Private ruling: Status of the Worker
Date of advice: 9 June 2017
Published: October 2017

Ruling: Q2: Is the Worker an employee of the Principal by virtue of subsection 12(3) of the SGAA for the period? Advice No. Please refer to 'why we have made this decision’.


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

Reasons for decision: Summary: 1. The facts and evidence suggest that the Worker was not your employee for the purposes of the SGAA under both the common law definition and the expanded definition as set out in subsection 12(3) of the SGAA. Therefore the Principal does not have an obligation to pay SG contributions on behalf of the Worker. | Detailed Reasoning - Detailed reasoning: 2. 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). 3. 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. 4. 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. 5. 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. 6. 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: Is the Worker a common law employee of the Principal as defined by subsection 12(1) of the SGAA for the period? | Detailed Reasoning - Terms and circumstances of the formation of the contract: 7. 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. 8. When considering the intentions of the parties in forming the contract, the task is to decide 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: 9. 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. 10. 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?: 11. 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. 12. 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. | Detailed Reasoning - Results’ contracts: 13. 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. 14. 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. Payment is often made for a negotiated contract price, as opposed to an hourly rate. | Detailed Reasoning - Whether the work can be delegated or subcontracted: 15. 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. 16. 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. 17. 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. 18. 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 - Risk: 19. 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. 20. 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. 21. 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: 22. 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. 23. 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: 24. The Worker is a qualified Chinese Medicine Practitioner who commenced practice at the Clinic in 2013. The Worker provides services to patients during allocated booking times at the Clinic. 25. An agreement was drafted and presented to the Worker, however this PSA was not signed by the Worker and has at no time constituted an Agreement between the parties. 26. The arrangement between the Principal and the Worker began during 2013 and consisted primarily of a verbal agreement. However, written evidence of the following has been provided: ● It was agreed that the Worker would issue invoices to the Principal for payment of a percentage commission per patient treated by the Worker. ● It was agreed that each practitioner will require a 'HICAPS’ provider number and that the initial payment for services will be made to the Principal’s bank account. ● It was agreed that the ownership of files, information sheets and any other documents developed by the Worker whilst with the Principal would remain under the ownership and property of the Principal. ● It was agreed that the Worker would be a 'content manager’ of the Principal’s Facebook page. ● It was agreed that the Principal would cover 100% of the cost of seminars for the Worker to attend which would benefit her as a practitioner and as a team member of the Principal, but this arrangement changed and the Worker now pays for their own seminars and networking events. 27. The Worker has had an active ABN. 28. Paragraph 16 of SGR 2005/1 provides that 'a person who holds an ABN may still be an employee for the purposes of the SGAA’. 29. Based on the information provided, the terms and circumstances of the formation of the arrangement are inconclusive on the initial characterisation of the relationship by the parties. 30. The Worker is not able to set the length of appointments for services at the Clinic or the amount charged by the Clinic to the client per appointment, however any changes to the amounts charged by the Clinic are able to be discussed with the Worker. 31. In addition to the services provided by the Worker during booking times, the Worker has attended meetings with the Principal and other workers at the Clinic. However, the parties are not in agreement as to whether these meetings were compulsory to attend. 32. The parties are not in agreement as to what additional tasks the Worker was required to complete and whether the Worker was required to remain at the Clinic, outside of the timeslots when the Worker was providing services to patients. 33. The parties are not in agreement as to whether the Worker was required to sell Clinic products to patients of the Clinic. 34. Paragraph 33 of SGR 2005/1 states that 'a common law employee is told not only what work is to be done, but how and where it is to be done’. 35. ATO Interpretive Decision 2011/87 Superannuation Guarantee Charge: employment status of a medical practitioner operating from a medical clinic ('ATO ID 2011/87’) outlines the application of the common law in the Supreme Court of NSW case of Health Services for Men & Ors v. D’Souza & Ors [1999] NSWSC 969 (' D’Souza ’). 36. In D’Souza , the workers were medical practitioners who performed services at a medical clinic. In obiter dicta, Bryson J at paragraph [16]-[17] stated the following: There is no indication in evidence that doctors are ever constrained by the plaintiffs’ direction to do anything otherwise than exactly as the doctors choose to act. There is no indication of any source for a right to control them in any such way. The essence of what is taking place is that patients who need medical treatment are consulting medical practitioners and obtaining the opinion and advice of the medical practitioners; the patients are not interested in consulting persons who are not medical practitioners but conduct clinics through the agency of medical practitioners who form part of their organisation. 37. In addition, Bryson J states at paragraph [17] that 'the need for individual personal judgment on the medical practitioner’s professional responsibility presents itself anew for each patient’. 