Private ruling: Superannuation guarantee
Published: March 2013

Ruling: Q2: Are the workers your employees by virtue of subsection 12(3) of the SGAA? Advice No. Refer to 'Reasons for decision' The arrangement commenced: After 1 July 2012

Relevant facts and circumstances: Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice. The Principal applied for a private ruling to determine whether the services provided by the workers, provided to the Principal, are considered to be performed as employees or contractors and their obligations in respect of superannuation guarantee in respect of the workers. Exporters hire you to provide a service in relation to a product for export and provide certificates based on the compilation of all information. You use a number of workers to allow you to provide these services to the exporters. The workers are engaged to perform the work on-site Most, if not all, of the workers perform services in several different areas to ensure they are working all year round. Some also work in different professions or conduct other businesses. A Contractor Agreement (the Agreement) has been drafted in order to formalise the relationship between you and the workers. It is intended that it be implemented in all agreements going forward following the receipt of the advice. Your application and the Agreement provide the following information: Terms and the circumstances of the formation of the contract The Principal engages the workers through word of mouth, from the workers advertising their services or as a result of a worker directly tendering for the provision of the services. The Principal intends to implement an Agreement with the workers to formalise the relationship between the parties. A worker is paid a fee on a per unit basis which is agreed between the parties from time to time determined by reference to the shipments per month. In setting the fee, the parties acknowledge that it has been taken into consideration that the worker is required to supply his/her own equipment and tools and that the market price of the equipment and tools is nominal. Either party can terminate the Agreement at any time by providing the other party with X months written notice of termination. The Principal may terminate the Agreement at any time subject to giving Y months' notice if, in the reasonable opinion of the Principal, that the contractor is in breach of the Agreement, including where the results have not been achieved, or with 14 days notice if the worker fails to remedy a breach. It is intended that a number of workers will be engaged on the same or similar basis. It is not intended that any of the workers will be engaged as employees. Control test - the lawful right to command The terms of the Agreement provide that an worker warrants that he/she has the necessary skills, qualifications and experience to undertake the tasks required. The worker is provided with guidelines that are in line with industry standards to ensure the service provided is suitable for the clients of the Principal. The hours of work are not set. When the Principal receives instructions in relation to a job from a client they will contact a worker in the area and offer the work to them. Once an agreement is reached between the Principal and the worker, all control in relation to the job is handed over to the worker. The worker will contact the client to arrange a time to complete the tasks. The worker is paid a fee on a per unit basis that is set out in the Agreement. The Agreement provides that the services are to be performed without the supervision of the Principal who has no entitlement to specify how the worker is to perform the services. The Agreement further provides that the worker retains absolute discretion and flexibility as to how the services are to be performed, including when the services are to be performed. The worker could refuse to do a particular job and when this occurs the Principal offers the job to another worker. Integration test The worker is able to provide their services to other individuals or businesses. The worker is free to continue to advertise his/her services in the press or other lawful means during the operation of the Agreement and thereafter, without reference to the Principal. The worker is required to have an ABN and to be registered for GST and must remain registered for the duration of the Agreement. The worker works independently to the Principal's business. There is no evidence in the application or Agreement that the worker would train, supervise or assess the work of other employees/workers of the Principal's business. The workers are not required to wear any uniform associating them with the Principal's business. The Principal requires that the workers comply with safety policies of the job site he/she attends and must wear a minimum of eye and ear protection and appropriate footwear. Result test The worker submits invoices on the completion of the job. The fee paid to the worker is on a per unit basis that is set out in the Agreement. The fee is agreed between the parties from time to time determined by reference to the number of shipments per month. The worker's payments are dependent on the completion of the job. Upon completion of the job the worker will provide a report to the Principal. The worker is paid within fourteen days of the Principal receiving the invoice from the worker. The invoice must include the worker's ABN. The worker is not entitled to receive payment or reimbursement for the purchase or maintenance of equipment and tools necessary to complete the job. The worker does not receive payment for holiday pay, sick pay, and long service leave or workers compensation. The Principal does not deduct any amounts from the worker for income tax or superannuation. Delegation test The Agreement provides that the worker is free to employ his/her own staff to assist in providing the services. A worker may delegate any of the services to a third party through a sub-contract arrangement consistent with the terms of the Agreement but may not assign the Agreement. Risk test The worker is responsible to provide personal professional liability insurance to cover any negligence of the worker (or the worker's employees or sub-contractors) and the minimum level of insurance is specified. Under the Agreement, the worker is required to indemnify the Principal from any claim against the Principal arising out of or in connection with: · any breach of the Agreement by the worker · any default, or any negligent or wilful act or omission by the worker. The worker is liable to the Principal for the cost of rectifying any defective services supplied by, or through him/her. The worker must, at his/her cost, rectify any fault, defective or negligently performed services. Where rectification is not possible, the Principal has the right to pursue the worker for the relevant component of the damages sustained in respect of or arising out of the faulty, defective or negligent services performed. Provision of tools and equipment The Agreement sets out a schedule of equipment and tools that the worker is required to provide to enable them to perform the services. The schedule includes specific equipment related to the provision of the services and also includes a vehicle for transport to job sites. The worker is required to purchase, repair and replace all equipment and tools required to perform the services. The cost of purchasing, repairing or replacing the equipment and tools is not recoverable from the Principal. The worker is required to wear as a minimum appropriate eye and ear protection and appropriate footwear which are to be provided by the worker.

