Private ruling: Status of the Worker
Date of advice: 13 June 2018
Published: August 2018

Ruling: Q1: Are the Head Coach (‘HC’) and the Replacement Coach (‘RC’) considered common law employees of the Principal as defined by subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (‘SGAA’) for the period? | A1: No. Please refer to ‘why we have made this decision’. | Q2: Are the HC and the RC considered employees of the Principal by virtue of subsection 12(3) of the SGAA for the period? | A2: No. Please refer to ‘why we have made this decision’. | Q3: Is the Assistant Coach (‘AC’) considered a common law employee of the Principal as defined by subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (‘SGAA’) for the period? | A3: Yes. Please refer to ‘why we have made this decision’. | Q4: Is the AC considered an employee of the Principal by virtue of subsection 12(3) of the SGAA for the period? | A4: Yes. Please refer to ‘why we have made this decision’.

Relevant facts and circumstances: You requested administratively binding advice (‘ABA’) on behalf of the Principal, as to the superannuation guarantee (‘SG’) obligations of the Principal with respect to the HC, AC and any RC engaged by the Principal. You provided further information regarding the arrangement between the Principal and the HC, AC and any RC, including attached copies of monthly timesheets for the AC. Based on the information provided, we considered the following to be relevant facts: ● The Principal is a sporting club, formed as an incorporated association, which provides both coaching services and access to facilities/equipment to its members, in consideration for either term or annual membership fees. ● The Principal is affiliated with both the relevant state sporting association and a university through which it provides services using facilities owned by the university. ● The Principal entered into a verbal agreement with the HC to provide all professional coaching, training and development services to Principal members. ● In practice, the HC has performed (or been obligated to perform, pursuant to the verbal agreement) the following services for the Principal during the relevant period: ● Determine, on an annual basis, the Principal’s coaching requirements (e.g. the regularity and structure of coaching, technical development and fitness programs etc.) giving consideration to membership numbers and the age range, skill and experience of members. ● Plan the content of weekly group training lessons, giving consideration to upcoming state, national and international competitions to achieve an improvement in the Principal’s competitive results. ● Deliver, or arrange the delivery of, the required coaching services to Principal members. ● Develop and mentor other coaches to support the Principal’s training needs. ● Arrange activities to promote the Principal and increase membership from year to year. ● Provide consultancy services to the Principal’s Committee on strategic and operational matters. ● Advertise/promote the HC’s services to Principal members, with a view of entering into individual arrangements with certain members who require private one-on-one lessons. ● You have advised that while there are no formal Key Performance Indicators (‘KPIs’) or other measures which the HC has been required to meet over the course of their engagement, the HC is required to report to the Principal’s Committee each term, as well as annually, to outline what coaching activities and results have been delivered during that period. ● The engagement of the HC by the Principal was initially established through the state sporting association, however the engagement is considered to be an agreement between the HC and the Principal, rather than the HC and the state sporting association. ● The HC has performed the above services in consideration for the payment of a fee by the Principal on a monthly basis, to be made on receipt of a monthly invoice from the HC. ● The rate of payment for the monthly fee is determined by the HC at the beginning of the calendar year and presented to the Principal’s Committee for approval. If the Principal’s Committee forms the view that the Principal will not receive sufficient additional coaching services to support an increase in the monthly fee, any proposed increase will not be approved. The monthly fee has increased since the beginning of the arrangement. ● As per the services outlined above, the HC has control over determining both the coaching requirements (training days, number of sessions, session times, age categories / skill level of classes etc.) and how coaching is to be provided to the Principal’s members. The HC will advise a member of the Principal’s Committee of these requirements at the beginning of the calendar year, to enable to Committee to arrange the necessary access to facilities. ● The Committee will arrange access to facilities through the university and bookings will be made in accordance with the HC’s requirements. The HC is required to perform coaching services on the agreed training days as booked, regardless of the number of members who attend on any given day. ● The HC will determine the structure of each class and plan the training program to be provided for all members from week to week. The Principal does not have any oversight, involvement or influence over the content of weekly training sessions provided by the HC, AC or any RC. ● If the HC is not available to perform coaching services on any of the agreed training days, the HC is responsible for arranging a suitable RC to complete the session/s. You have advised that the HC has the