38. In order to provide services as a practitioner at the Clinic, the Worker must be registered with the Australian Health Practitioner Regulation Agency ('AHPRA’) and they must have completed tertiary qualifications in Acupuncture and/or Chinese Medicine. The Worker is also required to be a member of a professional association. 39. The qualifications of the Worker as a Chinese Medicine Practitioner, their registration with AHPRA and the requirement for the Worker to be a member of a professional association serves to illustrate that the Worker has control over the way in which services are provided to patients. 40. As in D’Souza , the clients of the Principal do not seek the services of the Clinic outside of that which is provided under the control of the Worker. The Principal has no discernible right of control over the manner in which the practitioner performs their services to patients. 41. The Worker is allocated timeslots by the Principal based on their availability. Bookings are able to be made in the available timeslots by the Worker, the Clinic or by clients of the Clinic using an online booking system. 42. The fact that timeslots are allocated by the Principal based on the Worker’s availability provides some indicator of control on the part of the Worker. However, this factor is mitigated by the fact that the Worker is not able to set the length of appointments for services at the Clinic or the amount charged by the Clinic to the client per appointment. 43. There is evidence that the Worker has attended meetings with the Principal and other workers at the Clinic, as well as completing additional tasks outside of the timeslots when the Worker was providing services to patients. 44. However, based on the information provided, this evidence is insufficient to indicate a degree of control that the Principal exerts over the Worker. 45. As per the copies of six invoices issued by the Worker for payment during the period, the Worker receives a percentage amount for commission based on different Clinic products sold to patients. 46. However, based on the information provided, there is insufficient evidence to indicate that the Worker was 'required’ to sell Clinic products. Rather, the sale of these products merely forms part of the commission basis on which the Worker was renumerated per invoice. 47. The copies of email conversations between the Principal and the Worker during the period make reference to networking events and seminars for the Worker to attend, and include copies of tickets to these events where the Worker attended in the name of the Clinic. 48. The Worker has attended networking events which the Worker has paid for personally, however during an earlier period the Worker states that these events were attended under the Clinic brand. 49. The Worker states that they have contributed as a 'content manager’ to a Clinic social media page and blog in the past, however they no longer do so. 50. These factors provide some indication that the Worker has in the past been integrated and operating within the business of the Principal, rather than carrying on a business of their own. It is apparent that the Worker has performed a role in promoting the business of the Principal outside of the services provided in appointments with patients. 51. The parties are not in agreement as to what additional tasks the Worker was required to complete and whether the Worker was required to remain at the Clinic, outside of the timeslots when the Worker was providing services to patients. 52. The Worker was provided with a Clinic email address, however the parties are not in agreement as to whether the Worker is required to use their Clinic email address when interacting with Clinic staff and/or clients. 53. The Worker is also not required to adhere to any uniform or other dress standards while performing services for the Clinic. 54. It should be noted that where additional tasks (i.e. receptionist services) were required to be performed by the Worker, this would provide a stronger indicator that the Worker was operating within the business of the Principal. However, based on the information provided we are unable to make this determination. 55. The Worker has registered a business name under their ABN. The copies of six invoices issued by the Worker for payment each quote the Worker’s ABN. 56. The Worker has a website for their business which indicates the Worker is providing services as a Chinese Medicine Practitioner (including acupuncture and other services) through their business. The website includes a profile of the Worker detailing their qualifications and attributes as a practitioner, and an email address specific to this business. 57. The Worker has a website in their own name which has been created for themselves as a practitioner. The website includes a profile of the Worker detailing their qualifications and attributes as a practitioner. The website also includes details of the locations where the Worker practices (including the Clinic) and an email address for the Worker as an individual practitioner. 58. The Worker practices at a clinic other than the Clinic and has a profile on the website for this clinic that details their qualifications and attributes as a practitioner. The Worker is identified as a practitioner who performs services at the clinic. 59. In circumstances where the Worker has met a client outside of the Clinic (i.e. networking events) the Worker has been able to arrange to provide services to that client at a location other than the Clinic. However, this has not occurred for patients referred to the Worker via the Clinic. 60. The Worker has profiles across a number of social media and networking platforms. The Worker is represented in these profiles as an individual practitioner or in their own business name. 61. These factors indicate that the Worker has a set of professional skills which they are utilising to develop an independent career and that they intend to carry on a business of their own. This distinction has become more pronounced since the Worker registered a business name under their ABN. 62. The Principal and the Worker agreed that the Worker would issue invoices to the Principal for payment of a percentage commission per patient treated by the Worker. It was agreed that each practitioner will require a 'HICAPS’ provider number and that the initial payment for services will be made to the Principal’s bank account. 63. The copies of six invoices issued by the Worker for payment during the period each state the calculated amount of commission per consultation and the name of the patient, with four of the invoices aggregating these amounts based on the type of service provided. 