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

Reasons for decision: Summary: The workers, when they engage with the Principal under the "Contractor Agreement", are not considered to be common law employees as defined in subsection 12(1) of the SGAA, or by virtue of subsection 12(3) of the SGAA, for the period 1 July 2012 to 30 June 2016 inclusively. | 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 SGC. While the term 'employee' which is defined in section 12 of the SGAA, includes common law employees, it also extends to include workers who are engaged under a contract wholly or principally for their labour. This employment relationship is often referred to as a 'contract of service'. This relationship is distinguished in Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? (SGR 2005/1) from a 'contract for service which is typically a contractor and principal type of relationship and does not attract an SGC liability. Therefore, it is necessary to consider not only whether there is a common law relationship of employer/employee between the parties, but also, if the common law test is not met or is inconclusive, whether the expanded definition of 'employee' in subsection 12(3) of the SGAA applies. If a worker is not an employee under subsections 12(1) or 12(3) of the SGAA, their status is described as an independent contractor and there is no SG obligation. The task of defining the characteristics of the contract of service - the employment relationship - has been the subject of much judicial consideration. As a result, some general tests have been developed by the courts to assist in the determination of the nature of the relationship. However, defining the contractual relationship between the employer and employee can be difficult and will depend on the facts of each case. Accordingly it is necessary to determine the true nature of the whole relationship between the principal and the workers, as to whether there was a common law employer and employee relationship, or whether the workers meet the expanded definition of employee under subsection 12(3) of the SGAA. | Summary: The workers, when they engage with the Principal under the "Contractor Agreement", are not considered to be common law employees as defined in subsection 12(1) of the SGAA, for the period 1 July 2012 to 30 June 2016 inclusively. | Detailed Reasoning - Detailed reasoning: The relationship between an employer and employee is a contractual one. It is often referred to as a contract of service. Such a relationship is typically contrasted with the independent contractor relationship that is referred to as a contract for services. An independent contractor typically contracts to produce the contracted result in return for an agreed payment, whereas an employee contracts to provide their labour (typically to enable the employer to achieve a result). The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts. As a result, a substantial and well-established body of case law has developed on the issue. Consideration should be given to the various indicators identified in judicial decisions. No list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or independent contractor. In deciding whether an individual is a common law employee, there are a number of common law factors to consider. The common law factors we have considered are discussed below. | Detailed Reasoning - 1. Terms of engagement: The fundamental task with respect to the terms of engagement test is to determine the nature of the contract between the parties. For this test, we must determine the nature of the contract between the parties. We will consider whether the contract is written or verbal and whether the terms and conditions are express or implied. These factors are important in characterising the relationship between the parties. It might be argued that the parties' intention in forming a contract is not subjective, but an objective one; that is, the task is not to discover the intention of the parties involved but to decide what each could reasonably conclude from the actions of the other. In the observation made by Isaacs J in Curtis v. The Perth and Fremantle Bottle Exchange Co Ltd (1914) 18 CLR 17: Where parties enter into a bargain with one another whereby certain rights and obligations are created, they cannot by a mere consensual label alter the inherent character of the relations they have actually called into existence. Many cases have arisen where Courts have disregarded such labels, because in law they were wrong, and have looked beneath them to the real substance. Therefore, simply defining someone as a contractor does not necessarily lead to the conclusion that the individual is providing services as part of an operation of their own independent business. In Hollis v. Vabu Pty Ltd (2001) 207 CLR 21 ( Hollis v. Vabu Pty Ltd ) it was noted that although no payments of annual leave or sick leave were given, and no superannuation deductions were made by Vabu in respect of the bicycle couriers, the relationship between the parties was found not merely from these contractual terms. The system which was operated under and the work practices imposed by Vabu went to establishing 'the totality of the relationship' between the parties and it is this which is to be considered | Detailed Reasoning - Application of the common law to your case:: In your case, product exporters hire you to inspect their product during packing, test the samples for quality and provide certificates based on the compilation of all information. To enable you to provide these services to your clients, you engage the workers to inspect your client's shipments. The workers are identified by word or mouth, from the workers advertising their services or as a result of a tender process. Due to the nature of the industry, the workers who are qualified to undertake this work become well known to the Principal and other like businesses. When a client gives you notice that they have a shipment ready in a