According to DBA Lawyers special counsel Rebecca James, the most recent public ruling from the ATO on super guarantee payments noted that when an individual performs work through a separate entity such as a company or a trust, there is no employment relationship.
Recent cases, however, have indicated that the courts may decide contractors performing work for a business are actually employees, despite the fact that they may be working for a separate entity. The business, she said, would then be penalised for not making super guarantee payments.
Ms James said there was a case involving a prominent research company that the ATO has not commented on.
“[The company] had a whole lot of interviewers who were specifically trained in very particular processes with specific questions to ask in a specific order,” she explained.
“The ATO came and said, 'We think all your interviewers are not contractors; they’re employees for super purposes, and you should be paying super'.”
One of the arguments in the case was that a proportion of the contractors were incorporated and therefore the company didn’t need to make SG payments.
“The court looked at that and said, ‘We disagree, we don’t think that automatically knocks them out, we just think it is one factor to consider when we’re doing our weighing exercise’,” she said.
The court said this argument didn’t carry much weight, as it didn’t think [the research firm] was engaging the company to provide service, but engaging with a specific individual “with the company featured just as a recipient of the fees”, explained Ms James.
“So you can see that having the company wasn’t in itself sufficient; courts are willing to look through that structure to the reality and substance of what’s going on.”
Ms James said if accountants have any business clients with a large contractor force, in particular, she recommends they perform an internal audit, looking at their super, taxes, and contractual obligations.
“The ATO has no discretion to remit any part of the super guarantee charge and the interest is basically at about 10 per cent,” she said.
There are also additional penalties that may be applied, such as a part 7 penalty of up to 200 per cent of the SGC.
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