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Olias Pty Ltd as trustee for the Storer Family Trust and Commissioner of Taxation (Taxation) [2021] AATA 1524 (28 May 2021)

Last Updated: 31 May 2021

Olias Pty Ltd as trustee for the Storer Family Trust and Commissioner of Taxation (Taxation) [2021] AATA 1524 (28 May 2021)

Division: SMALL BUSINESS TAXATION DIVISION

File Numbers: 2019/5734, 2019/5735, 2019/5736

Re: Olias Pty Ltd as trustee for the Storer Family Trust

APPLICANT

And Commissioner of Taxation

RESPONDENT

DECISION

Tribunal: Member D Mitchell

Date: 28 May 2021

Place: Adelaide

The Tribunal decides that the objection decision:

(a) as it relates to the Superannuation Guarantee Assessment for the quarter ended 31 March 2016 is varied in accordance paragraphs 147 and 148 of the reasons for decision; and

(b) is otherwise affirmed.

...............[SGD]..........................................

Member D Mitchell

CATCHWORDS

TAXATION – superannuation guarantee charge – whether worker is an employee or independent contractor – multi-factorial approach to characterisation – objection decision under review is varied for one quarter in accordance with the agreement of the parties – the objection decision is otherwise affirmed.

LEGISLATION

A New Tax System (Australian Business Number) Act 1999 (Cth)

Superannuation Guarantee (Administration) Act 1992 (Cth)

Taxation Administration Act 1953 (Cth)

CASES

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122

Dental Corporation Pty Ltd v Moffet  [2021] HCATrans 16 

Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118

Hollis v Vabu Pty Ltd [2001] HCA 44

Marshall v Whittaker’s Building Supply Co Ltd [1963] HCA 26; (1963) 109 CLR 210

MWWD and Commissioner of Taxation [2020] AATA 4169

On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82

Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16

REASONS FOR DECISION


Member D Mitchell

28 May 2021

INTRODUCTION

  1. Olias Pty Ltd as trustee for the Storer Family Trust (the Applicant) is seeking review of an objection decision of the Commissioner of Taxation (the Respondent) dated 11 July 2019.[1]
  2. The reviewable decision disallowed the Applicant’s objection to Superannuation Guarantee Charge assessments made by the Respondent for the quarters ended 31 December 2014 to 30 June 2017 (Relevant Period).[2]

BACKGROUND

  1. During the Relevant Period the Applicant carried on business as a music school as a franchisee of the Forte School of Music.[3] The directors of the Applicant during the Relevant Period were Mrs Irene Storer (Mrs Storer) and Mr Stuart Storer (Mr Storer).[4] The Applicant traded as “Forte School of Music” from premises at Morphett Vale and Black Forest in South Australia.[5]
  2. The core operations of the Applicant is teaching music (principally piano and keyboards) to children from the age of 12 months via a set curriculum devised by specialist music educators.[6]
  3. In addition to the set curriculum program, the Applicant also offers private tuition for students from 8 years of age for piano, singing, guitar, flute, violin, clarinet, drums and saxophone.[7] During the Relevant Period private lessons were provided on a term basis[8] and weekly time slots were reserved exclusively for individual students.[9]
  4. During the period 1 July 2014 to 30 September 2017, the Applicant engaged the services of Mr Jayden Rowell (Mr Rowell) to provide private lessons for guitar and singing to students.[10] The Applicant’s position is that it engaged Mr Rowell as an independent contractor not as an employee.
  5. The Respondent undertook an audit of the Applicant’s superannuation guarantee obligations in relation to Mr Rowell and on 10 July 2018 issued a notice of position and position paper.[11] The Respondent having considered the information provided to it in the Superannuation Guarantee Status of the worker questionnaires completed on behalf of the Applicant[12] and Mr Rowell,[13] formed the position that the relationship between the Applicant and Mr Rowell was one of employer and employee under superannuation law.[14]
  6. According to the Applicant’s completed Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer form:[15]

(1) Group lessons. These teach the specific Forte Music programs using Forte syllabus and the teachers are employees. Everything they need is supplied and they wear uniforms.

(2) Instrument lessons. These are taught 1 on 1 and the teacher can choose the syllabus and brings their own instruments. These teachers are contractors.

  1. According to Mr Rowell’s completed Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee form:[16]
  2. The Applicant provided further information in response to the Respondent’s audit position by way of a letter from their accountants dated 20 August 2018.[17]
  3. On 26 October 2018, after finalising the audit, the Respondent issued notices of assessment of superannuation guarantee charge and calculation sheets for the Relevant Period.[18]
  4. On 16 November 2018, the Applicant lodged an objection to the assessments.[19]
  5. On 11 July 2019, the Respondent disallowed the Applicant’s objection having decided that Mr Rowell was an employee of the Applicant under common law and the extended definition in the Superannuation Guarantee (Administration) Act 1992 (Cth).[20]
  6. The Applicant lodged an application for review of the objection decision with the Tribunal dated 9 September 2019.[21]
  7. A Hearing was conducted by Microsoft Teams on 29 and 30 April 2021, both the Applicant and Respondent were represented by Counsel. Mr and Mrs Storer gave evidence on behalf of the Applicant and Mr Rowell was called to give evidence by the Respondent.