particular area, you will identify a worker in this area and offer them the job. When a worker accepts a job, you will enter into an Agreement with the worker for them to undertake the job in a particular area at a particular time. The workers are paid on a per unit basis which is agreed between the parties from time to time and is determined by reference to the shipments per month. Upon completion of the job, or at the end of the month, the worker provides an invoice to the Principal based on the terms specified in the Agreement quoting their ABN. Either party can terminate the Agreement at any time by providing the party with three months notice. In the event of a breach of the Agreement, the Principal may terminate the agreement at any time subject to providing one months notice. In the event that there is a breach of the agreement and the result is not achieved, the Principal can terminate the Agreement subject to providing 14 days notice. There is no provision in the Agreement for the Principal to provide annual leave, sick leave, and long service leave or workers compensation. Based on the information provided, we are satisfied that the terms of engagement test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractor/s. | 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 SGR 2005/1 provide that while control is important, it is not the sole indicator of whether or not a relationship is one of employment. The approach of the Courts has been to regard it as one of a number of indicia which must be considered in determination of that question. Even though the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still an important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v. Brodribb ((1986) 160 CLR 16 at 36) ( Stevens v. Brodribb) , where they state: In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. | Detailed Reasoning - Application of the common law to your case:: Upon receiving advice from a client that they have a shipment ready in a particular area, the Principal will identify a worker in the area and will offer them the job. When a worker accepts a job, the Principal will enter into an Agreement with a worker. The worker is provided with guidelines by the Principal that are in line with industry standards to ensure the service provided is suitable for the clients of the Principal. The worker is not supervised by the Principal. The Principal has no entitlement under the Agreement to stipulate to the worker how he/she is to perform the job. The worker retains absolute discretion and flexibility as to how the job is to be performed, including when the job is to be performed. The worker will liaise with the product packer to arrange a time to attend to conduct the inspection. The worker is obliged to maintain contact with the packer to ensure that they do not miss the packing inspection. Upon completion of the job, the worker will forward samples of the product inspected to the Principal's laboratory and provide a report or list the number of containers packed. An worker has the right to refuse the job. If job refusal occurs, the Principal will identify another worker in the area and offer them the job. Under the terms of the Agreement the Principal does not have the right to control the manner in which the worker completes the job. Whilst the Principal advises the location of the job, they do not have the right to direct when the job is done, nor how it is done. Overall, we are satisfied that the control test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractor. | Detailed Reasoning - 3. Integration: Another significant factor in establishing the nature of a contractual relationship at common law is to determine whether the worker's services are an integral part of the employer's business (under a contract of service as an employee) or providing services as an individual carrying on his or her own business (under a contract for services as an independent contractor). This is known as the 'integration' test. If the worker's services are an integral and essential part of the employer's business that engages them, they are considered by the courts to be a common law employee. If the worker is providing services as an individual carrying on their own business, they are an independent contractor. It is necessary to keep in mind the distinction between a worker operating their own business and a worker operating in the business of the payer. The worker needs to be running their own business or enterprise and have independence in the conduct of their operations. In Montreal v. Montreal Locomotive Works [1947] 1 DLR 161, Lord Wright said: ...it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior. Similarly, in Stevenson, Jordan and Harrison Ltd v. MacDonald and Evans [1952] 1 TLR 101 Denning LJ said: ...under a contract of service, a man is employed as part of the business, and his work is done as a integral part of the business; whereas, under a contract for services, his work, although done for the business, is not integrated into it but is only accessory to it. The professional skills involved in carrying out the work are also a useful guide in determining whether a person is carrying on their own business or not. The provision of professional skills or skilled labour may imply that the contractor is able to make an independent career by selling that skill. In the case of a contractor with an independent career, it may be implied that the contractor is able to conduct their own business using those skills. This was highlighted in Hollis v. Vabu Pty Ltd at paragraph 48, where the court said in relation to bicycle couriers hired by Vabu: The couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any 'goodwill' as a bicycle courier… Consideration may also be given to whether the worker could be expected to generate goodwill in their own right. If the benefits from the creation of goodwill flow to the worker then this would indicate that they are an independent contractor. Alternatively, if