Private ruling: PAYG Withholding
Date of advice: 29 March 2018
Published: June 2018
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021 | Year ended 30 June 2022
Date scheme commenced: 1 February 2018

Ruling: Q1: Is there an obligation on the recreational organisation to withhold from payments made to officials under section 12-35 of Schedule 1 to the Taxation Administration Act 1953 (TAA)? | A1: No | Q2: Is there an obligation on the recreational organisation to withhold from payments made to official coaches under section 12-35 of Schedule 1 to the TAA? | A2: No | Q3: Is there an obligation on the recreational organisation to withhold from payments made to official observers under section 12-35 of Schedule 1 to the TAA? | A3: No | Q4: Is there an obligation on the recreational organisation to withhold from payments made to official co-ordinators under section 12-35 of Schedule 1 to the TAA? | A4: No | Q5: Is there an obligation on the recreational organisation to withhold from payments made to official welfare officers under section 12-35 of Schedule 1 to the TAA? | A5: No

Relevant facts and circumstances: Officials provide their services to the recreational organisation. The annual completion of an online registration form is the only mandatory requirement to be able to officiate. Officials are required to provide all personal details and “working with children” accreditation details. Officials are required to be currently accredited or actively undertaking accreditation, to ensure a minimum level of competency while officiating. The umpiring season and training requirements are as follows: ● Junior Officials – train one night per week for approximately 1.5 hours. ● Senior Officials – train two nights per week for approximately 1.5 hours. Individual official performance is evaluated by the State official manager and other appointed observers once per season The recreational organisation is responsible for the appointment and employment of the State official manager. The State official manager then appoints the other official staff and appoints the observer panel. Official appointments are based on merit, such that the best available officials are appointed to the most important games. If an official advises, at short notice, that they are unavailable, the State official manager liaises with the relevant coach or co-ordinator where applicable, with a view to find a suitable replacement. Clubs registered with the recreational organisation are levied for umpiring as part of a combination of team fees and player registrations. Clubs in Senior Leagues are levied as part of team registration. Officials are paid a match fee for each match they officiate. The amounts paid vary from league to league, is dependent on what grade is officiated and the type of official. An official is appointed to a match generally during the week of the game. The official formally accepts the appointment electronically. They arrive at the game 45 minutes before the match begins, and leave approximately 15 minutes after the match concludes once match day paperwork is completed. For home and away matches, finals and grand finals, the recreational organisation pays each official appointed to a Match or representative Matches for travel outside their home region, an official travel allowance as follows: ● Officials required to travel from their home region to the next geographical region shall be paid the Official Travel Allowance. ● Officials required to travel from their home region through the next geographical region to get to another region shall be paid the Official Travel Allowance multiplied by two. ● Officials required to travel, by any mode other than air transport, outside of the regions shall be paid the Officials Travel Allowance multiplied by two. ● An Officials’ home region is the region in which the Official has registered with the recreational organisation. An Official is permitted a travel allowance to attend tribunal hearings as follows: ● Where an Official attends a tribunal hearing within their region, they will be paid a travel allowance ● Where an Official travels from one geographical region to the next geographical region to attend a tribunal hearing, they will be paid a travel allowance ● Where an Official travels from one geographical region through the next geographical region to get to next region to attend a tribunal hearing, they will be paid a travel allowance. If an Official is required to travel more than 350km from the capital city for any Match or representative Match, the recreational organisation bears the cost of all reasonable travel, accommodation and meal expenses (breakfast and dinner each day) incurred by an Official in the performance of his or her duties. All personal expenses such as entertainment, alcohol, travel (that is not necessary) and all telephone costs are at the Officials’ own expense. Senior Officials are paid directly by the recreational organisation fortnightly. Junior Officials are paid directly by the recreational organisation once per month. During the previous season: ● x officials received > $x,000 ● xx officials received between $x,000 and $x,000 ● Xxx officials received between $x,000 and $x,000 Match payments are not intended to, nor do they usually cover expenses. The purpose of payments is to encourage members of the community to participate in local sporting activities by subsidising their participation. Officials are required to incur expenditure in order to officiate, the recreational organisation supplies one uniform free of charge. The recreational organisation has coaches to improve the performance of officials. They are experienced former officials who educate the current officials. The recreational organisation provides and honorarium to each coach, observer, co-ordinator and welfare officer of up to $Z per year designed to reimburse them for some, but not all expenses incurred during the year. The persons appointed in the above roles incur travel and miscellaneous expenses. The gratuity is designed to reimburse them for some but not all expenses they incur during the year.

Relevant legislative provisions: Taxation Administration Act 1953 Section 12-35 of Schedule 1

