The ATO has determined that a commission-only salesperson was not an employee either at common law or under the expanded definition in s 12(1) and 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and that the principal did not therefore have an obligation to pay superannuation contributions.
While the individual:
- did not advertise their own business; and
- was paid primarily for their labour and skills,
and the principal:
- paid for the salesperson’s business mobile phone usage;
- provided t-shirts and business cards with their company logo;
- covered the cost of printer paper and ink;
- covered the cost of insurance for the product sold by the individual and the installation; and
- reimbursed the individual for travel expenses,
the ATO ruled that, taking all the indicators into consideration, the individual was an independent contractor on the basis that they:
- were paid for a result and did not receive payment if they did not sell any products;
- provided services to at least one other business;
- had their own business as a sole trader with their own ABN;
- was not supervised, set their own hours of work, scheduled their own tasks and did not attend meetings;
- did not receive training;
- maintained insurances relating to services other than the product sold;
- could delegate the work;
- had paid for the establishment of their home office; and
- the contract was not wholly or principally for the worker’s labour and therefore no contract for labour existed.
The Commissioner found that, on balance, the relationship was one of principal and independent contractor. The decision shows the complexity of considering the range of factors that determine employee/contractor status both at common law and under the SGAA’s expanded definition of employee for the purposes of superannuation. While the first seven factors (in italics above) considered by the Commissioner were regarded as indicators that the relationship between individual and principal was in some ways employee-like, payment based on a result, flexibility in scheduling, ability to delegate the work, having liability insurance extending beyond the products sold via the principal, providing business services to another client and covering the cost of setting up a home business appeared to have carried more significant weight for the ATO in making its ruling.
For further information, refer to our PSI information including the table of determining and indicative factors in PSI Solutions.
ATO private binding ruling No 1013103814672, April 2017