goodwill flows to the principal, this suggests an employer/employee relationship. It is therefore necessary to consider whether the worker is providing services as part of the principal's business (under a contract of service as an employee) or providing services as part of their own business (under a contract for services as an independent contractor). | Detailed Reasoning - Application of the common law to your case:: To enable you to provide services to your clients, you engage workers to complete these services to your clients. When you engage the workers you will enter into an Agreement that requires them to provide their ABN and to be registered for GST. Upon completion of a job, or at the end of the month, the worker provides an invoice to the Principal which includes the workers ABN. The workers are able to provide their services to other individuals or businesses. They are free to continue to advertise their services in the press or by other lawful means whilst the Agreement is in place. The application and Agreement do not indicate that the worker is required to train, supervise or assess the work of other employees or workers of the Principals business. The workers are not required to wear any uniform associating them with the Principal's business. The Principal does not instruct the worker on how to complete the work but does require that they comply with safety policies of the job site that is attended to complete the job and the Principal specifies the minimum safety equipment required. From the information provided in the application and Agreement, the fact that the workers are required to provide their ABN and be registered for GST and that they are able to provide and advertise their services to other individuals and businesses of a similar nature to the Principal, there is sufficient information to support that the workers are operating their own businesses. Overall, we are satisfied that the integration test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors. | 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 your case:: Upon completion of the job, the worker submits invoices to the Principal. The fee paid to the worker is on a per unit basis that is set out in the agreement. The worker's payment is dependant on the completion of the job. The workers are not entitled to receive payment or reimbursement for expenses or allowances and do not receive payment for holiday pay, sick pay, long service leave or workers compensation. The Principal does not deduct any amounts from the workers for income tax or superannuation. The facts and evidence indicate that the workers are providing the service of product inspection to the Principal. The payment of fees becomes payable only upon satisfactory completion of the specified services. Overall, we are satisfied that the results test in isolation is more in favour of the notion that the relationship between you and the workers is 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 who may not be suitably qualified. In the case of Bowerman v. Sinclair Halvorsen Pty Ltd [1999] NSWIRComm 21, Bishop J said: The fact that any substitute driver had to be approved by the company does not give the respondent [the principal] control over that delegation… the company surely had the right to be confident that any substitute driver was competent to do the job and maintain the "integrity" of the company as Mr Coomb put it. Therefore, under a contract for services, the emphasis is on the performance of the agreed services (achievement of the 'result'). A person who has a right to delegate work (whether or not that right is exercised in practice) does not work under a contract wholly or principally for their labour. Unless the contract expressly requires the service provider to personally perform the contracted services, the contractor is free to arrange for his or her employees to perform all or some of the work or may subcontract all or some of the work to another service provider. | Detailed Reasoning - Application of the common law to your case:: The Agreement stipulates that the worker is free to employ his/her own staff to assist in providing the services. The Agreement further stipulates that the worker may delegate any of the services to a third party through a sub-contract arrangement consistent with the terms of the agreement. There is no indication in the contract that approval of the Principal is required in the situation that the worker should utilise his/her own staff or a sub-contractor in providing the services to the Principal. These factors indicate that the worker has the power to delegate or sub-contract under the Agreement. Overall, we are satisfied that the delegation test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors. | Detailed Reasoning - 6. Risk: Generally speaking, employers are vicariously liable for negligence and injury caused by their employees. However a principal will not be liable for negligence or injury caused by an independent contractor. The higher the degree to which a worker is exposed to the risk of commercial loss (and the chance of commercial profit), the more they are likely to be regarded as being independent. Typically, a worker who derives piece rate payments and sustains large outgoings would be so exposed. The higher the proportion of the gross income of the worker which is required to be expended in deriving that income, and the more substantial the assets which the worker brings to the tasks, the more likely that the contract is for service, or a contract with an independent contractor. As stated by McKenna J in Ready Mixed Concrete (South East) Limited v. Minister Pensions and National Insurance [1968] 2 QB 497 at 526: …the owner of assets, the chance of profit and risk of loss in the business of carriage are his and not the company's. Another consideration of risk is the liability for the cost of rectifying faulty work. That is, the key underlying consideration is whether the individual is exposed to commercial