THE LAW

Superannuation Guarantee

  1. Where an employer does not provide the minimum level of superannuation support for its employees (unless the employee is an exempt employee) via payment of the superannuation guarantee into an appropriate fund by the date such a payment is required, the employer is required to pay the superannuation guarantee charge as calculated in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act).
  2. Section 12 of the SGA Act, relevantly provides:

12 Interpretation: employee, employer

(1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):

(a) expand the meaning of those terms; and

(b) make particular provision to avoid doubt as to the status of certain persons.

.......

(3) 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.

........

  1. Whether or not a worker is an employee or contractor has been an issue that the courts and the Tribunal have wrestled with on many occasions. Legal precents provide that the issue is resolved using a ‘multi-factorial’ approach to characterisation.[22] The common law indicia include, but not limited to the contract (being the terms of engagement), control, integration, delegation, risk and tools and equipment. Given the factual nature of considering the relationship in question the same fact may be applicable across multiple indicia.
  2. In Marshall v Whittaker’s Building Supply Co Ltd [1963] HCA 26; (1963) 109 CLR 210 at 217, Windeyer J explained that:

.... the distinction between a servant and an independent contactor ... is rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own.

  1. This distinction was taken up by the High Court in Hollis v Vabu Pty Ltd [2001] HCA 44 (Vabu), where Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ noted the distinction to be:

.... Rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own.

  1. This view was essentially also adopted by McHugh J in a separate judgement in Vabu where he explained at [68] an independent contractor was:

.... someone who acts as an independent principal, exercising an independent discretion in carrying out a task for his own business interest and who is retained simply to produce a result.

  1. In Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2020] FCAFC 122 (Personnel Contracting) Allsop CJ having considered these precedents provided that the approach to characterisation is one that must involve looking at the relationship as a whole. Allsop CJ provided at [15] that:

Attention to these expressions of the underlying conceptions involved does not lead one to a simple formula or definition, but rather it illuminates the need for characterisation of a human, social, legal and commercial relationship embodying such relational concepts, to which process the rights and obligations sourced in contact and the practical realities of execution, performance and relationship are relevant. .....

  1. His Honour warned against treating the different indica that may be relevant in a particular case as a checklist, he explained (at [20]) that what is required is an:

.... Intuitive appreciation and assessment of the whole, rather than a process of mechanically disaggregating and deconstructing different parts of the relationship by testsdrawn from other cases.

  1. The most recent decision on the operation of section 12(3) of the SGA Act, is that of the Full Federal Court in Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 (Dental Corporation). In that case the Court had to determine whether Mr Moffet was an employee or contactor for the purpose of leave entitlements and superannuation guarantee.
  2. Perram and Anderson JJ in their joint judgment explained that section 12(3) of the SGA Act requires three questions to be asked and that emphasis is placed on the view of the relationship held by the punitive employer. Their Honours provided at [82]-[84]:
    1. In our opinion, what s 12(3) requires is that: (a) there should be a ‘contract’; (b) which is wholly or principally ‘for’ the labour of a person; and (c) that the person must ‘work’ under that contract. There is no doubt that Dr Moffet provided his work under the Services Agreement so the requirements of (a) and (c) are met.
    2. So far as (b) is concerned, the word ‘for’ is purposive but even the simplest employment relationship has two purposes depending on the perspective from which it is viewed. From the employer’s perspective an employment contract is ‘for’ the provision of labour (in return for wages); from the employee’s perspective it is ‘for’ the receipt of wages (in return for labour).
    3. Since s 12(3) poses the question of whether the contract is ‘for’ the labour of a person, this shows that Parliament was mandating an inquiry into the purpose of the contract from the perspective of the person obtaining the benefit of the labour (ie the quasi-employer). On no view could the question posed by s 12(3) be answered by asking whether the contract was wholly or principally ‘for’ wages.
  3. Focus therefore being what was the agreement in place ‘for’ from the punitive employers perspective is to be determined by reference to its terms. The question to be asked is whether the labour component was ‘wholly or principally’ what the agreement was ‘for’ so far as the Applicant was concerned.[23]
  4. It is noted that special leave to appeal the decision of the Full Federal Court was denied by the High Court of Australia with Gageler J providing that:[24]

There is no reason to doubt the jurisdiction of the Federal Court, nor are we persuaded that there is reason to doubt the conclusion reached in the Federal Court that the respondent was an employee of the applicant by operation of section 12(3) of the Superannuation Guarantee (administration) Act. ......

Onus of Proof

  1. Where a taxpayer is dissatisfied with an assessment they may object against it in accordance with the requirements set out in Part IVC of the Taxation Administration Act 1953 (Cth) (TAA 1953).
  2. The Respondent must decide whether to allow, wholly or in part; or disallow, the taxpayer’s objection.[25]
  3. A taxpayer dissatisfied with the Respondent’s objection decision may apply to the Tribunal for a review of the decision or appeal to the Federal Court against it.[26]
  4. Section 14ZZK(b)(i) of the TAA 1953 provides that on application for review of a reviewable objection decision, the Applicant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been.

