The Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act) stipulates that certain contractors are considered employees when it comes to mandatory superannuation contributions. To be deemed an employee under the SGA Act, a contractor must meet the following criteria:
There is a contract;
The contract is primarily for an individual's labour; and
The person works under the contract.
If these conditions are met, the payer must make Superannuation Guarantee contributions on behalf of the contractor.
The Full Federal Court examined the SGA Act's scope in Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48, including in respect of section 12(3) which provides that if a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.
Contract analysis
For the SGA Act's deeming provisions to apply, the worker must be a natural person who participates in the contract individually, not as a partner or as a trustee of a personal service trust. The contract must involve payment in exchange for the worker's labour.
Additional parties may be included in the contract, such as a dentist working under a tripartite service agreement involving the corporate trustee of their family trust. However, the worker must be the primary party to the contract.
In Jamsek v ZG Operations Australia, the Court founds that the SGA Act's deeming provisions did not apply since the contract was with a partnership formed by two truck drivers. The drivers together with their respective wives, acting on behalf of the partnership, were parties to the contract in their capacity as partners, not as individuals. Partnerships cannot be deemed employees under the SGA Act.
Determining if a Contract is Primarily for an Individual's Labour
To evaluate whether a contract is primarily for an individual's labour, the party receiving the services must consider the contract terms. A contract is not primarily for an individual's labour if:
the contractor is allowed to complete the work themselves or employ others to do so, regardless of the actual workload or expectations of the parties involved; and/or
the contractor is committed to achieving a specific outcome.
In Jamsek v ZG Operations Australia, the Court determined that the contracts were not primarily for the drivers' labour for the following reasons:
the partnership provided a delivery service using a significant capital asset (trucks) and assumed all associated costs and risks, including insurance;
the partnership could delegate work to a substitute driver with the principal's approval; and
The client received a comprehensive delivery service executed by the partnership using its resources and at its own risk, fully insured at the partnership's expense. The labour component by a specifically identified natural person was not the primary benefit.
In summary, contractors may be deemed employees under the SGA Act in specific circumstances. Understanding these provisions and their implications for both contractors and employers is crucial to ensure compliance with the SGA Act's requirements.
BlackBay Lawyers can help clients navigate the complexities of the Superannuation Guarantee Act and its implications for contractors by offering contract review and drafting, compliance advice, dispute resolution and litigation support, and ongoing support and advisory services. With their extensive expertise in employment law and regulatory compliance, BlackBay Lawyers guides clients in confidently meeting their obligations and maintain positive working relationships while staying compliant with the SGA Act and other relevant regulations.