risk in terms of a liability to cover the cost of rectifying defective work. This is consistent with the focus on the chance of profit and the risk of loss as a traditional indicator that a worker is an independent contractor conducting their own business. Carrying their own insurance and indemnity policies is an indicator that a worker is engaged as an independent contractor. | Detailed Reasoning - Application of the common law to your case:: The worker is responsible for providing personal professional liability insurance to cover any negligence in respect of the provision of their services, or the services of their employees or sub-contractors. The Agreement stipulates that the worker is required to indemnify the Principal from any claim against the Principal, arising out of or in connection with any breach of the agreement by the worker, or any default, negligent or wilful act or omission by the worker in the provision of their services. The worker is liable to the Principal for the cost of rectifying any defective services supplied by, or through him/her. Furthermore, the cost of rectifying any fault, defective or negligently performed services is borne by the worker. Where rectification of a defect is not possible, the Principal has the right to pursue the worker for damages. The information provided in the application and Agreement indicates that the majority of risk is borne by the worker in the fact that they are required to provide personal processional liability insurance, and the fact that the workers are required to rectify their work in the event of defect and in that the Principal has the right to pursue the worker for damages. Overall, we are satisfied that the risk test in isolation was more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors. | 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 your case:: The Agreement sets out a schedule of equipment and tools that the worker is required to provide to enable them to complete the job. The Agreement also sets out that the worker is responsible for providing a vehicle for transport to job sites. The worker is required to purchase, repair and replace all equipment and tools required to perform the services. The worker has no recourse against the Principal for the costs of purchasing, repairing or replacing the equipment and tools required to perform the services. The provision and maintenance of all equipment and tools required to complete the job and a vehicle for transport to the job sites is the sole responsibility of the worker. This indicates that the workers are carrying on a business. Therefore overall, we are satisfied that the capital test in isolation is more in favour of the notion that the relationship between you and the workers is one of principal and independent contractors. | Detailed Reasoning - Our conclusion regarding the common law definition of employee: With respect to the relationship between you and the workers, the facts and evidence provided points to the conclusion that the workers are not common law employees of the Principal. As the facts and evidence indicate that the workers are not your employees under common law, we are required to consider the expanded definition of employee under subsection 12(3) of the SGAA. | Summary: The workers are not your employees by virtue of subsection 12(3) of the SGAA. | Detailed Reasoning - Expanded definition of employee for SGAA purposes: The expanded definition of employee within subsection 12(3) of the SGAA, which states: If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract. SGR 2005/1 explains when an individual is considered to be an 'employee' under section 12 of SGAA. Paragraph 78 of SGR 2005/1 states that where the terms of the contract, in light of the subsequent conduct of the parties, indicate that: · the individual is remunerated (either wholly or principally) for their personal labour and skills; · the individual must perform the contractual work personally (there is no right to delegate); and · the individual is not paid to achieve a result. The contract is considered to be wholly and principally for the labour of the individual engaged, and he or she will be an employee under subsection 12(3) of the SGAA. | Detailed Reasoning - Wholly or principally for labour: In this context, the word "principally" assumes its commonly understood meaning, that is chiefly or mainly, and labour includes mental and artistic effort as well as physical toil. A contract may be partly for labour and partly for something else, such as the supply of goods, materials or hire of plant or machinery. Subsection 12(3) of the SGAA only applies if the contract is wholly or principally for labour. The Agreement stipulates that the workers are required to provide all equipment and tools required to complete the job. It is specified in the Agreement that the market price of the equipment and tools is nominal. Based on the available facts and evidence, we consider that the facts and evidence support that the workers are paid primarily for their own labour and skills. | Detailed Reasoning - The individual must perform the duties themselves: As discussed earlier, we consider that the facts and evidence indicate that the workers 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 workers are paid for a result. | Detailed Reasoning - Our conclusion regarding the expanded definition of employee: Accordingly, as the workers do not satisfy all three 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 all the available facts and evidence the Commissioner is satisfied that with respect to work performed for the Principal, the workers do 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 does not have an obligation to pay superannuation contributions for the benefit of the workers under the SGAA.

Question 1: Are the workers, when they engage with the Principal under the "Contractor Agreement", considered to be common law employees as defined in subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA)?