ISSUES

  1. On application for review of a reviewable objection decision, the Applicant has the burden of proving that the Superannuation Guarantee Charge assessments are excessive or otherwise incorrect and what the assessment should have been.[27] Therefore, to be successful in their application before this Tribunal the Applicant must prove that Mr Rowell was not an employee during the Relevant Period.
  2. As such the issues before the Tribunal are whether during the Relevant Period Mr Rowell was:
    1. an employee of the Applicant within the ordinary meaning of the word “employee”?

(b) an employee of the Applicant within the extended definition of “employee” set out in section 12(3) of the SGA Act? Specifically, was Mr Rowell a person who worked under a contract that was wholly or principally for his labour.

EVIDENCE

Evidence of Mr Storer

  1. In the lead up to the Hearing Mr Storer provided two written statements.[28] At Hearing Mr Storer confirmed that he adopted the statements as being true and correct to the best of his knowledge.[29] Further after dealing with an objection raised by the Respondent at Hearing, paragraphs 64 and 65 of Mr Storer’s Witness Statement found on page 185 of the Joint Hearing Book were stuck out and consequently will not be considered by this Tribunal.[30]
  2. In his initial witness statement, Mr Storer outlined:[31]
  3. Mr Storer provided a supplementary witness statement[32] setting out the arrangements the Applicant has in place in relation to employed piano/keyboard teachers. In support of his statement Mr Store provided a sample of an employment contract[33] typically used by the Applicant in respect of piano/keyboard teachers and the Forte Teacher Manual[34] which contains the course content and expectations relating to the training of those teachers. The Tribunal has had regard to that material.
  4. At Hearing, under affirmation, Mr Storer told the Tribunal that:[35]

Evidence of Mrs Storer

  1. In addition to the information provided in the Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer[36] (see paragraph 9 above), Mrs Storer also provided a written statement[37] and gave evidence at Hearing. At Hearing Mrs Storer confirmed that she adopted her written statement as being true and correct to the best of her knowledge.[38] The Respondent raised an objection with paragraphs 17 to 20 of Mrs Storer’s written statement on the basis that they were hearsay. The particular paragraphs relate to Mrs Storer’s view that Mr Rowell took all of his students with him when he ceased teaching at the Applicant’s music schools. The Tribunal formed the view that it would be a matter for the Tribunal to determine how much weight should be put on this evidence rather than strike out the particular paragraphs.[39]
  2. In her witness statement Mrs Storer provided that the handwritten responses in the Questionnaire were filled in by the Applicant’s accountant, based on her instructions and that she adheres to and adopts those responses.[40] Mrs Storer sought to clarify and augment the responses provided in the Questionnaire as follows:[41]
  3. At Hearing, under affirmation, Mrs Storer told the Tribunal:[48]

Evidence of Mr Rowell

  1. In addition to the information provided in the Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee[49] (see paragraph 10 above), Mr Rowell provided a written statement[50] and gave evidence at Hearing.
  2. In his witness statement, Mr Rowell provided:[51]
  3. At Hearing, under affirmation, Mr Rowell told the Tribunal:[52]

Well, no, it’s my understanding that that wouldn’t have been the – the order of events. It’s my understanding that had I – were I to miss a day of lessons, I would tell Irene about it – well, Irene or Stuart about it first, and then if I had a suggestion of someone to fill in for me, I could provide their details. It wasn’t my understanding of – the order of events would have necessitated me just solely getting permission from Irene and then having ... the teacher come in.

  1. At Hearing the following exchange occurred in relation to the issue of delegation:[53]

Applicant’s Counsel: But what I’m asking you is not about a previous situation you were involved in. I’m asking you as to your understanding of what your contractual rights were, and your answer to this point in time has been first in this document, a statement that you’re unsure, and it has now graduated to an emphatic no, that you would not have had that right. And I’m putting to you, Mr Rowell, that you don’t really know whether you had that right?

Mr Rowell: ‑‑‑Well, no. Once again, I - I would - I would refer your attention to the paragraph that I wrote. I said I wasn’t sure on the exact details, but there were situations. So whilst I wasn’t sure of the exact details of the - how to do this - and by your own admission, it’s confusing wording. So hence why I wrote down that I was unsure. However, in the hypothetical situation you gave, no, I would not subcontract John Smith and pay him the $30. That is, in my - and I can be - you know, as - to your use word, emphatic in my declaration that no, I would not pay John Smith. It would be Irene or Stuart that would pay John Smith, and it was - it’s my understanding that I would never have the opportunity to pay John Smith as I would never receive that initial payment to provide John Smith with.

Applicant’s Counsel: Okay. And where did you get that understanding from, Mr Rowell?

Mr Rowell: ‑‑‑Based on business proceedings and the way it worked. So it was never - it - I feel like that is something that we would have to be expressly informed that we could do, and also based on the nature in which when I told Irene or Stuart that I was unable to attend a lesson, it was not conducted in a manner that would facilitate such a scenario. It was conducted in a manner in which, you know, in this situation they asked me to make up my students (indistinct) it was never - yes.

Applicant’s Counsel: So your evidence is that you - you say to the tribunal that you could not have done it for two reasons. One, because it was the type of matter that would have had to have been expressly communicated to you as something you could have done in order for you to have been able to do it?

Mr Rowell: ‑‑‑Yes.

Applicant’s Counsel: That was the first proposition you put. And the second was that there had been an instance where it didn’t happen that way?