64. The calculated amount of commission per consultation is based on a piece-rate and not on any measurement of time. Two of the invoices state in the 'General Description’ percentage amounts for commission based on different services and/or products, including acupuncture invoiced at the agreed rate. The invoices request payment for the total amount of commission for that period. 65. Generally, where a Worker submits 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. 66. Paragraph 43 of SGR 2005/1 states the following with respect to the meaning of the phrase 'the production of a given result’: 43. 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. 67. Based on the information provided, there have been no circumstances in which the Worker has delegated work to another person, be that person a worker at the Clinic or from outside the Clinic. In circumstances where another practitioner has performed services in place of the Worker, it has been the other practitioner who invoiced the Principal for those services. 68. The Worker is able to use equipment/tools and herbs sourced from outside of the Clinic, however the parties are not in agreement as to the frequency, types and circumstances in which equipment/tools and herbs sourced from outside of the Clinic can be used. The Principal provides a fully furnished room and supplies “most” equipment to the Worker. 69. The Principal has advised the Worker in writing that specific tools/equipment and herbs will not be supplied by the Principal, and that the Worker will need to supply these items if they wish provide these specific services. 70. These factors indicate that while there is no express limit on the means to be utilised the Worker to achieve a given result, nonetheless the results have been achieved primarily through means provided by the Principal. This mitigates against the general view that the Worker has achieved a separately identifiable result by providing services per appointment. 71. Paragraph 51 of SGR 2005/1 states that an independent contractor will often carry their own insurance and indemnity policies. The Worker is required to obtain their own public liability and professional indemnity insurance. This indicates that the Worker bears the primary risk for any costs that arise from carrying out their services. 72. As part of the initial arrangement between the Worker and the Principal in 2013, it was agreed that the Principal would cover 100% of the cost of seminars for the Worker to attend which would benefit her as a practitioner and as a team member of the Principal. However, this arrangement changed and the Worker now pays for their own seminars and networking events. 73. Paragraph 57 of SGR 2005/1 provides that an employee will often be reimbursed (or receive an allowance) for expenses incurred in the course of employment, including for the use of their own assets. Based on the information provided, it is clear that this has occurred in the past however the nature of the arrangement has since changed. 74. Paragraph 25 of SGR 2005/1 provides that the totality of the relationship between the parties must be considered to determine whether, on balance, the Worker is an employee or an independent contractor of the Principal. 75. It is clear that following the Worker registering a business name under their ABN, the Worker now has a set of professional skills which they are utilising to develop an independent career and that they intend to carry on a business of their own. This is a strong indicator that the Worker is an independent contractor. 76. Based on the information provided, there is insufficient evidence to indicate that the Worker was not operating in a business of their own prior registering a business name under their ABN. As outlined in ATO ID 2011/87, the Principal has never had a clear right of control over the manner in which the practitioner performs their services to patients. 77. The requirement for the Worker to have certain qualifications, be registered with AHPRA and be a member of a professional association, indicates that the Worker has utilised a set of independent professional skills and had control over the way in which services are provided to patients. These factors have not altered since the beginning of the arrangement. | Detailed Reasoning - Our conclusion regarding the common law definition of employee: 78. With respect to the relationship between the Principal and the Worker, the facts and evidence provided point to the conclusion that the Worker is not a common law employee of the Principal. 79. As the facts and evidence indicate that the Worker is not your employee under common law, we are required to consider the extended definition in subsection 12(3) of the SGAA. | Detailed Reasoning - Question 2: Was the Worker an employee of the Principal by virtue of subsection 12(3) of the SGAA? | Detailed Reasoning - Expanded definition of employee for SGAA purposes: 80. 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. 81. SGR 2005/1 explains when an individual is considered to be an 'employee’ under section 12 of SGAA. 82. 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: 83. 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. 84. 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. 85. Based on the available facts and evidence, we consider that the Worker was paid primarily for their own labour and skills as a Chinese Medicine Practitioner. | Detailed Reasoning - The individual must perform the duties themselves: 86. As discussed earlier, based on the information provided, the facts are neutral on the question of whether the Worker is required to perform their roles and responsibilities personally. 87. While there have been no circumstances in which the Worker has delegated work to another person, there is no express requirement for the Worker to perform the work personally. | Detailed Reasoning - Not paid to achieve a result: 88. As discussed earlier, on balance we consider that the facts and evidence indicate that the Worker was paid to achieve a result, being the provision of services to patients per appointment. | Detailed Reasoning - Our conclusion regarding the expanded definition of employee: 89. Accordingly, as the Worker does 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: 90. Upon considering of all the available facts and evidence, the Commissioner is satisfied that with respect to work performed for the Principal, the Worker does not meet the definition of an employee for the purposes of the SGAA under either the common law definition or the expanded definition provided under subsection 12(3) of the SGAA. 91. Accordingly, the Principal does not have an obligation to pay superannuation contributions for the benefit of the Worker under the SGAA.