right to refuse any work additional to those requirements previously outlined. ● If a member requires additional coaching services to be provided outside of the training sessions provided through the Principal, the HC will arrange all aspects of the coaching session directly with the member. ● The HC is registered as a sole trader operating under an ABN and has provided this ABN along with a business name on the invoices supplied to the Principal for services performed. You have advised that the HC also performs services in their capacity as a sole trader for schools, the state sporting association, the national federation, universities and members of the Principal through separate arrangements. ● The HC advertises their own services through their ABN and business name to Principal members as well as members of the general public. This advertising includes the placement of signs and banners with the HC’s business name on display around the training facilities used by the Principal, as well as at other events away from these facilities. ● The AC (or RC when acting in that capacity) is permitted to promote their services to members for private lessons on a verbal basis, however the AC does not advertise their services through any form of signage as this is not permitted by the HC. There is no other RC who is in a position to promote their services separately to the services performed through the Principal. ● The Principal does not require the HC, AC or any RC to wear a uniform or adhere to any particular dress standards, nor are any of the coaches required to wear a name tag when coaching services are being provided. ● The HC, AC and any RC are not required to use a particular email address in the name of the Principal for their email communications, whether this is with the Principal or any of the Principal members. The HC was issued with a ‘coach’ email address to receive Committee communications; however, you have advised that it is not compulsory for this email address to be used. ● The HC is responsible for managing and supervising all coaching services provided to the Principal members, whether these coaching services are provided personally or by the AC or a RC. All coaches, including the AC and any RC, are required to report to the HC. Neither the AC, nor any other potential RC, has any responsibilities or duties with the Principal other than to perform coaching duties at the direction of the HC. ● The HC appointed an AC to support the Principal’s coaching requirements, in particular for sessions where a greater level of supervision for the participants was required. The AC is under the HC’s control and direction. The AC is usually the RC provided when the HC is not available. ● You have advised that the hours of work, days of work and rate of payment for the AC were determined as per advice provided by the HC to the Principal’s Committee. The arrangement was that the Principal would pay the AC directly for their services, to be calculated at a set rate per hour. ● You have advised that there are a number of disputes between the HC and the Principal regarding payment arrangements, both for the HC personally and for when the AC or a RC is engaged to perform services. ● You have advised that during part of the period, the HC paid the RC (when acting in that capacity) directly for their services. ● You have advised that during part of the period, the Principal has paid the RC (when acting in that capacity) directly for their services. On these occasions, the Principal has sought to reduce the fee for “coaching hours" paid to the HC, however this arrangement is disputed by the HC. ● You have advised that the payments made by the Principal to the RC directly are made to ensure continuity of services when the HC has failed to make payments. The Principal does not consider that it has an obligation to make payments to the RC and has not entered into an agreement with the RC for payment in these circumstances. ● The rate of payment for the AC when acting as RC is the same hourly rate of payment as usual for the AC. ● The Principal has requested that the AC provide documentation showing the dates and times worked as an AC or RC over the course of a term. The sample of ‘monthly timesheets’ provided indicate the following: ● each of the timesheets state that they must be signed by the coach and the Treasurer (or an authorised delegate, as provided by the timesheet) and payment will be made within seven days of receipt of all approved timesheets for the month; ● each of the timesheets show the name of the coach (being the AC and/or RC) and are signed and dated by the coach, with a space for the Treasurer (or Delegate) to sign and date; ● each of the timesheets are in a format which shows the following: Day, Date, Start Time, Finish Time, Private Lessons (if any) and total hours; ● the timesheets are not in the format of a tax invoice and do not display an ABN or business name for the coach, nor do they display any payment information for the coach. ● You have advised that the AC has supplied an ABN when receiving payments from the Principal and that this ABN is registered for the AC as a sole trader. ● The HC is not required to obtain the Principal’s permission for periods of absence or for the use of a RC in their absence. The HC is responsible for ensuring that a suitably qualified RC is provided for the continuation of those coaching services. ● You have advised that all coaches are required to be affiliated with the national sporting federation and through this affiliation, they are provided with public liability and professional indemnity