Mr Rowell: ‑‑‑There has been, yes, many instances in which the - the - that was not the type of scenario that happens. Instead, it was a teacher was unable to attend a lesson, and in some cases, if (indistinct) by Irene or Stuart, they would arrange for someone to come in, or in cases such as with drums, they were unable to find someone to fill in. They would allow, you know, a recommendation from another teacher or a recommendation from someone, at which point - at which point Irene or Stuart would be engaged with that said person. It was not a - it’s not - it was not a relationship that would go - it’s not as though the payment would go from Irene to the original teacher to the subcontractor teacher (indistinct).

Applicant’s Counsel: Well, Mr Rowell, you have absolutely no idea what the arrangements were between other people at Forte, between drum teachers filling in for drum teachers. You were not involved in that?

Mr Rowell: ‑‑‑Yes, I was.

Applicant’s Counsel: I see. So you were involved in the contractual arrangements (indistinct)?

Mr Rowell: ‑‑‑No, you have (indistinct).

Applicant’s Counsel: No, I’m asking a question. You were involved, were you, in the contractual arrangements between those people as to their remuneration, were you?

Mr Rowell: ‑‑‑No.

Applicant’s Counsel: No, you weren’t. You have no idea what those arrangements might have been, do you?

Mr Rowell: ‑‑‑Well, those are two separate statements. I know the person and I spoke to them, and I know how that was conducted, but no, I wasn’t involved in the contractual arrangements.

.... And I also know from my experience when I filled in for the initial teacher on my first day of working there that my - my engagement was directly to Irene, not to the other teacher.

Applicant’s Counsel: Yes. Yes. So where we end up with is that you’re saying to the tribunal that your understanding about this complex matter that we’re grappling with derives from one example, is that right, that you were personally involved in?

Mr Rowell: ‑‑‑The one example being my initial day of employment there?

Applicant’s Counsel: That seems to be what you’re telling the tribunal?

Mr Rowell: ‑‑‑Yes. Yes. There was other events, I believe, in which I may have filled in for another teacher who was, you know - I think the name was Katie, from memory, in which they had a guitar student or two and vocal students, and they also had piano students, and for them - in that situation, the piano students were rescheduled with her, whereas I would - I taught the guitar and vocal students on that day.

Applicant’s Counsel: Now, we have - in a different context, we have looked at the terms governing your contractual relationship with Forte and we have seen that those terms are very brief. They’re really (indistinct) just contained in an email. There was no written document stating whether or not you could yourself engage someone to fill in for you with the approval of Stuart or Irene, was there?

Mr Rowell: ‑‑‑No, there was not.

Applicant’s Counsel: No. And there was no express discussion in which there - it was put to you one way or the other whether you had the right to engage someone to step in for you with or without their approval. It wasn’t discussed either, was it?

Mr Rowell: ‑‑‑No, it was not discussed.

  1. Mr Rowell went on at Hearing to the tell the Tribunal that:[54]

CONSIDERATION

  1. Ahead of the Hearing, the Applicant and Respondent set out their positions by filing Statements of Facts, Issues and Contentions.[55] The Respondent also filed an Outline of Argument ahead of the Hearing.[56] Counsel for both the Applicant and Respondent sought to rely upon their written contentions as supplemented by their opening and closing statements at Hearing.
  2. The Tribunal has had the benefit of having reviewed the evidence before it, the written submissions of the parties and the transcript of proceedings. The facts overall in this matter are uncontroversial, rather it is the characterisation of the relationship between the Applicant and Mr Rowell where the dispute lies. There is no question that Mr Rowell was engaged by the Applicant to provide guitar and voice private lessons to students at its two music schools during the Relevant Period.
  3. The issue for the Tribunal to consider is whether or not Mr Rowell was an employee of the Applicant for superannuation guarantee purposes. This requires the Tribunal to consider both the ordinary meaning of employee and the extended definition as required by section 12 of the SGA Act.

During the Relevant Period was Mr Rowell an employee of the Applicant within the ordinary meaning of the word “employee”?

  1. The Applicant contended that overall, the indicia reveal that Mr Rowell was not an employee during the Relevant Period. In contrast the Respondent contended that every indicia lead to the conclusion that Mr Rowell was an employee during the Relevant Period.
  2. Both parties agreed that the starting point when considering the ordinary meaning of “employee” is to look at the indicia as set by previous cases, however that this exercise is to be undertaken in a multifactorial or multilayered approach where the assessment being made is of the relationship as a whole. The Parties referred to the reasons of Allsop CJ in Personal Contracting (as set out in paragraph 24 above) setting out that what is required is an intuitive appreciation and assessment of the whole of the relationship rather than a process of mechanically disaggregating and deconstructing different parts of the relationship by test drawn from other cases.[57] The Tribunal agrees with the Parties submissions in that regard.
  3. As put by Deputy President McCabe in MWWD and Commissioner of Taxation [2020] AATA 4169 at [15]:

The challenge then, is to look to the relationship between the parties whilst keeping in mind the essence of what constitutes an employment relationship as opposed to an independent contractor arrangement. There may be aspect of the relationship which point one way or the other. The assessment is necessarily impressionistic but, like obscenity, an employment relationship should be more or less obvious when one sees it: see Jacobellis v. Ohio [1964] USSC 164; 378 US 184 (1964) at 197 per Stewart J.