Reasons for decision: Summary: Section 12-35 of Schedule 1 to the TAA states an entity must withhold an amount from salary, wages, commission, bonuses or allowances it pays to an individual as an employee (whether of that or another entity). Taxation Ruling TR 2005/16 Income Tax: Pay As You Go – withholding from payments to employees provides guidance as to whether an individual is paid as an employee for the purposes of section 12-35 of Schedule 1 to the TAA. The term ‘employee’ is not defined in the TAA. For the purposes of withholding under section 12-35 the word ‘employee’ has its ordinary meaning. Whether a person is an employee of another is a question of fact to be determined by examining the terms and circumstances of the contract between them having regard to the key indicators expressed in the relevant case law. TR 2005/16 also considers the various indicators the Courts have considered in establishing whether a person engaged by another individual or entity is an employee within the common law meaning of the term. These indicators include: ● The control test: the degree of control which the payer can exercise over the payee. ● The organisation or integration test: whether the worker operates on their own account or in the business of the payer. ● The results test: whether the worker is free to employ their own means and is paid to achieve the contractually specified outcome. ● The delegation test: whether the work can be delegated or subcontracted (with or without the approval or consent of the principal). ● The risk test: whether the worker bears the legal responsibility and expense of rectification or remedy in the case of unsatisfactory performance. ● Which party provides tools, equipment and payment of business expenses? Control The test for determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. A common law employee is told not only what work is to be done, but how and where it is to be done. The importance of control lays not so much in its actual exercise as in the right of the employer to exercise it. A high degree of discretion or latitude in the manner in which a task is performed does not, of itself, indicate a contract for services. Further, although it is not uncommon for a contract to specify how the contracted services are to be performed, this does not necessarily imply an employment relationship. A high degree of direction and control is not uncommon in contracts of service. In contractual arrangements any control or direction must be expressed in terms of the contract only, otherwise the contractor is free to exercise their own discretion, because they work for themselves. Organisation or integration In an employment relationship, tasks are performed at the request of the employer and the employee is said to be working in the business of the employer. An independent contractor carries on a trade or business of their own. An independent contractor enters into a contract to perform specific tasks and has a high level of discretion and flexibility about how the work is to be performed, even if the contract contains precise terms about methods of performance. An employee works in the business of the employer and the work performed may be said to be integral to that business. An independent contractor works for the payers business but the work is not integrated into the business rather is an accessory to it. Results Where the substance of a contract is for the production of a given result, there is a strong indication that the contract is one for services. '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. The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to hours worked. If remuneration is payable when, and only when, the contractual conditions have been fulfilled, the remuneration is usually made for producing a given result. Delegation The power to delegate or subcontract 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. Whereas if an individual has unfettered power to delegate the work to others (with or without approval or consent of the principal), this is a strong indication that the person is engaged as an independent contractor. The contractor is free to arrange for their 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. A common law employee may frequently 'delegate' tasks to other employees, particularly where the employee is performing a supervisory or managerial role. However, this 'delegation' exercised by an employee is fundamentally different to the delegation exercised by a contractor outlined above. 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 workers have merely organised a substitution or shared the work load. This is not delegation consistent with that exercised by a contractor. Risk An employee bears little or no risk of the costs arising out of injury or defect in carrying out their work. An independent contractor bears the commercial risk and responsibility for any poor workmanship or injury sustained in the performance of work. An independent contractor is usually expected to take out their own insurance and indemnity policies. Whether the worker is contractually obliged to accept liability for the cost, in terms of time or money, for the rectification of faulty or defective work is a relevant consideration in determining if that worker should be regarded as an employee or independent contractor. Commonly, an independent contractor or entity would solely bear the risk and responsibility of liability for their work if it does not meet an agreed standard and would be required to either rectify this defective work in their own time or at their own expense. An employee on the other hand, would bear no such responsibility and the liability for any defective work of the employee, either to a third party or otherwise, would fall to the employer in terms of the burden of cost or time for rectification. Provision of tools and equipment and payment of business expenses The provision of assets, equipment and tools by an individual and the incurring of expenses and other overheads is an indicator that the individual is an independent contractor. However, the provision of necessary tools and equipment is not necessarily inconsistent with an employment relationship. The provision and maintenance of tools and equipment and payment of business expenses should be significant for the individual to be considered an independent contractor. There are situations where very little or no tools of trade or plant and equipment are necessary to perform the work. This fact by itself will not lead to the conclusion that the individual engaged is as an employee. The weight or emphasis given to this indicator (as with all the other indicators) depends on the particular circumstances and the context and nature of the contractual work. Further, an employee, unlike an independent contractor, is often reimbursed (or receives an allowance) for expenses incurred in the course of employment, including for the use of their own assets such as a car. In this case the recreational organisation uses officials to officiate in games. The officials are only told the time and venue of the game they are required to officiate in. They are not told how to officiate the game. Officials are paid for a given result, i.e. the satisfactory officiating of a game. The official is chosen to officiate in a game because they have the requisite skills so it is assumed that the official cannot sub-contract their officiating role in any game. After comparing the facts against the above factors it is considered that officials are not employees of the recreational organisation therefore there is no obligation to withhold from payments made to them under section 12-35 of Sch 1 to the TAA. In this case the recreational organisation uses official coaches to assist in the development of current officials. These coaches are told the time and venue of the training. They are not told how to provide that training. Official coaches are paid for a given result, i.e. the satisfactory development of current officials. The official coach is chosen because they have the requisite skills so it is assumed that they cannot sub-contract their coaching role. The recreational organisation also use official observers, official co-ordinators and official welfare officers to assist in the development of current Umpires. They are assigned to watch a number of matches each week to observe and provide feedback and assistance to coaches. Observers, co-ordinators, and welfare officers are paid for a given result, i.e. the satisfactory development of current officials. They are chosen because they have the requisite skills so it is assumed that they cannot subcontract their roles. After comparing the facts against the above factors it is considered that official coaches, official observers, official co-ordinators and official welfare officers are not employees of the recreational organisation, therefore there is no obligation to withhold from payments made to them under section 12-35 of Sch 1 to the TAA.