Is the Worker considered a common law employee of the Clinic ('the Principal’) as defined by subsection 12(1) of the Superannuation Guarantee Administration Act 1992 (SGAA) for the period? | We considered these to be relevant facts: You lodged a private ruling application for the Clinic ('the Principal’), requesting advice as your superannuation guarantee ('SG’) obligations in respect to the Worker. | Your private ruling application included the following attachments: | ● A document outlining the facts describing the scheme or circumstance, as well as your arguments and references; and | ● Copies of screenshots of appointment schedules for the Worker. | You spoke to ATO officer and discussed the nature of the arrangement between the Principal and the Worker. | You provided the following further information by email: | ● A copy of an unsigned “Practitioner Service Agreement” ('PSA’) which was presented to the Worker, but not signed by the Worker. | ● Clear copies of screenshots of appointment schedules for the Worker. | ● A copy of email conversations between yourself and the Worker during the period. | You provided further information by email in response to our specific questions. | With the permission of both parties, ATO officer spoke to the Worker to discuss the nature of the arrangement between the Principal and the Worker. | The Worker provided the following further information by email: | ● Responses to our specific questions requesting further information. | ● An annotated copy of the PSA which was presented to the Worker, but not signed by the Worker. | ● Copies of email conversations between yourself and the Worker. | The Worker provided further information by email including copies of email conversations between yourself and the Worker regarding the provision of equipment and herbs. | Where the Principal and the Worker disagree or have provided contrary evidence as to a material fact, we have not considered these facts as part of our decision. | Based on the information provided, we considered the following to be relevant facts: | ● The copies of six invoices issued by the Worker for payment during the period demonstrate the following: | ● each of the invoices were issued by the Worker and state the Worker’s ABN; | ● each of the invoices states the calculated amount of commission per consultation and states the name of the patient, with four of the invoices aggregating these amounts based on the type of service provided; | ● the invoices request payment for the total amount of commission for that period; and | ● GST has not been included on the invoices. | ● The copies of screenshots of appointment schedules for the Worker demonstrate the following: | ● the Worker has a schedule over the course of a period from Monday to Saturday; | ● the schedule shows on what days, or the periods during a day, when the Worker is unavailable; and | ● the schedule provides for hourly timeslots which are allocated by the Principal, and bookings are made within those timeslots, which generally run for 45 minutes duration. | ● The copies of email conversations between yourself and the Worker during the period make reference to networking events and seminars for the Worker to attend, and include copies of tickets to these events where the Worker attended in the name of the Clinic. | ● As per the copies of six invoices issued by the Worker for payment during the period, the Worker receives a percentage amount for commission based on different Clinic products sold to patients. The parties are not in agreement as to whether the Worker was required to sell Clinic products to patients of the Clinic. | ● During recent months, the Worker has asked the Principal to reimburse her for products purchased by the Worker from outside of the Clinic, but paid for by the client using the Clinic’s EFTPOS facility. | ● The Worker is not required to adhere to any uniform or other dress standards while performing services for the Clinic. | ● The Worker has attended networking events which the Worker has paid for personally, however during the period the Worker states that these events were attended under the Clinic brand. | ● The Worker has their own social media pages for them as a practitioner. The Worker states that they have also contributed to a Clinic social media page and blog in the past, however they no longer do so. | ● The Worker has an active ABN. The Worker has registered a business name on under this ABN. | ● The Worker practices at a clinic other than the Clinic and has a profile on the website for this clinic that details their qualifications and attributes as a practitioner. The Worker is identified as a practitioner who performs services at the other clinic. | We formed our view on the facts by relying on this information: The private ruling application form and further information provided by both the Principal and the Worker. | Assumptions: No assumptions have been made.