Private ruling: Superannuation guarantee
Date of advice: 5 January 2016
Published: March 2016

Ruling: Q2: Was the Worker the Principal's employee by virtue of subsection 12(3) of the SGAA? Advice No. Refer to 'why we have made this decision'

Relevant facts and circumstances: This 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 . 1. The Principal employs a number of employees as well as subcontractors. The Principal operates in construction industry and requires subcontractors to perform extra work as required. 2. Several subcontractors have been working with the Principal for a number of years. The Workers pay their own insurance, have an ABN, contribute to their own superannuation and also work for other clients. 3. The Superannuation Guarantee: Status of the worker questionnaire Principal/Payer provides the following information: • The Worker was engaged in relation to work for residential house construction. • The Worker worked unsupervised off house plans. • Terms and conditions of the formation of the contract • The Worker previously worked for The Principal and subsequently left The Principal's employment to work independently. • The Worker contacted The Principal seeking work. • The Principal did not enter into a written contract with the Worker. • The Worker was responsible to complete the job as allocated. The Worker would send invoices as progress claims and provided their ABN. • There were no fixed hours of work. • The Principal agreed to a higher rate of pay to cover insurance, superannuation etc. • The Worker was able to renegotiate their rate of pay and terms and conditions on a project by project basis. • The Principal had the right to dismiss or terminate the services of the Worker if they did not comply with occupational health and safety requirements or if the standard of work was not acceptable. • There were other workers engaged on the same or similar basis. • Control test • The Principal provided the Worker with occupational health and safety training at the Worker's expense. • The Worker chose their own, working hours and days. • The Principal did not require the Worker to attend meetings within the Principal's business and/or with the Principal's clients. • The Worker was not entitled to paid breaks. • The Principal did not schedule the jobs or tasks to be carried out by the Worker. • The Principal did direct the Worker to the relevant site that the project was located on. • The Worker was not supervised by the Principal or their representative, however, an independent review was conducted. • The Worker could refuse to do a particular task and did so when they were occupied with other jobs and when the Worker had health issues. • If the Worker wanted to take time off they were not required to seek the Principal's permission or to provide prior notice. • Integration test • The Worker could provide their services to other individuals or business but to the Principal's knowledge they did not do so. • The Worker worked alone. • The Worker did not train, supervise or assess the work of any other employee or workers of the Principal's business. • The Worker was not provided with a name badge, clothing, business cards, stationery or any other item promoting the Principal's business name or logo. • The Worker did not have their own name badge, clothing, business cards, stationery or any other items promoting their business or services. • The Principal did not advertise the Principal's business on any of the assets/equipment/tools used by the Worker. • The Worker did not advertise their business on any of the assets/equipment/tools they used. • Results test • On some occasions the Worker would submit job quotes. On other occasions The Principal would advise the Worker of the amount they had allocated in relation to the work and the Worker would advise if they could undertake the works within this budget. • The Worker would submit invoices for payment. • The Worker's payment depended upon the completion of the job or task. If the job was not fully completed the Principal would only pay the amount in respect of the percentage of the job that had been completed. • The Principal would undertake checks to confirm that the Worker had completed their work before they paid the invoices. • The Worker was paid into a bank account in their name. • The Worker did not receive payment or reimbursement of any allowances, such as a car allowance, tool allowance, travel allowance, holiday pay, sick pay, training etc. • The Principal did not deduct any amount from the Worker for income tax, superannuation or any other deduction. • Delegation test • The Principal did not give specific instructions to the Worker as to whether they were to complete the work personally. • If the Worker was sick or went on holidays, the Worker arranged for their work to be done while they were absent. • The Worker could not organise for their work or tasks to be completed by an employee of The Principal's business. The Worker could arrange for another person engaged by them to complete their work or tasks however, that person was required to have completed the necessary occupational health and safety training provided by The Principal's business. • Risk test • The Worker was responsible for paying workers compensation and private accident insurance. The Principal was liable to pay public liability