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CAUTION: This Case Decision Summary is only a brief summary of what may have been complex legal arguments applied to complex facts. If you rely on the decision and your circumstances are materially the same as those described, you will be taken to have exercised reasonable care. This summary represents the ATO's view on the application of the relevant provisions of the law to the circumstances outlined in the summary. However, if the relevant provisions, being those in force at the date of the decision, have been amended or rewritten, it will be necessary to have regard to the amended or rewritten law. You may wish to obtain further advice from the ATO or a professional adviser.

This Case Decision Summary has been withdrawn and replaced by ATO Interpretative Decision ATO ID 2002/376

ATO Case Decision

Case Decision Number:

CDS103374

Subject:

Is there an employer-employee relationship between the taxpayer company and its delivery truck drivers for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and, therefore, a requirement on the taxpayer company to pay superannuation contributions on behalf of the drivers?

Decision:

Yes. Based on the facts, the taxpayer company is an employer of the permanent drivers for the purposes of the SGAA and, therefore, is required to make payments for superannuation purposes on behalf of their employees. The taxpayer company is not the employer of the other casual drivers who are working through other companies, in partnership or as sole traders.

Facts:

· The taxpayer is a company who contracts drivers and their vehicles to deliver goods. The company hires permanent drivers who only work for the taxpayer. The taxpayer also hires other casual drivers who work for the taxpayer on a needs basis and who also work for other companies and/or in partnership or as sole traders.

· The drivers provide their own vehicles for the work and are required to cover all costs associated with the running of the vehicles.

· The drivers are paid a fixed rate per hour on the number of hours worked. There are no set finishing times.

· The taxpayer makes no provision for annual or sick leave for the drivers but it does pay workers compensation.

· Prescribed Payments are withheld from the drivers’ payments.

· The drivers meet at a set time each morning to collect the goods for delivery, which are allocated to the drivers depending on the capacity of their vehicles and the location of the delivery.

· The drivers are not instructed which way to travel to the delivery location or as to what order the deliveries are to be made, but it is stipulated that the orders are to be made that day.

· If a driver is not able to work on a particular day, the taxpayer organises someone else to deliver the goods; the drivers are not permitted to delegate work.

· The taxpayer is responsible for the goods carried by the drivers.

Reasons for Decision:

Subsection 12(1) (SGAA) states that the terms ‘employee’ and ‘employer’ have their ordinary meaning. Subsection 12(3) (SGAA) states that where a person works under a contract wholly or principally for the labour of the person, the person is an employee of the other party to the contract. These subsections have to be interpreted in light of the decisions of the courts to determine whether a person is considered to be an employee.

In Vabu Pty Ltd v FCT (1996) 96 ATC 4898; 33 ATR 537 (Vabu), the Supreme Court of NSW, on appeal, held that courier drivers engaged by a courier company were independent contractors and were neither ‘common law employees’ nor ‘employees’ under subsection 12(3) (SGAA). This case can be distinguished from Vabu by the degree of control exercised over the permanent drivers.

By taking into account the degree of control it we consider that the permanent drivers are 'common law employees'. The degree of control over the permanent drivers is indicated by the following factors:

· monitoring of time taken for drivers to perform deliveries;

· the day starts at a set time and the goods are required to be delivered on the day;

· drivers are paid a fixed rate per hour based on the number of hours worked;

· drivers are covered by workers compensation;

· drivers cannot profit from their enterprise; and

· drivers cannot suffer liability for damage to the goods they transport.

As the permanent drivers are employees within the definition, the taxpayer company is an employer for Superannuation Guarantee purposes and will be required to make superannuation contributions in order to avoid a shortfall for SGAA 1992 purposes.

The drivers, who work in a partnership, through a company or as a sole trader, are not considered to be employees of the delivery company. Therefore, no payments, for superannuation purposes, need to be made by the taxpayer for those drivers.

Legislative References:

Superannuation Guarantee (Administration) Act 1992 subsection 12(1), subsection 12(3)

Relevant Cases:

Vabu Pty Ltd v FCT (1996) 96 ATC 4898; 33 ATR 537

Rulings/Determinations Cited:

Superannuation Guarantee Ruling SGR93/1

Keywords:

Superannuation guarantee charge

Employer/employee relationship issues

Contract for labour

Control test

Crisis Couriers case

Hypothetical case reports

Date of decision:

11 August 1998

Year of Income/Date of Transaction:

Year ended 30 June 1998

FOI Number:

I2000374


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