insurances. The coaches must pay a fee for their affiliation with the federation. ● You have advised that the Principal is required to be affiliated with the state sporting association and through this affiliation, the Principal is covered by public liability insurance and injury protection for members. However, the Principal does not provide workers compensation insurance to the coaches. ● The HC is required to supply the Principal with a monthly invoice outlining the services provided by the HC during that period. The sample of invoices provided indicates the following: ● each of the invoices display the name of the HC, their ABN, their business name describing the business as “specialists”, an email address for the business, phone number and a website address for the business; ● each of the invoices provide a bank account for payment in the individual name of the HC; ● four of the invoices are for ‘Head Coach’ services, with a quantity or hours of ‘1’ and a fixed unit price for the period; ● one of the invoices is for Head Coach services, with a quantity or hours of ‘1’ and a fixed unit price for the period; ● one of the invoices differentiates between Head Coach services and ‘Coaching Hours’, which are calculated with a unit price on an hourly basis, which amounts to a total amount for coaching hours; ● GST is not included on any of the invoices. ● You have advised that the invoice which differentiates between Head Coach services and ‘Coaching Hours’ is reflective of the basis of payment over a six month period, with the intention that the ‘Coaching Hours’ component would be variable based on the number of hours worked during that period. The HC has disputed that their services can be linked to the number of hours worked during the period. ● You have advised that the invoice which states a lower fixed unit price has been reduced due to the absence of the HC during the period, which resulted in the Principal making payments to the RC directly during that period. ● The Principal members are required to pay the Principal either a term or annual membership fee for access to training sessions, as well as the use of the Principal’s equipment and facilities during their membership period. Any fee for additional coaching services are negotiated and paid directly between the HC and the member. ● The Principal is responsible for providing tools and equipment for use by its members, which is provided in consideration for the membership fees paid by the members. ● You have advised that any equipment required for ‘coaching purposes’ is provided by the HC. The Principal does not offer any reimbursement of costs for items purchased by the HC for coaching services. ● The AC or RC (when acting in that capacity) provides their own coaching equipment, and any other RC will either provide their own equipment or borrow equipment from the HC. The Principal does not provide any coaching equipment to any of the coaches. ● The HC is able to transfer and use their coaching equipment at other locations for uses outside of the arrangement with the Principal. The HC may also choose to provide equipment for use by the AC or any RC. These costs are also not reimbursed by the Principal. ● You have advised that there is no payment made by the Principal to the HC, AC or any RC for any official duties undertaken at a sporting competition. Similarly, there are no payments made by the Principal to the state sporting association for the performance of any official duties by the HC, AC or any RC at a sporting competition.

Relevant legislative provisions: ● Superannuation Guarantee (Administration) Act 1992 Subsection 12(1) | ● Superannuation Guarantee (Administration) Act 1992 Subsection 12(3) | ● Superannuation Guarantee (Administration) Act 1992 Subsection 27(2)

Reasons for decision: Summary: 1. The facts and evidence suggest that the HC and the RC are not employees of the Principal for the purposes of the SGAA under both the common law test and the extended definition as set out in subsection 12(3) of the SGAA. The Principal does not have an obligation to pay superannuation contributions on behalf of the HC and the RC. 2. The facts and evidence suggest that the AC is an employee of the Principal for the purposes of the SGAA under both the common law test and the extended definition as set out in subsection 12(3) of the SGAA. The Principal does have an obligation to pay superannuation contributions on behalf of the AC. | Detailed Reasoning - Detailed reasoning: 3. 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). 4. 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. 5. 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. 6. 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. 7. 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: Are the HC and the RC considered common law employees of the Principal as defined by subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (‘SGAA’) for the period? | Detailed Reasoning - Common law employee: 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 - Terms and circumstances of the formation of the contract: 8. The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. We must determine the nature of the contract between the parties, consider whether the contract is written or verbal, and whether the terms and conditions are expressed or implied. These factors are important in characterising the relationship between the parties. 9. When considering the intentions of the parties in forming the contract, it must be determined what each party could reasonably conclude from the actions of the other. 