Decision impact statement

General Aviation Maintenance Pty Ltd and Commissioner of Taxation

Court citation:
[2012] AATA 120
2012 ATC 10-235
87 ATR 552

Venue: Administrative Appeals Tribunal
Venue Reference No: 2010/5564-5567
Judge Name: Senior Member O'Loughlin
Judgment date: 6 March 2012
Appeals on foot: No
Decision Outcome: Adverse as to quantum, favourable as to legal principle

Impacted Advice

Relevant Rulings/Determinations:

• None

Subject References:
Superannuation guarantee charge
Definition of employee

Précis

Outlines the ATO's response to this case which concerned whether a sky dive instructor engaged by the taxpayer was an employee within the meaning of s 12 of the Superannuation Guarantee (Administration) Act 1992 ("SGAA"), for the purposes of determining the Applicant's liability to a superannuation guarantee charge.

Brief summary of facts

The Applicant conducted a skydive business.

The worker was paid by the Applicant for packing parachutes, undertaking tandem descents and for video recording skydives which were then provided to the Applicant's clients. The worker frequently, if not exclusively, wore the Applicant's uniform. The worker was required to attend at times specified by the Applicant; be courteous to the Applicant's clients while providing the services he provided, as well as maintain the appearance, grooming, and hygiene expected within the tourism industry. There was no written contract between the Applicant and the worker nor was the worker paid for annual leave or sick leave.

The Applicant did not make superannuation contributions on behalf of the worker.

Following an audit regarding the superannuation obligations of the taxpayer, the Commissioner concluded that the worker was, for the purposes of the superannuation guarantee charge, an employee within the meaning of subsections 12(1) and/or 12(3) of the SGAA.

The taxpayer contended that the worker was engaged by a third party, alternatively it contended that the worker was an independent contractor, and was not an employee within the meaning of section 12 of the SGAA. Further, the applicant contended that, even if the worker was an employee for the purposes of the SGAA, only that portion of the payments made relating to skydiving would amount to salary and wages. The portion relating to video recording and production services was payment for a result.

Before the hearing, it was established that incorrect calculations were made of the salary and wages of the worker and to this extent the Commissioner conceded that the assessments were excessive.

Issues decided by the tribunal

The Tribunal found the worker was an employee within the meanings of subsections 12(1), 12(3) and/or 12(8) of the SGAA.

Subsection 12(1): an employee within the ordinary meaning of the term

On a holistic consideration of all relevant factors, the worker was found to be an employee within the ordinary meaning of the word.

Subsection 12(3): contracts for the labour of the person

The Tribunal found that if its conclusion that the worker was an employee within the ordinary meaning of the term was incorrect then s 12(3) had a role to play. As the Applicant failed to establish that all or part of the payments made were not for the worker's labour, the Tribunal found that the worker was an employee of the Applicant within the extended definition in subsection 12(3) of the SGAA. .

Subsection 12(8): person paid to participate in the presentation of entertainment or paid to provide services in connection with the performance or presentation of entertainment

Further, if the amounts paid to the worker were not otherwise salary or wages, then s 12(8) applied. The Tribunal found that the worker was contracted to participate in the provision of entertainment and therefore was an employee within the extended definition in subsection 12(8)(a) of the SGAA. The Tribunal further found that the Applicant paid the worker to produce a film or disc, which is a service within the scope of the extended definition in subection 12(8)(b) and (c).. Accordingly payments made by the Applicant to the worker for the production of video recordings of the descent formed part of the worker's salary and wages.

The Tribunal also noted that subsections 11(ba) and (d) act to include any amount of payments, made for labour as contemplated by 12(3) or under a contract as contemplated by 12(8), to a worker who is an employee under subsections 12(3) or 12(8) will be salary and wages for the purpose of the SGAA.

The Tribunal referred the matter back to the Commissioner to amend the assessments to reflect the correct calculations and otherwise affirmed all other aspect's of the Commissioner's decision.

ATO view of Decision

The Commissioner's views in SGR 2005/1 and SGR 2009/1 are consistent with the Tribunal's conclusion that the worker's activities fit into the broad terms in s12(8)(a), either as "...entertainment, possibly sport, or a similar activity' [30]. This is the first decision considering the application of s 12(8) of the SGAA.

The Commissioner accepts that it was open to the Tribunal to remit the matter to the Commissioner to issue amended assessments reflecting the amounts referred to at paragraph 15(q) of the reasons for decision.

Administrative Treatment

Implications for ATO precedential documents (Public Rulings & Determinations etc)

None.

Implications on Law Administration Practice Statements

None.

Legislative References:
Superannuation Guarantee (Administration) Act 1992
Section 11
Subsection 12(1)
Subsection 12(3)
Subsection 12(8)

Case References:
Hollis v Vabu
[2001] HCA 44
207 CLR 21
2001 ATC 4508
47 ATR 559

Commissioner of Taxation v Broken Hill Pty Company Ltd
[2000] FCA 1431
2000 ATC 4659
45 ATR 507

Zuijs v Wirth Brothers Pty Ltd
[1955] HCA 73
93 CLR 561

On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3)
[2011] FCA 366
2011 ATC 20-258

Other References:
Superannuation Guarantee Ruling SGR 2005/1: Superannuation guarantee: who is an employee?
Superannuation Guarantee Ruling SGR 2009/1: Superannuation guarantee: payments made to sportspersons.
ATO ID 2002/376 Superannuation guarantee scheme: employment status