  1. Given the overlay between the factual circumstances that apply to each of the indicia discussed below, the conclusion reached by the Tribunal with regards to each has been reached not only considering the specifics relevant to that indicia but by also considering the relationship as a whole.

Terms of Engagement

  1. The contract between Mr Rowell and the Applicant was largely one based on verbal agreements and conduct. At the commencement of Mr Rowell’s engagement there were a series of brief emails in which Mr Storer requested that Mr Rowell provide an ABN as they “engage tutors on a contract basis.”[58] Mr Rowell endeavoured to and subsequently did obtain and provide an ABN to the Applicant. Further Mr Rowell provided details of his availabilities and advised that he could not teach bass guitar. It is these brief emails that form the basis of the initial contract between Mr Rowell and the Applicant.
  2. The Applicant contended that the contract was very simple but necessarily clear and as such this is not a case where there are conflicting contractual terms which might point one way or another, nor was this a case where it might be said that the worker could not have understood the contract because it was too complex or convoluted. The Applicant contended that the evidence as to the contract undoubtably support the indicia of an independent contractor.[59]
  3. The Respondent contended that the contract in this matter is not confined to what the Tribunal will find in writing between the parties, but rather it is constituted not only by the very brief emails that were exchanged between the parties but the whole conduct of the contractual relationship.[60]
  4. The terms of the contract do not determine the relationship of the parties, rather they are a starting place. The status of the relationship provided by the parties is also not necessarily determinative. The Tribunal notes that Allsop CJ in Personnel Contracting at [21] provided that:

The process of characterisation is not the process of construction or interpretation of the written contract. The decision or conclusion as to the character of the relationship is affected by the terms, meaning and content of the contract in particular by the clauses that give rise to rights and obligations, rather than those that simply seek to place a contractual label on the relationship. It is essential to recall, however, that it is not the contract that is to be characterised, but the relationship. The relationship is founded on, but not defined by, the contract terms. ...

  1. The Tribunal considers that the contractual arrangements in this matter by way of conduct clearly provide that the Applicant would pay Mr Rowell a half hourly rate in accordance with the number of lessons he taught. Mr Rowell was expected to provide those lessons when scheduled, to the students provided to him, for the specified lesson duration, at the specified location, whilst wearing a uniform shirt. The starting expectation as provided by Mr and Mrs Storer was that Mr Rowell would provide the lessons personally. The written contract essentially was a take it or leave it offer seeking that Mr Rowell provide an ABN to the Applicant. There was no negotiation of rates of pay.
  2. The evidence of Mr and Mrs Storer and Mr Rowell made it clear that there were no further written procedures or human relation guidelines provided, that set out the full terms of the working relationship.
  3. The mere fact that Mr Storer indicated that the Applicant “engage tutors on a contract basis” or that it was the Applicant’s intention to engage Mr Rowell as a contractor is not sufficient to move the relationship to one of contractor and principal instead of employee and employer.
  4. The Applicant contends that Mr Rowell’s conduct of providing an ABN, not questioning that tax was not being withheld from his payments or his rate of pay indicates that he understood and agreed that he was being engaged as a contractor rather than an employee. The evidence provided by Mr Rowell and by Mr and Mrs Storer which sets out the Applicant’s expectations of Mr Rowell in the Tribunal’s view does not make the matter clear cut.
  5. The conduct of the parties that support the written contract, when all of the evidence and the whole relationship is considered lean more toward the present indicia pointing towards an employment relationship. The contractual arrangement seems akin to that of a casual employment agreement. Other than the assertion that the Applicant engages tutors on a contract basis and requiring the provision of an ABN there was no other clear indication in the express terms or terms determined by conduct that clearly demonstrate a contractor relationship.

Goodwill

  1. When considering goodwill, it is important to keep in mind that the central question to be answered is whether the person is employed. Considerations of who is conducting what business and for whom does the goodwill inure are but aids to that analysis.[61]
  2. The evidence before the Tribunal is that some of the Applicant’s guitar students continued privately with Mr Rowell after he ceased work for the Applicant. Mrs Storer’s evidence was that all of the Applicant’s guitar students left when Mr Rowell did, however there is no conclusive evidence that he took them all with him, Mr Rowell’s recollection is that less than 10 continued on with him.
  3. The Respondent contended that the Applicant felt some commercial pressure in terms of what they could charge and seemed aggrieved that Mr Rowell might have taken some students with him when he left. The Respondent contended that the reality of the market was that any of their staff might have set up on their own in competition and collected the $32 per half an hour they were charging. The Respondent contended it was instructive that Mr and Mrs Storer were aggrieved that Mr Rowell picked up some of their guitar students, which is more obviously a breach of an employee’s duty to an employer than it is for a contractor. When one engages a contractor, a contractor is one’s commercial counter party and the proposition that the contractor might take business away from the principle exists, unless there is a specific term in the agreement between those parties that one will not take the clients of the other.[62]
  4. The Applicant on the other hand contended that there was no evidence that Mr and Mrs Storer were aggrieved that Mr Rowell had taken students, and that to the extent that the Respondent might have considered they seemed aggrieved it was submitted that more likely, their concern was merely that Mr Rowell was suggesting he was an employee in circumstances where he had gone and taken his clients. The Applicant contended that it was really just a concern about the inconsistent positions Mr Rowell was taking rather than losing a part of their business, a part that they were not really focused on.[63]
  5. The Applicant contended that here, seemingly Mr Rowell did maintain the goodwill in the clients because to a measure they moved with him.[64]
  6. The general proposition is that in the case of an employer and employee relationship there is only one set of good will which reposes in the employer and if there are two sets of goodwill or if the worker has their own good will then that is an indicator of it not being an employment relationship. However, that is not always the case.
  7. When thinking about service related industries, it is clear that goodwill can sit in the employers business but also with the employee who is actually providing the service to the customer. For example, a hairdressing salon has its own goodwill, however the client builds rapport with the individual hairdresser who is an employee of the salon. There are without doubt situations where a client sees the same particular hairdresser for a number of years and when that hairdresser moves to a new salon or sets up their own business the client may move with them. In situations where that is not possible the client may stay with the salon. The existence of two lots of goodwill do not alter the relationship between the hairdresser and salon. This depending on the circumstances may also be the case for doctors, dentists, optometrist, beauty therapist and teachers.
  8. When looking at the evidence as a whole the Tribunal does not consider this indicia to point decisively in one direction or the other. It certainly does not strongly repute the establishment of an employment relationship.

