SGR 2004/D1 - Superannuation guarantee: who is an employee?
26 August 2004
This draft ruling explains how employers should determine which individuals are employees for the purposes of their superannuation obligations.
Under subsection 12(1) of the SGAA, if a person is an employee at common law, that person is an employee under the SGAA.2
Whether a person is an employee of another is a question of fact to be determined having regard to the key indicators expressed in judicial decisions which have considered the issue of whether a person is a common law employee. Defining the contractual relationship is often a process of examining a number of factors and evaluating those factors within the context of the relationship between the parties. No one indicator of itself is determinative of that relationship. The totality of the relationship between the parties must be considered.
The classification of a person as an employee for the purposes of the SGAA is not solely dependent upon the existence of a common law employment relationship. While the definition includes most persons who at common law would be regarded as employees, it also extends to certain persons who would not be regarded as employees at common law such as Members of Parliament.
Where an individual performs work for another party through an entity such as a company or trust, there is no employer-employee relationship between the individual and other party for the purposes of the SGAA, either at common law or under the extended definition of employee. This is because the company or trust (not the individual) has entered into an agreement rather than the individual. However, the individual may be the employee of the intermediary company or trust, depending on the terms of the arrangement.
If a partnership has contracted to provide services, then the person who actually does the work is not the employee of the other party to the contract. This is so even if the worker is a partner and even if the contract requires the partner to do the work. However, if partners contract outside the partnership in their own personal capacity to provide their labour to fulfil a contractual obligation, they can be an employee of the other party to the contract.
A partner in a partnership is not an employee of the partnership.
A person who holds an ABN may still be an employee for the purposes of the SGAA.
The question of whether or not a person is an employee for SGAA purposes is not determined by reference to whether the person is a full-time, part time or casual worker.
The application or otherwise of the PSI measures in Part 2-42 of the ITAA 1997 is not determinative of whether an individual is an employee within the meaning of section 12 of the SGAA.
An arrangement between parties that is structured in a way that does not give rise to a payment for services rendered but rather a payment for something entirely different, such as a lease or a bailment does not give rise to an employer/employee relationship for the purposes of the SGAA.