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. | Detailed Reasoning - Control: 10. The extent to which the engaging entity 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 lays not so much in its actual exercise, but in the right of the employer to exercise it. 11. 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 - Does the worker operate on his or her own account or in the business of the payer?: 12. If the worker’s services are an integral and essential part of the business that engages them (under a contract of service), they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business (under a contract for services), they are an independent contractor. It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer. 13. 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. 14. Consideration may also be given to whether the worker could be expected to generate goodwill in their own right. ‘ Results’ contracts 15. 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. 16. 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. | Detailed Reasoning - Whether the work can be delegated or subcontracted: 17. 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. 18. 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. 19. 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. 20. Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). 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 - Risk: 21. Generally speaking, employers are vicariously liable for negligence and injury caused by their employees, whereas a principal will not be liable for negligence or injury caused by an independent contractor. 22. 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. 23. This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business. | Detailed Reasoning - Provision of tools and equipment and payment of business expenses: 24. A worker/payee who has been integrated as an employee into the business is more likely to be provided with the tools and equipment required to complete their 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. 25. 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 they will seek separate payment for such expenses from the principal. | Detailed Reasoning - In your case: 26. There is no evidence of any written agreement between the Principal and the HC or the RC. However, it is not in dispute that the Principal entered into a verbal agreement with the HC to provide all professional coaching, training and development services to Principal members. 27. Paragraph 28 of SGR 2005/1 provides that it is the true substance of the relationship, and not simply a label or characterisation, which will determine the nature of the arrangement. In the absence of any written agreement, the true substance of the relationship may be inferred from the actions of the parties during the relevant period, provided those facts indicate a mutual agreement between the parties. 28. As outlined below, the actions of the Principal, HC and the RC during the period are indicative of a mutual agreement between the parties that the HC is engaged as an independent contractor by the Principal. 29. The commercial dispute between the Principal and the HC during the period is evidence of a dispute regarding payment, and is not considered evidence of a dispute which alters the existence of a mutual agreement between the parties as to the true substance of the relationship. 30. As per the services outlined in the relevant facts, the HC has control over determining both the coaching requirements (training days, number of sessions, session times, age categories / skill level of classes etc.) and how coaching is to be provided to the Principal’s members. 31. The HC will advise a member of the Principal’s Committee of these requirements at the beginning of the calendar year, to enable the Committee to arrange the necessary access to facilities and any other expenditure. 32. The Committee will arrange access to facilities through the university and bookings will be made in accordance with the HC’s requirements. The HC is required to perform coaching services on the agreed training days as booked, regardless of the number of members who attend on any given day. 33. The HC will determine the structure of each class and plan the training program to be provided for all members from week to week. The Principal does not have any oversight, involvement or influence over the content of weekly training sessions provided by the HC, AC or any RC. 34. If the HC is not available to perform coaching services on any of the agreed training days, the HC is responsible for arranging a suitable RC to complete the session/s. You have advised that the HC has the right to refuse any work additional to those requirements previously outlined. 35. There is no evidence that either the HC or the RC have performed work additional to those requirements as outlined in the relevant facts. 36. You have advised that while there are no formal KPIs or other measures which the HC has been required to meet over the course of their engagement, the HC is required to report to the Principal’s Committee each term, as well as annually, to outline what coaching activities and results have been delivered during that period. 37. As outlined in paragraph 33 of SGR 2005/1, a common law employee is told not only what work is to be done, but how and where it is to be done. While day-to-day control is relevant, the importance of control lies not so much in its actual exercise, but in the ultimate right of the employer to exercise this control ( Stevens v Brodribb ). 