Exclusivity

  1. Whether the terms of the contract between the worker and the putative employer restrict the worker from performing the work anywhere else is a relevant indicator of the overall relationship.
  2. The evidence before the Tribunal is undisputed. Mr Rowell was not restricted during the Relevant Period to only being able to provide his services to the Applicant. It was undisputed that should Mr Rowell have wanted to, he could have provided private music lessons on either his own accord or for another company should he have chosen to. This was demonstrated by his advertisement on Gumtree.
  3. The Tribunal considers that this indicator weighs towards a contractor relationship.

Remuneration, Tax and Regulatory Arrangements

  1. Mr Rowell gave evidence that he was unaware when commencing his engagement with the Applicant as to what his rate of pay was. There was no negotiation in relation to pay and while the Tribunal appreciates that the amount of the tuition that the Applicant retained had to account for overhead costs and the assumption of risk, the rate being paid to Mr Rowell was not reflective of what he was likely to have received had he of taken the lessons independently of the Applicant. Further when Mr Rowell sought to renegotiate his rate of pay, the evidence shows that such a discussion appears to have resulted in him being told his rate would not be increased, which led to his decision to cease his relationship with the Applicant.
  2. The Applicant contended that Mr Rowell never questioned or asked for tax to be withheld from his pay. Mrs Storer confirmed that Mr Rowell was not issued with any form of payment advice other than the end of year payment summary which she issued to all staff and contractors at the recommendation of her accountant.
  3. Mr Rowell gave evidence that during the Relevant Period he did not lodge a income tax return as he was not required to. His only earning were those from the Applicant and they were below the tax free threshold. Subsequently he confirmed that meant he also did not seek to claim any deductions.
  4. Mr Rowell gave evidence that he applied for an ABN online after being requested to do so by Mr Storer. He told the Tribunal he did not know what “on a contract basis” meant but he got the information that Mr Storer requested. Mr Rowell also said he sought the ABN so that he could use it should he want to play a gig.
  5. The Applicant contended that section 8 of A New Tax System (Australian Business Number) Act 1999 (Cth) (ABN Act) an entitlement to an ABN only arises if an individual is carrying on an enterprise and as such as Mr Rowell had applied for an ABN himself in doing so he must have identified himself as a sole trader. The Applicant contended that it was impossible to imagine how Mr Rowell would have ended up with an ABN describing him self as such were that not have been the case.[65]
  6. The Respondent contended that previous cases broadly dismiss the notion that those regulatory or compliance incidents around employment or contracting are a clear indicia of the true nature of the relationship. The Respondent contended that Mr Rowell’s application for an ABN followed Mr Storer’s request that he provide one and from the point of view of an employee who has little power in the relationship it is not surprising he trotted off to get the requested ABN. The Respondent submitted it should be noted that section 18(1)(b) of the ABN Act authorises the Respondent as the Registrar of the Australian Business Number Register to cancel an ABN and one of the reasons for doing so is that at the time the person was issued with an ABN they were not entitled to have one. The Respondent contended this points out the fact that a person may very well apply for an ABN and make the declarations and so on, it does not mean that they are a matter of fact an independent contractor or a sole trader.[66]
  7. On considering the evidence in relation to this indicia and relationship as a whole the Tribunal considers that it weighs, although not decisively, towards a relationship of employment. In the Tribunal’s view, it is unlikely that an independent contractor would not negotiate their payrate and it is not unreasonable that a person would seek to obtain an ABN when requested to do so, when the reality is they do not actually meet the requirements to hold an ABN.

