Private ruling: Superannuation guarantee - expanded definition of employee
Date of advice: 23 August 2023
Published: 9 October 2023
Date scheme commenced: 1 July 2022

Ruling: Q1: Are the identified individual sole traders (the Workers), engaged by the Principal considered employees under the expanded definition of subsection 12(8) of the Superannuation Guarantee Administration Act 1992 (SGAA)? | A1: Yes

Relevant facts and circumstances: Background The commercial advertising industry works predominantly on a freelance basis. That is, 90% of workers are independent subcontractors who go from shoot to shoot, set to set. Jobs are high volume, quick turnaround where there can be a one-day shoot or a five-day shoot and the cast and crew vary from job to job, subject to availability. For any single job, the Principal employs a wide range of workers, from senior production managers to production assistants, photography assistants, digital operators, performing artists and models, stylists, camera operators, hair and make-up artists, videographers, set builders and so on. For a sub-contractor, to work for the Principal, the sub-contractor must invoice the Principal with a valid ABN. The Workers must also complete a subcontractor statement confirming that they will carry out all their legal tax obligations, workers compensation insurance and superannuation requirements, as required by law. The Principal identified the following Workers for the purpose of this administratively binding advice: Worker 1: Production manager/line producer on stills photographic and motion set The Principal contacts Worker 1 when they have a scheduled photo shoot. The Principal may require pre-production on shoot but more often than not the Principal just require Worker 1 on the shoot day to run the production. The Principal tells Worker 1 the date they require and Worker 1 lets the Principal know whether or not they are available for the shoot, based on their availability. If the Worker 1 is available the Principal will place a hold on the date and then will let Worker 1 know once the shoot is confirmed. Prior to the shoot day, the Principal will provide Worker 1 with a call sheet that includes the location details and call time for the shoot. The call time, duration of shoot and location always varies. Worker 1 is free to refuse a job or not take a booking if they choose not to and have no obligation to work for the Principal. Worker 1 oversees the production of the job, When on set, Worker 1 manages the schedule and ensures that the shoot runs on time. Worker 1 acts as the liaison between the client and the photographer. Worker 1 does not subcontract or employ others to carry out their work. Worker 1 does advertise their service commercially. Worker 1 is free to work for multiple clients. The location of the work is on the set of the location of the shoot. Worker 1 is registered for the Goods and Services Tax (GST) and GST applies to invoices Worker 1 issues to the Principal. Worker 2: Hair and Makeup Artist Worker 2 is engaged by the Principal to do the make-up and hair for the 'Talents' appearing in still or motion shots. Worker 2 advertises their services commercially via social media and is free to work for multiple clients. Worker 2 provides their own hair and makeup kit to perform the work they are engaged for. This kit is a business expense to Worker 2 and is not invoiced to or reimbursed by the Principal. Worker 2 is not required to wear a uniform. Worker 2 is paid a daily rate based on the hair and makeup artists fees plus overtime. Worker 2 invoices under their ABN. The location of Worker's 2 work is on set at the location of the shoot for which the Worker had been engaged. Worker 3: Digital Operator Worker 3 is contacted by the Principal when the Principal has a scheduled photo shoot. The Principal advises the date of the shoot and Worker 3 advises whether or not they are available. If they are available, the Principal will place a hold on the date and then let the Worker 3 know once the shoot has been confirmed. Prior to the day of the shoot, the Principal will provide a call sheet that includes the location details and call time for the shoot. The call time, duration of the shoot and the location always varies. Worker 3 can refuse a job or booking and has no obligation to work for the Principal. Worker 3 may subcontract or employ others to carry out their work. Worker 3 advertises their services commercially via social media.

Relevant legislative provisions: Superannuation Guarantee Administration Act 1992 subsection 12(8).