38. The facts indicate that short of discontinuing the arrangement between the Principal and the HC, which is carried on through the supply of monthly invoices, there is no ultimate right of control exercised by the Principal over the HC. 39. The facts also indicate that the HC is essentially self-directed in determining their actions and the manner in which they perform the services, and the HC reports on the outcome of these services to the Principal’s Committee as outlined in their duties. 40. You have advised that all coaches, including the AC and any RC, are required to report to the HC. Neither the AC, nor any other potential RC, has any responsibilities or duties with the Principal other than to perform coaching duties at the direction of the HC. 41. The actual control exercised by the HC extends to the engagement of the RC to perform services in their absence. The facts indicate that any RC is directed by the HC as to how services should be performed, and the fact that the RC was not paid by the Principal during the period further indicates that no ultimate right to control the RC is held by the Principal. 42. As per paragraph 41 of SGR 2005/1, it is necessary to consider the distinction between a worker carrying on a trade or business of their own, and a worker operating in the business of the payer. 43. The facts indicate that the HC is registered as sole trader operating under an ABN and has provided this ABN along with a business name on the invoices supplied to the Principal for services performed. 44. You have advised that the HC also performs services in their capacity as a sole trader for schools, the state sporting association, the national federation, universities and members of the Principal through separate arrangements. 45. These factors indicate, prima facie, that the HC is operating in a business of their own, with that business being the provision of coaching services and other specialist activities (including consultancies) consistent with the scope of their business. 46. This can be distinguished from the business of the Principal, which is to provide access to coaching services and facilities/equipment to its members, in consideration for either term or annual membership fees. 47. The commercial arrangement between the HC and the Principal merely serves to enhance the opportunity of the HC to provide services, in the usual operation of their own business, to a pool of individuals connected as paying members of the Principal’s business. 48. This distinction is highlighted by the fact that the HC advertises their own services through their ABN and business name to Principal members, as well as members of the general public. This advertising includes the placement of signs and banners with the HC’s business name on display around the training facilities used by the Principal, as well as at other events away from these facilities. 49. The use of a business name, the advertising of this business name and promotion of services to Principal members and the general public is not consistent with the notion that the HC is operating within the business of the Principal. Rather, it is consistent with the notion that the HC’s business is enhanced by their access to a wider market of individuals by virtue of them performing services at this location. 50. Paragraph 43 of SGR 2005/1 states the following with respect to ‘results’ contracts and whether work can be delegated or subcontracted: The phrase 'the production of a given result' means the performance of a service by one party for another where the first-mentioned party is free to employ their own means (such as third party labour, plant and equipment) to achieve the contractually specified outcome. Satisfactory completion of the specified services is the 'result' for which the parties have bargained. 51. It follows that whether the arrangement between the Principal and the HC is a contract for ‘the production of a given result’ is dependent on whether the HC is able to ‘delegate’ those services to the AC or a RC, or to utilise their own plant and equipment, in order to achieve that result. 52. Based on the information provided, the HC and subsequently the RC will utilise their own plant and equipment, or equipment borrowed from the HC, in providing coaching services. This indicates that the HC and RC are free to employ their own means to achieve a specified result, being the provision of coaching services. 53. Furthermore, you have advised that during the period, the HC paid the RC (when acting in that capacity) directly for their services. The RC subsequently performed services at the direction of the HC. This delegation of duties by the HC is a clear indicator that the HC was free to employ their own means in order to achieve a specified result, being the overall provision of coaching services. 54. Paragraph 44 of SGR 2005/1 states that “in contracts to produce a result, payment is often made for a negotiated contract price, as opposed to an hourly rate”. Based on the information provided, payment is made on a monthly basis for a price determined by the HC at the beginning of the calendar year, and presented to the Principal’s Committee for approval. 55. Based on the information provided, the majority of invoices are for ‘Head Coach’ services at a fixed monthly rate, which is not referrable to hours worked. Rather, the payment of a fixed price by the Principal is in consideration for the full scope of services provided by the HC in accordance with the outline of duties. 