Control

  1. The potential for the putative employer to exercise control over the worker is an important consideration. The evidence before the Tribunal in relation to this indicia is clear. All three witnesses agreed that:
  2. Mr Storer’s evidence was that he had no control over Mr Rowell and how he taught his lessons as he was an independent contractor. Mr Storer said that he was not in a position to insist that Mr Rowell use the Rockschool Method of teaching, he could make a suggestion but not insist. He said he was unable to direct Mr Rowell as to how to provide the guitar lessons.
  3. Both Mr and Mrs Storer gave evidence that it was difficult for them to get new music teachers and that it would be their problem if a teacher decided to stop teaching mid-way through at term because the students parent’s had largely paid for the term of lessons in advance and they had an obligation to deliver those lessons. Mr and Mrs Storer agreed that they were both overall happy with how Mr Rowell was undertaking his work, as the parents and students were happy.
  4. Mr Storer gave evidence that they were not going to replace Mr Rowell because he did not want to use the Rockschool Method of teaching and when asked if that was because they would not want to replace him in the middle of the term, said that they had no reason to replace him because they could not exercise that degree of control. Further when put to him that it was not because he lacked the legal power, it was simply not worth the trouble, he confirmed that it was not worth the trouble.
  5. Mr Rowell’s evidence was that he did use the Rockschool Method of teaching with approximately 30% of his students. Mr and Mrs Storer were unable to dispute this.
  6. The Applicant contended that the evidence in relation to control of the worker clearly indicated that Mr Rowell was not an employee as Mr Rowell acknowledged that he had never been supervised and he agreed that the Applicant did not have the skills to supervise him.[67]
  7. The Respondent contended that the control test is no longer as decisive as it had previously was as employers are getting bigger, with needs that are more diverse and work that is getting more specialised. The Respondent submitted that:[68]

..many organisations would have IT specialists, management accountants, engineers, actuaries, who are unquestionably employees but for whom the employer simply has no hope of directing them in the performance of their work at a fine grain level. What they can direct though for employees in that category, and all employees, is well, what project they are going to work on. What deadline do they have for that work. How are they going to be directed to spend their work hours at a more general level. And that is control and the situation is no different here, the Storers and Mr Rowell all admit that they did not supervise what he did in the class room with his students.

Both Mr and Mrs Storer freely accepted that they relied on what they could gather from feedback that they received from parents and Mrs Storer said in the questionnaire the worker did his own thing and conducted the lessons as he saw fit. She said quality control was done by the parents, which we can determine by parents’ complaints. .. Mr Storer’s take on the same point was a bit more of a positive spin, he said if the parent are happy, we are happy. But the key ways in which the Applicant did control Mr Rowell’s work were the ways that made it their business, and not his business. Their business was getting students in classes with teachers and charging them for it. So, its business was to marshal its teaching resources and to direct its teachers to deliver the service that it had contracted to provide to parent or students and in aid of this it scheduled the classes. It directed Mr Rowell where he needed to be and when, it rescheduled classes when he wasn’t available and, at a practical level, this is the way it controlled Mr Rowell.

  1. The Applicant contended that the size of the enterprise matters, in a large company there are structures in place which, in effect, give rise to supervision in a structural manner – that is not the case here.[69]
  2. The Respondent drew the Tribunal’s attention to the Vabu case of in which cycle couriers were found to be employees of the courier company. In that case the couriers provided their own bicycle, were paid per job, carried a radio and were directed by the courier company to pick up a parcel here and deliver it there. How they did it was up to them but they were going to ride their bicycles to do it.[70] The Respondent contended that the following passage of the majority of the High Court at [57] has relevance to the control an integration tests:

The couriers had little latitude. Their work was allocated by Vabu’s fleet controller. They were to deliver goods in the manner in which Vabu directed. In this way, Vabu’s business involved the marshalling and direction of the labour of the couriers, whose efforts comprised the very essence of the public manifestation of Vabu’s business. It was not the case that the couriers supplemented or performed part of the work undertaken by Vabu or aided from time to time; rather, as the two documents relating to work practices suggest, to its customers they were Vabu and effectively performed all of Vabu’s operations in the outside world. It would be unrealistic to describe the couriers other than as employees.

  1. The Respondent contended that because Mr Storer did not insist that Mr Rowell used the Rockschool teaching method does not indicate he did not have the legal right to direct him. The Respondent contended that it was completely understandable when it was hard for the Applicant to fill the teaching positions, their main concern was keeping parents happy and Mr Rowell seemed to do that. Both Mr and Mrs Storer had said that they were generally happy with Mr Rowell’s standard of work and it would have been a real problem for them if one of the teachers left in the middle of the term. The Respondent submitted that it would have therefore been counterproductive for them to force the issue, whatever the true nature of the legal relationship.[71]
  2. The Applicant contended that the Vabu case is distinguishable as in that case the company knew what the workers were doing, they were couriers and it was incredibly straight forward what they were doing, to be contrasted to this case where the simple fact is that the Storers really did not know what the Mr Rowell was doing. The Applicant contended that the nature of the business in Vabu of courier delivery was consistent with the overall business. The Applicant contended that in fact, it was the overall business to be contrasted with the situation here where the nature of the work was significantly differentiated from the overall business. Unlike here, the courier drivers were not, purporting to run their own separate business.[72]
  3. The Tribunal does not accept the contentions of the Applicant in this regard. It is difficult to accept that Mr and Mrs Storer did not know what Mr Rowell was doing. They knew he was providing guitar lessons, from parent feedback and what appears to have been consistent enrolments that overall, the parents and students were satisfied with those lessons. They may not have known the specific methods of how Mr Rowell was instructing the students however at the end of the day they were not that concerned as long as the lessons were provided.
  4. The Tribunal agrees with the contentions of the Respondent that just because Mr Storer choose not to impose his preferred method of teaching upon Mr Rowell did not mean he could not do so. In fact, Mr Rowell’s uncontested evidence, because neither Mr or Mrs Storer ever supervised his lessons was that he did use the teaching method recommended by Mr Storer for a third of his students. The Tribunal’s view of the evidence provided by Mr and Mrs Storer is that if the parents and students were happy, they were happy and they would not rock the boat because finding a new teacher to honour the contracts they had with the parents and students was difficult.
  5. In considering the evidence before it as a whole the Tribunal considers that the Applicant did have a degree of control over Mr Rowell, being that which was exercised by, time, duration and location of lessons, fees paid for lessons, uniform to be worn and that which was not exercised, being how he taught the lessons. The Tribunal considers this indicia weighs towards a relationship of employment.

