The Superannuation Guarantee (Administration) Act 1992 (Cth) (SG Act) deems certain workers to be employees for the purposes of Superannuation Guarantee Contributions (SGC) even if the worker is engaged under an independent contractor relationship. This deeming provision will apply if the person works under a contract that is wholly or principally for their labour.
In On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (2011) the Federal Court ruled this deeming provision will apply when an independent contractor provides personal services in an “employment-like setting which was not of a domestic or private nature”. According to the Court, an employment-like setting arose when, in all the circumstances, the labour component of the contract in question could have been provided by the recipient of the labour employing an employee.
A recent decision of the Full Federal Court in Dental Corporation Pty Ltd v Moffet (2020) has declined to follow the approach in On Call. The Court determined that the question is whether the contract is wholly or principally ‘for’ the labour of a person. It applied this approach to a dentist working under a services agreement with a company carrying on a dental practice. The proper inquiry was what the company received under that agreement. The dentist was to provide dentistry, practice management and, when requested by the company, assistance to the company to guide it on how it should provide administrative services to him. He was also required to determine appropriate fees and maintain patient records. He was required to do all of these things personally, but also to give him the option of procuring other people, engaged by the company, to do them as well.
The Court then considered whether, in addition to the labour of the dentist, the company received other benefits under the services agreement. The remuneration structure under the agreement gave rise to a revenue stream to the company. Those revenues were collected either as a result of the dentist’s own labour (as a dentist) or by his management of the other dentists and health care professionals within the practice. Therefore, in addition to the labour of the dentist, the agreement provided the company with the benefit of the dentist’s undertaking to ensure the practice would achieve a minimum cash flow, which was backed up by the company’s right to reduce his monthly drawings by 50% until any shortfall was rectified.
The Court observed that ‘like the dancer and the dance’ these two benefits cannot be disentangled although they remain conceptually distinct. The revenues derived for the company under the agreement were merely the consequence of the application by the dentist of his labour under that agreement. The minimum cash flow requirement was inextricably related to his promise to provide his labour, making the Services Agreement wholly or substantially ‘for’ the labour of the dentist.
For this reason, the Court concluded the payments made to the dentist attracted SGC obligations.