56. As discussed above, the commercial dispute between the Principal and the HC during part of the period is evidence of a dispute regarding payment, and is not considered evidence of a change in the arrangement whereby the HC was no longer free to employ their own means in order to achieve a specified result. 57. It follows that the invoice/s which differentiate between ‘Head Coach’ services and ‘Coaching Hours’ during part of this period will not be considered evidence of a change in the nature of the arrangement. As per paragraph 45 of SGR 2005/1, having regard for the true essence of the contract, the manner in which payment is structured will not of itself exclude genuine results based contracts. 58. Paragraph 49 of SGR 2005/1 states the following with respect to the power to delegate work in a contract for services: Under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). 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. In these circumstances, the contractor is the party responsible for remunerating the replacement worker. 59. As per above, you have advised that during the period, the HC paid the RC (when acting in that capacity) directly for their services. The RC subsequently performed services at the direction of the HC. This is a clear indicator that the HC has the right to delegate work as an independent contractor. 60. You have advised that all coaches are required to be affiliated with the national sporting federation and through this affiliation, they are provided with public liability and professional indemnity insurances. The coaches must pay a fee for their affiliation with the federation. 61. The Principal does not provide workers compensation insurance to the coaches. These factors provide some indication that the HC and the RC bear the primary commercial risk in relation to the services they provide. 62. The commercial risk held by the Principal with respect to the services provided by the HC or the RC is considered to be a relatively neutral factor, as it must be weighed against the commercial risk held by the HC in the operation of their own business. 63. The commercial risk that a member of the Principal may not renew their membership, if they are unsatisfied with the quality of coaching services provided, is also borne by the HC because the HC also promotes the services of their own business at this location. 64. The Principal is responsible for providing tools and equipment for use by its members, which is provided in consideration for the membership fees paid by the members. 65. However, any equipment required for ‘coaching purposes’ is provided by the HC. The Principal does not offer any reimbursement of costs for items purchased by the HC for coaching services. The RC either provides their own coaching equipment or borrows equipment from the HC. These costs are also not reimbursed by the Principal. 66. The HC is able to transfer and use their coaching equipment at other locations for uses outside of the arrangement with the Principal. These factors indicate that the HC and the RC are engaged as independent contractors. 67. It is also relevant that the HC and the RC are effectively unable to provide services for the Principal without access to, and use of, the Principal’s equipment and facilities. However, per ATO Interpretive Decision 2011/87 Superannuation Guarantee Charge: employment status of a medical practitioner operating from a medical clinic (‘ATO ID 2011/87’), this may not be considered a significant factor in the totality of the relationship. 68. ATO ID 2011/87 considered a scenario where a medical clinic provided a practitioner with furnished rooms in which to treat clients, necessary equipment and materials, and receptionist services. These factors were not considered significant enough, in the totality of the relationship, to alter the nature of the relationship to that of employer and employee. 69. Similarly, while it is the Principal that is primarily responsible for replacing damaged equipment or purchasing new equipment, where that equipment is used by members, this commercial risk is not considered significant enough to alter the nature of the relationship. 70. With respect to the relationship between the Principal and the HC, the totality of the relationship between the parties indicates that the relationship is that of principal and independent contractor. | Detailed Reasoning - No legal relationship between the Principal and the RC: 71. It is necessary to determine whether a legal relationship exists between the Principal and any RC during the relevant period. Superannuation Guarantee Ruling SGR 2005/2 Superannuation guarantee: work arranged by intermediaries (SGR 2005/2) outlines the relevant considerations in determining whether a legal relationship exists between the parties. 72. Paragraph 36 of SGR 2005/2 provides that an agreement supported by consideration is an essential element in determining whether a legal relationship exists between two parties. You have advised that during the period, the HC paid the RC (when acting in that capacity) directly for their services. 73. It follows that there is no legal relationship between the Principal and the RC during the period. In the absence of a legal relationship between the Principal and the RC, it cannot be considered that there is an employee/employer relationship between the parties in accordance with either subsections 12(1) or 12(3) of the SGAA. 74. Based on the information provided, we are unable to provide advice on whether the commercial dispute between the Principal and the HC during part of the period, and subsequent impact on the basis of payment to the RC, has any impact on the existence of a legal relationship between the Principal and the RC during that period. | Detailed Reasoning - Our conclusion regarding the common law definition of employee: 75. With respect to the relationship between the Principal and the HC and the RC, the facts and evidence provided point to the conclusion that the HC and the RC are not common law employees of the Principal. 