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Tribunal: Deputy President B McCabe

The Tribunal set aside the decision and decided, in substitution, that the party contracting with the applicant was not an employee in the period under review.

The applicant, in this case, is a company that provides repair and maintenance services to businesses operating a type of machinery. The applicant’s head office was in Sydney, but it had service technicians operating from depots in different states. Some of the service technicians were employed by the applicant under conventional contracts of employment. Other technicians were described as independent contractors.

Andrew Smith (a pseudonym) was one of the applicant’s service technicians who was described as an independent contractor. He operated out of the applicant’s Melbourne depot in the period 30 September 2013 through to 30 September 2017.

The applicant did not make any superannuation contributions with respect to Mr Smith during the period in question. It says it was not obliged to do so because Mr Smith was not an employee during that period. Mr Smith asserted he was entitled to superannuation – although he acknowledged the applicant was not obliged to make superannuation contributions if he was, in fact, a genuine independent contractor.

The Commissioner of Taxation agreed with Mr Smith’s take on the relationship. The Commissioner concluded Mr Smith was an ‘employee’ of the applicant within the meaning of s 12 of the Superannuation Guarantee (Administration) Act 1992 (the Administration Act) notwithstanding the way the parties described themselves. The Commissioner assessed the applicant as being liable to pay a superannuation guarantee charge in respect of the superannuation contributions the applicant should have paid during the period.

To make a decision in this case, the Tribunal had to be satisfied that both parties intended to negotiate an independent contracting relationship and that they had succeeded in doing so.

The Tribunal heard evidence from both parties which showed that they both understood the differences between hiring someone as an independent contractor and hiring someone as an employee.

The contract between the parties was a key piece of evidence. The Tribunal took into account clauses regarding exclusivity, risk, and Mr Smith’s right to take on other work, delegate and schedule his workday. It also considered how Mr Smith was paid for his services.

Mr Smith was, for the most part, being paid to complete discrete tasks. He also had the opportunity to earn additional amounts for completing other defined tasks.

These arrangements point to an independent contractor relationship because they sound less like a contract of service than a contract for the provision of defined service. On this basis, the Tribunal was satisfied that the parties each intended to negotiate an independent contracting relationship, and that they had succeeded in doing so. The decision was set aside.

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