insurance. • The Worker was required to guarantee their work and where the workmanship was not up to standard they were required to do the necessary repairs. • If the Worker made a mistake or broke something when doing their work, they were required to correct the work in their own time, pay for the materials used to correct their mistake and to pay for any breakage. • Provision of tools and equipment and payment of business expenses • The Principal did not supply the Worker with any assets, equipment or tools to complete their work. • The Worker provided all tools for the job. • The Principal did not reimburse the Worker for the assets, equipment or tools. • The Principal provided the materials for the job. Both The Principal and the Worker arranged for the delivery of the materials. • The Worker was required to wear protective work gear as required under occupational health and safety regulations. • The Worker provided the protective work gear. 4. The Superannuation Guarantee: Status of the worker questionnaire Worker/Payee provides the following information: • The Worker was engaged by the Principal to complete work in relation to construction. • The Worker worked independently using construction plans. • Terms and conditions of the formation of the contract • The Worker contacted the Principal to enquire if there was any work available. • The Worker did not enter into a written agreement with the Principal. • The Worker was responsible to complete tasks which were invoiced upon completion of progress of the work. • The Worker was required to have an ABN and be registered GST. • The Worker set their hours of work. • The Worker was able to renegotiate their rate of pay or terms and conditions and any renegotiations were discussed at the beginning of each project. • The Principal had the right to dismiss or terminate the Worker's services if any breach of occupational health and safety policies occurred. • Control test • The Worker completed occupational health and safety training at their expense. • The Worker chose their own, hours of work required to complete the job. • The Worker was not required to attend meetings within the Principal's business and/or with the Principal's clients. • The Worker was not entitled to paid breaks. • The Principal did not schedule the job or task to be carried out by the Worker. • The Worker was directed to where the job or tasks were to be performed. The Worker was advised of the work site. • The Worker was not supervised however an independent check was completed. • The Worker could refuse to do a particular job or task. • If the Worker wanted to take time off they were not required to get the Principal's permission nor provide prior notice. • Integration test • During the period the Worker worked for the Principal they did not advertise their services. • The Worker could provide their services to other individuals or businesses independently of the Principal. • The Worker worked alone. • The Worker did not train, supervise or assess the work of any other employee or workers of the Principal's business. • The Worker was not required to wear or use a name badge, clothing, business cards, stationery or any other item promoting the Principal's name or logo. • The Worker did not have their own name badge, clothing, business cards, stationery or any other items promoting their business or services. • The Principal did not advertise their business on any of the assets, equipment or tool used by the Worker. • The Worker did not advertise their business on any of the assets, equipment or tools used by the Worker. • Results test • The Worker set the fees for the work or tasks to be done and each job was invoiced to the Principal. • The Worker was paid directly into their bank account. • The Worker did not receive payment or reimbursement for any allowances such as a car allowance, tool allowance, travel allowance, payment of expenses such as petrol, tools, materials and phone, holiday pay, sick pay, workers compensation, superannuation or training. • Delegation test • The Principal did not give the Worker specific instructions about whether they were to complete the work personally. • If the Worker was sick or went on holidays, the Worker arranged for the work to be done while they were away. • The Worker could not organise for their work or tasks to be completed by an employee of the Principal's business. However the Worker could organise for their work or tasks to be completed by another person engaged by them or any other person. • Risk test • The Worker was responsible for paying workers compensation insurance. • The Worker was not required to guarantee their work or any period of time. • If the Worker made a mistake or broke something whilst doing their work they were required to correct the work in their own time, pay for the materials used to correct the mistake and pay for any breakage. • Provision of tools and equipment and payment of business expenses • The Worker supplied their own, assets, equipment and tools. • The Worker was not reimbursed by the Principal for any of their assets, equipment or tools. • The Principal supplied the materials for the job. • Both the Worker and the Principal arranged delivery of materials to a job. • The Worker was required to wear protective work gear. • The Worker supplied the protective work year.