76. As the facts and evidence indicate that the HC and the RC are not employees of the Principal under common law, we are required to consider the extended definition in subsection 12(3) of the SGAA. | Detailed Reasoning - Question 2: Are the HC and the RC considered employees of the Principal by virtue of subsection 12(3) of the SGAA for the period? | Detailed Reasoning - Expanded definition of employee for SGAA purposes: 77. The expanded definition of employee within subsection 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. 78. SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA. 79. 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: 80. 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. 81. 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. 82. Based on the available facts and evidence, we consider that the HC was paid primarily for their own labour and skills as a coach. 83. As per above, in the absence of a legal relationship between the Principal and the RC, it cannot be considered that there is an employee/employer relationship between the parties in accordance with subsection 12(3) of the SGAA. | Detailed Reasoning - The individual must perform the duties themselves: 84. As discussed earlier, the facts indicate that the HC has the right to delegate work to the AC or the RC, and is not required to perform coaching duties personally. 85. As per above, in the absence of a legal relationship between the Principal and the RC, it cannot be considered that there is an employee/employer relationship between the parties in accordance with subsection 12(3) of the SGAA. | Detailed Reasoning - Not paid to achieve a result: 86. As discussed earlier, the facts indicate that the HC is engaged for the ‘production of a given result’. 87. As per above, in the absence of a legal relationship between the Principal and the RC, it cannot be considered that there is an employee/employer relationship between the parties in accordance with subsection 12(3) of the SGAA. | Detailed Reasoning - Our conclusion regarding the expanded definition of employee: 88. Accordingly, the facts and evidence indicate that the HC and the RC do not meet the extended definition of employee as set out under subsection 12(3) of the SGAA. | Detailed Reasoning - Question 3: Is the AC considered a common law employee of the Principal as defined by subsection 12(1) of the Superannuation Guarantee (Administration) Act 1992 (‘SGAA’) for the period? | Detailed Reasoning - In your case: 89. You have advised that the HC appointed an AC to support the Principal’s coaching requirements, in particular for sessions where a greater level of supervision for the participants was required. 90. There is no evidence of a written agreement between the Principal and the AC for the provision of coaching services. This is contrary to the sample of ‘monthly timesheets’ which state that an agreement must be signed before the commencement of services. 91. You have advised that the AC is under the HC’s control and direction. The AC has also usually been the RC provided when the HC is not available. 92. You have advised that the hours of work, days of work and rate of payment for the AC were determined as per advice provided by the HC to the Principal’s Committee. The arrangement was that the Principal would pay the AC directly for their services, to be calculated at a set rate per hour. 93. The Principal has requested that the AC provide documentation showing the dates and times worked as an AC or RC over the course of a term. The sample of ‘monthly timesheets’ provided indicate the following: ● each of the timesheets state that they must be signed by the coach and the Treasurer (or an authorised delegate, as provided by the timesheet) and payment will be made within seven days of receipt of all approved timesheets for the month; ● each of the timesheets show the name of the coach (being the AC and/or RC) and are signed and dated by the coach, with a space for the Treasurer (or Delegate) to sign and date; ● each of the timesheets are in a format which shows the following: Day, Date, Start Time, Finish Time, Private Lessons (if any) and total hours; ● the timesheets are not in the format of a tax invoice and do not display an ABN or business name for the coach, nor do they display any payment information for the coach. 94. You have advised that the AC has supplied an ABN when receiving payments from the Principal and that this ABN is registered for the AC as a sole trader. 95. In accordance with paragraph 108 of SGR 2005/1, the fact that the AC has an ABN does not prevent the HC from being engaged contemporaneously as an employee by the Principal. 96. As outlined in paragraph 33 of SGR 2005/1, a common law employee is told not only what work is to be done, but how and where it is to be done. While day-to-day control is relevant, the importance of control lies not so much in its actual exercise, but in the ultimate right of the employer to exercise this control ( Stevens v Brodribb ). 97. The ultimate right of the Principal to exercise control over the AC, as opposed to the day-to-day control exercised by the HC, is evidenced by the requirement of the AC to complete the monthly timesheets in order to receive payment. 