Reasons for decision: Summary: The facts and evidence support that the Workers are the Principal's employees for the purposes of the SGAA under the expanded definition as set out in subsection 12(8) of the SGAA. The Principal therefore have an obligation to pay superannuation guarantee to these Workers. The SGAA requires 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). Section 12(8) of the SGAA states: The following are employees for the purposes of this Act: (a) a person who is paid to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills is an employee of the person liable to make the payment; (b) a person who is paid to provide services in connection with an activity referred to in paragraph (a) is an employee of the person liable to make the payment; (c) a person who is paid to perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast is an employee of the person liable to make the payment. Workers such as makeup artists, creative product designer or digital operator and the like may fall within paragraph 12(8)(b) of the SGAA as they provide services in connection with an activity referred to in paragraph 12(8)(a) of the SGAA. The phrase, 'film, tape or disc or of any television or radio broadcast' referred to in paragraph 12(8)(c) is limited to being in relation to activities and workers listed in paragraph 12(8)(a) and 12(8)(b). That is a person paid to provide services in connection with one of the activities listed in paragraph 12(8)(a) where the content is to be conveyed to an audience not present at the performance. Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? (SGR 2005/1) states at paragraph 10 that: 10. The classification of a person as an employee for the purposes of the SGAA is not solely dependent upon the existence of a common law employment relationship. While the definition includes • .... • a person who is paid to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills (paragraph 12(8)(a)); • a person who is paid to provide services in connection with any activity referred to in paragraph 12(8)(a); • a person who is paid to perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast (paragraph 12(8)(c)); • .... Paragraph 61 of the SGR 2005/1 explains the expanded employee definition under subsection 12(2) to 12(11) as follows: 61. Although the term 'employee' has its ordinary meaning in the SGAA, subsections 12(2) to 12(11) list a number of further persons who are also treated as employees. These subsections deem persons who come within these subsections to be employees for the purposes of the SGAA, even if they are not common law employees and are clearly distinguishable from common law employees. This indicates the Workers listed above will be an employee of the Principal if the expanded definition of employee in subsection 12(8) of the SGAA applies. Paragraph 84 of the SGR 2005/1 states that one limitation of paragraph 12(8)(a) is that the active participation of the artist or sportsperson is required. Therefore, in order to meet the requirements of 12(8)(a) of the SGAA, the worker needs to actively participate in the performance or presentation of an activity. Paragraphs 86 and 87 of the SGR 2005/1 provide further guidance on the interpretation of subsection 12(8) of the SGAA: 86. The requirement of paragraph 12(8)(a) that the employees it covers must be active participants will, in some cases, be of little significance because the persons defined to be employees are extended further in paragraphs 12(8)(b) and 12(8)(c). These provide: (b) a person who is paid to provide services in connection with an activity referred to in paragraph (a) is an employee of the person liable to make the payment; and (c) a person who is paid to perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast is an employee of the person liable to make the payment. 87. These paragraphs are not limited in the way that subsection 12(3) is limited to contracts wholly or principally for a person's labour. However, it is necessary that the particular person is actually paid to provide services rather than for some other purpose. For example, a person engaged to write a script is performing services but one who sells existing scripts is not - they are merely selling property. Superannuation Guarantee Ruling SGR 2009/1 Superannuation guarantee: payments made to sportspersons (SGR 2009/1) deals with the application of subsection 12(8) to 'sportspersons and persons providing services in connection with sporting activities'. It specifically states that it does not deal specifically with artists, musicians or other performers who are also referred to in section 12(8) of the SGAA, however it still provides the ATO view on the general operation of subsection 12(8) of the SGAA. SGR 2009/1 explains at paragraph 9 that subsection 12(8) of the SGAA applies on a payment by payment basis and 'the character of the payments received are determinative of whether the person will be treated as an employee'. Tests in subsection 12(8) to be applied on a payment by payment basis 9. Subsection 12(8) applies on a payment by payment basis. The character of the payments received by a sportsperson are determinative of whether that person will be treated as an employee of the payer under subsection 12(8) for the purposes of the SGAA. In determining the character of the relevant payment, reference must be made to the substance of the arrangement, and not merely by reference to what the parties have agreed to label the payment. Each case must be examined on all the facts and circumstances. While SGR 2009/1 does not specifically deal with performers other than sportspersons paragraphs 12, 13 and 82 consider the meaning of the term 'in connection with' which has relevance in this case. Payments for services provided in connection with a sporting activity - paragraph 12(8)(b) 12. In the context in which the term appears, services are provided 'in connection with' a sporting activity if the services are directly referrable to the sporting activity such that the services can be said to be 'bound up' or 'involved in' that activity. The provision will also cover persons providing services required so that the sporting activity can be played. Such services may be provided before, during or after the sporting activity. Hence, paragraph 12(8)(b) will include persons such as umpires, referees and other sporting officials and technicians who are not already under a common law employment relationship with the relevant payer. The terms of paragraph 12(8)(b) will not be satisfied where services are provided at the same time as the sporting event but are provided for some other purpose, such as for example, advertising. In such circumstances, the direct causal link required by paragraph 12(8)(b) will not exist. Payments for provision of services in, or in connection with, any television or radio broadcast - paragraph 12(8)(c) 13. A sportsperson who is paid to appear on a television or radio broadcast will be an employee of the payer under paragraph 12(8)(c). The terms of paragraph 12(8)(c) do not require that the sportsperson participate or perform in such a broadcast using their physical or personal skills. The term 'in connection with' is read in a similarly narrow way as that under paragraph 12(8)(b) - that is the payment is made for services that are directly related to the making of any film, tape or disc or of any television or radio broadcast. .... 82. As can be seen from the statement above, the term 'in connection with' can be given a relatively wide meaning, depending on the context in which that term appears. However, having regard to the context in which the term appears in the SGAA, 'in connection with' requires that the services a person provides or performs must relate directly to the relevant activity in question. Services provided or performed before or after the relevant activity occurs may fall within the scope of paragraphs 12(8)(b) or 12(8)(c) as long as the services are 'bound up or involved in' that activity. That is, the use of the term 'in connection with' in paragraphs 12(8)(b) and 12(8)(c) is intended to cover persons providing the 'behind the scenes' services which enable the relevant activity to occur. For example, referees, umpires, team officials and event commentators who participate or provide services before, during and after the sporting activity are employees under subsection 12(8). Subsection 12(8) of the SGAA does not require all the usual indicators of common law employment or a contract for labour to apply to make a payer an employer for SGAA purposes. In this case, for example where a makeup artist/stylist was paid to provide a product in relation to one of the listed activities under paragraph 12(8)(a) of the SGAA and did not feature or perform in the product, but rather performed 'behind the scenes' tasks, the Worker would fall under paragraph 12(8)(b). Conversely, where a makeup artist/stylist was paid to feature or perform in the advertising activity they would fall under paragraph 12(8)(a). Consequently, Workers such as makeup artists, production managers, digital operators and the like who are providing services in connection with the advertising assignment under paragraph 12(8)(a) of the SGAA fall under paragraph 12(8)(b) and paragraph 12(8)(c) of the SGAA depending on the activity. Therefore, the identified Workers are considered to be employees of the Principal under paragraph 12(8)(b) and 12(8)(c) of the SGAA in relation to payments for services provided in connection with an activity described in paragraph 12(8)(a) of the SGAA.

This advice applies for the following period : Period ended 30 June 2023