In the recent decision of MWWD v FC of T 2020 ATC (16 October 2020), the Administrative Appeals Tribunal (AAT) found that payments to a contractor repair technician did not trigger a superannuation contribution/charge obligation under the Superannuation Guarantee (Administration) Act 1992 (Cth) (SG Act). This was on the basis that the contractor was found not to be either a common law employee or an “employee” under the extended definition under section 12(3). Section 12(3) of the SG Act provides that if a person works under a contract that is wholly or principally for the labour of the person, the person is deemed to be an “employee” of the other party to the contract.
Mr Smith was contracted by the applicant as a service technician. The applicant’s business provided repair and maintenance services to businesses operating a particular type of machinery. Some of the service technicians were employed by the applicant under conventional contracts of employment. Other technicians (including Mr Smith) were described as independent contractors.
The written contract between the parties referred to Mr Smith as ‘the contractor’, and the agreement expressly provided that he was not an employee. However, there were factors which weighed for and against the existence of an employer/employee relationship. For example, the contract required Mr Smith to obtain his own insurance and indemnify the applicant (consistent with an independent contractor relationship), but also gave the applicant some formal control over where, when and how Mr Smith was to provide the repair services (indicative of an employer/employee relationship). Mr Smith also had (subject to some limits) a right to delegate under the contract.
After weighing each of these factors and assessing the relationship between the parties as a whole, the Tribunal found that the Mr Smith was an independent contractor and not a common law employee. The reasons for this finding included:
Mr Smith was not engaged to serve at the direction of the applicant;
The terms of the contract and the practical experience of the relationship made clear that Mr Smith was free to complete (and had the ability to arrange for delegates to complete) the contracted tasks within broad parameters; and
Mr Smith completed the contracted tasks at his own risk, as the parties plainly intended Mr Smith would assume liability for any loss or damage arising out of his work, which reflects the allocation of responsibilities.
As the contract contained a term giving Mr Smith the right to delegate his work to sub-contractors, the Tribunal also found that Mr Smith was not a person who works under a contract that is wholly or principally for the labour of the person and therefore not a deemed “employee” within the extended definition under section 12(3) of the SG Act. As such the payments to Mr Smith did not trigger an obligation to make superannuation contributions nor trigger the super guarantee charge.
To discuss further or for more information please contact:
Phil Broderick
Principal
M +61 419 512 801 | T +61 3 9611 0163
E: pbroderick@sladen.com.au
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