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

Reasons for decision: Summary: The facts and evidence suggest that the Worker was not the Principal's employee 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. Therefore the Principal did not have an obligation to pay superannuation contributions on behalf of the Worker. | 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 - Question 1: Was the Worker the Principal's common law employee as defined in subsection 12(1) of the SGAA for the relevant quarters? | 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 this case:: The Worker was previously employed by the Principal. The Worker left the employ of the Principal to work independently and at a later time, contacted the Principal to see if the Principal had any work available. The Worker was engaged to complete work in relation to construction and worked unsupervised off house plans. There was no written contract. The Worker was engaged on a project by project basis and was able to renegotiate their fees and the terms and conditions at the commencement of each project. The Principal did not schedule the jobs or tasks to be carried out by the Worker who set their own hours of work. The Principal did direct the Worker to the particular job site. The Worker submitted invoices for each project, had a trading name and was required to have an ABN and to be registered for GST. The Principal had the right to dismiss the Worker if they did not comply with occupational health and safety requirements or the standard of work was not acceptable. Overall, we are satisfied that the terms of engagement test in isolation is more in favour of the notion that the relationship between the Principal 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 this case:: The Principal provided the Worker with occupational health and safety training upon commencement which was at the Worker's expense. Whilst the Principal directed the relevant project site, the Worker chose their own working hours and days and was not entitled to paid breaks. The Worker worked independently using construction plans to complete the job or task. The Worker's work was not scheduled by the Principal and the Worker was not supervised by the Principal or their representative. An independent would review the work. The Worker was not required to attend meetings within the Principal's business or with the Principal's clients. The Worker could refuse to do a particular task and on occasion did so. The Principal had the right to terminate the Worker if any breach of occupational health and safety policies occurred or if the work was not of an acceptable standard. 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 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). | Detailed Reasoning - Application of the common law to this case: The Worker could provide their services as a qualified tradesperson to other individuals or businesses independently of the Principal. The Worker has an ABN and is registered for GST. The Worker worked alone and did not train, supervise or assess the work of any other employee or workers of the Principal. The Worker was not provided with any items promoting the Principal's business and did not have any items promoting their business or services. The Principal did not advertise their business on any assets, equipment or tools used by the Worker. The Worker did not advertise his business or services on any assets, equipment or tools used by the Worker. Overall, we are satisfied that the integration 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 - 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. 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 this case:: On some occasions the Worker would submit job quotes and on other occasions, the Principal would advise the Worker of the amount allocated for the work and the Worker would advise if they could undertake the work for this amount. The Worker would submit invoices for payment and the Principal would undertake checks to confirm that the Worker had completed the work before payment of the invoice. The Worker did not receive payment or reimbursement of any allowances and paid for the relevant occupational health and safety training. The Principal did not deduct any amount from the Worker for income tax, superannuation or any other deductions and the Worker was paid directly into a bank account in their name. In this case, the Worker was paid in relation to a specified result. 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 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 know, 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 this case:: There is no written contract between the Principal and the Worker and no specific instructions were given in relation to delegation. Whilst the Worker could not organise for their work or tasks to be completed by an employee of the Principal's business, they could organise for their work or tasks to be completed by another person engaged by them so long as they had completed the necessary occupational health and safety training. 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 this case:: The Worker was responsible for paying workers compensation and private accident insurance whilst the Principal was responsible for public liability insurance. Whilst the Principal indicates that the Worker was required to guarantee their workmanship, the Worker's information does not concur with this view. However, the Worker and Principal both agree that if the Worker made a mistake or broke something when doing their work, they were required to correct the work in their own time, pay for the materials used to correct the mistake and pay for any breakages. Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between you and the Worker 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… | Detailed Reasoning - Application of the common law to this case:: The Worker was required to supply their own tools and equipment for the job and the Principal did not reimburse the Worker for the tools and equipment. The Principal provided the materials for the job and delivery was arranged by both the Principal and the Worker. The Worker was required to wear protective work gear which was provided by the Worker. Overall, we are satisfied that the capital 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 - Our conclusion regarding the common law definition of employee: With respect to the relationship between the Principal and the Worker, the facts and evidence provided points to the conclusion that the Worker was not a common law employee of the Principal As the facts and evidence indicate that the Worker was not the Principal's 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 the Principal's employee 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. Based on the available facts and evidence, we consider that the Worker was not paid primarily for their own labour and skills. The Worker was paid to provide services to the Principal. Whilst the Worker was not required to provide materials for the job, the evidence supports that they had significant ongoing expenses in the provision of their own tools and equipment and the requirement to pay workers compensation and private accident insurance. | Detailed Reasoning - The individual must perform the duties themselves: As discussed earlier, we consider that the facts and evidence 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 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 any 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 the working relationship between the Principal and 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 for the period under review.

Was the Worker considered the Principal's common law employee as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA) for the relevant quarters?