Hello Chasers,
There is still a lot of confusion about whether a contractor should have superannuation guarantee contributions paid to them and also be covered for WorkCover by the hirer.
In a recent decision, the AAT held that a cleaner was an employee rather than an independent contractor for superannuation guarantee (‘SG’) purposes, and therefore the SG charge assessments imposed on the employer company were not excessive.
Facts
The taxpayer, S&H Investments Pty Ltd, was a private company that provided technology solutions for corporate and government clients. In March 2014, the taxpayer engaged TW as a full-time employee to clean the taxpayer’s office. She was paid $23 per hour and was given a desk and a work email address, and the taxpayer paid superannuation for her as her employer.
The taxpayer decided to restructure to reduce its expenses, and in May 2015 the taxpayer emailed TW about changing the terms of TW’s employment, so that she would do contract cleaning work for the taxpayer for 20 hours per week at $30 per hour, and she emailed back saying this was “acceptable”. The taxpayer then regarded TW as an independent contractor, and on this basis, it stopped making any superannuation contributions on TW’s behalf.
However, the ATO issued the taxpayer with SG charge assessments for the quarters ending 30 June 2015 to 30 September 2018 inclusive, on the basis that TW was still the taxpayer’s employee, rather than an independent contractor. The taxpayer objected to the assessments and, upon the objections being disallowed, appealed to the Administrative Appeals Tribunal. (AAT)
Decision
The principal issue for the AAT to determine was whether TW was an employee of the taxpayer within the extended definition of that term under S.12(3) of the Superannuation
Guarantee (Administration) Act 1992 (‘SGAA’), which provides: “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.”
The AAT noted in this regard that “there is no dispute between the parties that there is a contract and that TW performed work under the contract. It is whether the contract was wholly or principally for the labour of TW that is in contention.”
The AAT made the following findings:
- TW was remunerated for her personal labour and skills in cleaning the taxpayer’s office;
- the conduct of the parties suggested that there was no right to delegate, and TW never actually delegated her work;
- TW was not required to achieve a result, and the work she performed was not connected to any quantifiable result.
The AAT therefore held that TW was an employee of the taxpayer under S.12(3) of the SGAA, on the basis that the contract between TW and the taxpayer was “wholly or principally for the labour of TW.”
The AAT accordingly affirmed the SG charge assessments that the ATO had issued to the taxpayer.
The AAT also noted that “employers cannot contract out of their superannuation obligations, nor can employees waive their entitlements under the SGAA.”
Just this week, we had a potential new customer dispute the fact that they needed to pay super for a worker they hired with an ABN. Unfortunately, we declined to act for them because they would not accept our advice.
If you have any concerns about contractors you are engaging, please make sure you get advice before the relationship develops too much longer and contact our team on 0355612643.
Have a great day!
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