98. For example, each of the timesheets state that they must be signed by the coach and the Treasurer (or an authorised delegate, as provided by the timesheet) and payment will be made within seven days of receipt of all approved timesheets for the month. 99. The timesheets also state that the AC must ensure that all timesheets are authorised and submitted at the conclusion of each month, or payments may be delayed. Contrary to the invoices supplied by the HC, the timesheets do not display an ABN or business name for the AC. 100. These factors indicate that the Principal does exercise the ultimate right of control over the AC, thus indicating that the nature of the relationship is as between an employer and employee. 101. Paragraph 44 of SGR 2005/1 states that “in contracts to produce a result, payment is often made for a negotiated contract price, as opposed to an hourly rate”. The facts indicate that payment to the AC is based on an hourly rate, which is generally not indicative of a contract for a result. 102. Additionally, in accordance with paragraph 43 of SGR 2005/1, the extent to which the AC is free to employ their own means to achieve the outcome of performing services on an hourly basis is limited to any equipment the AC supplies themselves. 103. The facts indicate that the AC does not have a genuine right to delegate their duties, as they are not permitted to delegate any of their duties to another party unless at the direction or with the permission of the HC. 104. You have advised that all coaches are required to be affiliated with the national sporting federation and through this affiliation, they are provided with public liability and professional indemnity insurances. The coaches must pay a fee for their affiliation with the federation. 105. The Principal does not provide workers compensation insurance to the coaches. These factors provide some indication that the AC bears the primary commercial risk in relation to the services they provide. 106. However, the commercial risk that a member of the Principal may not renew their membership, if they are unsatisfied with the quality of coaching services provided, is not borne as heavily by the AC as they do not conduct the same type of activities (i.e. advertising) as the HC does in promoting the services of their own business at this location. 107. With respect to the relationship between the Principal and the AC, the totality of the relationship between the parties indicates that the relationship is that of employer and employee. | Detailed Reasoning - Our conclusion regarding the common law definition of employee: 108. With respect to the relationship between the Principal and the AC, the facts and evidence provided point to the conclusion that the AC is a common law employee of the Principal. 109. As the facts and evidence indicate that the AC is an employee of the Principal under common law, we are not required to consider the extended definition in subsection 12(3) of the SGAA. However, in order to leave no doubt as to the Commissioner’s view of this matter, the extended definition has been considered and is discussed below. | Detailed Reasoning - Question 4: Is the AC considered an employee of the Principal by virtue of subsection 12(3) of the SGAA for the period? | Detailed Reasoning - Expanded definition of employee for SGAA purposes: 110. The expanded definition of employee within subsection 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. 111. SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA. 112. 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: 113. 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. 114. 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. 115. Based on the available facts and evidence, we consider that the AC was paid primarily for their own labour and skills as a coach. | Detailed Reasoning - The individual must perform the duties themselves: 116. As discussed earlier, the facts indicate that the AC does not have the right to delegate their duties, and there is no evidence that such delegation has occurred. The facts indicate that the AC has been engaged to perform their coaching duties personally, as directed by the HC. | Detailed Reasoning - Not paid to achieve a result: 117. As discussed earlier, it cannot be considered that the AC is engaged for the production of a given result. | Detailed Reasoning - Our conclusion regarding the expanded definition of employee: 118. Accordingly, the facts and evidence indicate that the AC does meet the extended definition of an employee as set out under subsection 12(3) of the SGAA. | Detailed Reasoning - Conclusion – overall: 119. Upon considering of all the available facts and evidence, the Commissioner is satisfied that with respect to work performed for the Principal, the HC and the RC are not employees for the purposes of the SGAA under both the common law test and the extended definition as set out in subsection 12(3) of the SGAA. 120. Accordingly, the Principal does not have an obligation to pay superannuation contributions for the benefit of the HC and the RC under the SGAA. 121. However, the facts and evidence suggest that the AC is an employee of the Principal for the purposes of the SGAA under both the common law test and the extended definition as set out in subsection 12(3) of the SGAA. 122. The Principal does have an obligation to pay superannuation contributions on behalf of the AC. 123. Note that the Principal is not required to pay superannuation contributions to a worker who is paid less than $450 by way of salary or wages in a calendar month, as per subsection 27(2) of the SGAA.

This advice applies for the following periods: ● Year ended 30 June 20xx