allowances to the Worker. Overall, we are satisfied that the results test in isolation is more in favour of the notion that the relationship between you and the worker was one of principal and independent contractor. | Detailed Reasoning - 5. Delegation: The power to delegate or subcontract (in the sense of the capacity to engage others to do the work) is a significant factor in deciding whether a worker is an employee or independent contractor. If a person is contractually required to personally perform the work, this is an indication that the person is an employee. If the contract does not expressly require the worker to personally perform the services, an independent contractor has the capacity to delegate or subcontract all (or some) of the work to others. Where the worker delegates, they are responsible for remunerating that worker. In the case of Neale (DFC of T) v. Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 425; 6 AITR 201 at 202, the High Court interpreted the words 'a contract which is wholly or substantially for the labour of the person to whom the payments are made' to decide that if a contract leaves a person completely free, if he or she chooses, to engage others to perform the work on his or her behalf means that the payments are not payments under a contract for labour. That is so even if the contractor actually does perform the work personally and had no intention of doing otherwise. If the contract leaves the contractor free to do the work himself/herself or employ other persons to carry it out the contractual remuneration when paid is not a payment made wholly or at all for the labour of the person to whom the payments are made. It is a payment made under a contract whereby the contractor has undertaken to produce a result... When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker; rather the employee has merely substituted or shared the workload. However, a clause in the contract may permit the worker to delegate the task to another worker subject to approval of the principal, as the principal may not want an unknown worker to be working on their site or who may not be suitably qualified. In the case of Bowerman v. Sinclair Halvorsen Pty Ltd [1999] NSWIRComm 21, Bishop J said: The fact that any substitute driver had to be approved by the company does not give the respondent [the principal] control over that delegation… the company surely had the right to be confident that any substitute driver was competent to do the job and maintain the "integrity" of the company as Mr Coomb put it. Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). A person who has a right to delegate work (whether or not that right is exercised in practice) does not work under a contract wholly or principally for their labour. Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider. | Detailed Reasoning - Application of the common law to your case:: The PQ makes it clear that a verbal contract was formed which allowed the Worker to perform the jobs himself/herself or to subcontract those jobs to another. The Worker has made no reference to any verbal agreement and advised that he/she was expected to finish jobs as your clients had been notified that he/she would be doing the job. He/She also advised that on occasions when workers were required you provided one of your employees to assist. You have confirmed that on occasions this practice occurred. Although the Worker had the right to delegate, no evidence was provided that the right was exercised in practice. You confirmed that the worker had the right to delegate with the only limitation being that he/she engage a person holding the appropriate qualifications and having the training to perform the services. The use of your employees to assist the Worker on occasions does not impinge on his/her right to engage subcontractors. Overall, we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between you and the worker was 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. | Detailed Reasoning - Application of the common law to your case:: You have advised that the Worker was responsible for paying workers compensation, private accident and public liability insurances. You have referred to the need for the Worker to provide a vehicle capable of transporting your products. The Worker has confirmed that he/she provided a vehicle and his/her own equipment. The Worker was responsible for correcting defective work but that in some circumstances you would replace products at your cost, effectively reducing the commercial risk to the Worker. The Worker operated under an agreement based on fixed payments being made on completion of the job. As such any increase in his efficiency would allow resultant increases in the number of jobs completed and potential profits. Marginal increases in profits may also have flowed to you. In summary the Worker provided a specialised vehicle and tools and was responsible for his/her own insurances. He/She was exposed to risk of variation in the reward he/she received as he/she was paid on the basis of installations completed rather than a on a fixed hourly rate. On the other hand, you lessened the risk for the Worker by providing warranties and covering expenses for items broken. Overall, we are satisfied that that the risk test in isolation is neutral in a determination of whether the relationship between you and the worker is one of employer and employee or 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 equipment required for his/her 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, equipment, maintenance costs and other expenses. Usually, they will have factored these costs in their overall fee or will seek separate payment for such expenses from the principal. In Stevens v. Brodribb at 36-37, the High Court observed that working on one's own account (as an independent contractor) often involves: The provision of him by his own place of work or of his equipment, the creation of him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion… | Detailed Reasoning - Application of the common law to your case:: You have advised that you did not supply any assets, equipment or tools to the Worker nor did you reimburse the worker for any costs. The worker has confirmed that he/she supplied a suitable commercial vehicle, tools and equipment and met his/her own fuel and running expenses. The Worker has made a significant investment in a specialised commercial vehicle and has met the fuel and associated running expenses. Any items provided by you in relation to completing the tasks are considered to be minimal. On this basis the capital and expenses test factor in isolation is considered more in favour that the relationship between you and the worker was one of principal and independent contractor. | Detailed Reasoning - Our conclusion regarding the common law definition of employee: We have considered the relationship between you and your Worker under 7 common law factors. On 5 of the factors we found that the tests were more in favour of the notion that the relationship between you and the Worker was one of principal and independent contractor. We considered the other 2 tests to be neutral in our determination. Consequently we consider on balance that the results under section 12(1) of the SGAA are that the relationship is one of principal and independent contractor. Our consideration was based on the content of a completed Worker questionnaire and a Principal questionnaire detailing the verbal terms of offer and acceptance. As the facts and evidence indicate that the Worker was not your employee under common law, we are required to consider the expanded definition of employee under subsection 12(3) of the SGAA. | Detailed Reasoning - Question 2: Was the Worker an employee of the Principal by virtue of subsection 12(3) of the SGAA? | Summary: The Worker was not an employee of the Principal by virtue of subsection 12(3) of the SGAA. | Detailed Reasoning - Expanded definition of employee for SGAA purposes: The expanded definition of employee within subsection 12(3) of the SGAA, which states: If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract. SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA. Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that: · the individual is remunerated (either wholly or principally) for their personal labour and skills; · the individual must perform the contractual work personally (there is no right to delegate); and · the individual is not paid to achieve a result. The contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA. | Detailed Reasoning - Wholly or principally for labour: In this context, the word "principally" assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil. A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour. The Worker was paid a fixed amount for each job. Based on the available facts and evidence, we consider that the worker was paid primarily for his/her own labour and skills. | Detailed Reasoning - The individual must perform the duties themselves: As discussed earlier, we consider that the facts and evidence (common law element of delegation) indicate that the worker did have the right to delegate work to others. | Detailed Reasoning - Not paid to achieve a result: As discussed earlier, we consider that the facts and evidence (common law element of results) indicate that the Worker was paid for a result. | Detailed Reasoning - Our conclusion regarding the expanded definition of employee: Accordingly, as the Worker does not satisfy all three components of the expanded definition under subsection 12(3) of the SGAA, he/she does 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 considers that with respect to work performed for the Principal, the Worker did 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 did not have an obligation to pay superannuation contributions for the benefit of the Worker under the SGAA.