Integration

  1. The level of integration into the business is an indicator that is directed to the fundamental question of whether the worker serves his employer in his employer’s business or whether he carries on trade or business of his own.[73]
  2. The evidence before the Tribunal clearly demonstrates that the Applicant’s business is one of offering music tuition. This point is uncontroversial. The Tribunal accepts that there were two distinct business lines for the Applicant’s business that of providing piano/keyboard lessons which were operated using the Forte Method of teaching and that of private lessons for other instruments. While the Applicant’s evidence is that the teaching of other instruments was adjunct to its core business, it was a profitable part of its business. The evidence demonstrates that the Applicant, not Mr Rowell sourced the students, in fact the other instrument lessons were offered to protect the core business from leakage of students by offering tuition to the siblings of its piano/keyboard lessons the opportunity to also take music lessons at the Applicant’s schools of music.
  3. The Tribunal acknowledges the Applicant’s evidence that the provision of lessons of other instruments represented a small part of their overall business, approximately 10% of its total revenue and that its core business is delivered in accordance with the Forte system, in line no doubt with its franchise agreement. However, the Tribunal notes that the offering of lessons for instruments other than piano and keyboards is also a recognised offering by the Franchised Forte Schools of Music as demonstrated by the website of which Mr Storer told the Tribunal is managed and run by the franchisor. As such while the Tribunal recognised the difference in the teaching models of the two arms of the Applicant’s business, they are consistent with each other and in fact operate to support each other.
  4. The Applicant contended that size of a business does not affect how the legal principles apply, and in this case if one does not allow oneself to be too troubled by how tiny Mr Rowell’s business was, he was clearly carrying on a business. The Applicant contended that Mr Rowell had got his own ABN, had said to the world and to the government on the public record he was a sole trader and put an ad on Gumtree.[74]
  5. While Mr Rowell did have an active advertisement for his services on Gumtree and had printed brochures of which he says he did not deliver and obtained an ABN, the Tribunal is not convinced that he was in fact carrying on his own business of providing music tuition. Even if he had of, that would not necessarily have changed the relationship between him and the Applicant unless of course he was representing his own business while carrying out the lessons he was contracted by the Applicant to provide.
  6. The evidence indicates that as previously mentioned the Applicant sourced the students, set the timetables, set the fees and collected them from the students, entered into a separate contractual relationship with the students in which terms and conditions were outlined and obligations were created between the students and the Applicant, it was the Applicant who owed a duty of care to the students. Both Mr and Mrs Storer’s evidence indicated that Mr Rowell was seen by the students and their parents to have been one of their teachers. They provided him with a company logo t-shirt and referred to him in that manner – which clearly demonstrates this fact.
  7. When considering the contractual obligations between the Applicant and the students (often as represented by their parents), that all lessons were held on the Applicant’s premises, that the Applicant was responsible for ensuring the lessons were delivered, the Tribunal finds that this indicia weighs heavily towards the relationship in question being one of employment. Mr Rowell was required to attend when he was told to and to teach the lessons scheduled during that time. Mr Rowell was held out by the Applicant as being one of its teachers.
  8. There was no evidence advanced before the Tribunal that indicated that Mr Rowell was in anyway providing his services on his own behalf rather than on behalf of the Applicant as the Forte School of Music at Morphett Vale or Black Forest. The Respondent contended that the Applicant set the price, kept the profit and was certainly much more than a mere commission agent or a booking agent for the teachers. The Tribunal agrees with that contention and considers it was clear that Mr Rowell was serving the Applicant in their business.

Results

  1. The results test requires consideration of whether the contract was to produce a particular result or provide a service. Where there is no discernible product created which is distinct from the labour that created it, this indicia may not be that helpful.[75]
  2. In this regard the Respondent contended that:[76]

The substance of Mr Rowell’s contract was not to produce a specified result as distinct from his labour, it was to teach for a specific period of time. Payment for the lesson was calculated by reference to the time taken for the lesson and was, in essence, payment for Mr Rowell’s labour. If a student missed their class (without notice) Mr Rowell was sometimes paid despite not delivering any tuition.

  1. The Applicant on the other hand contended that the completion of a music lesson by Mr Rowell was the fulfillment of the Applicant’s desired result or in the alternative the Applicant’s desired result was for the particular body of students who sought tuition in an other instrument, in any given term, to receive the that tuition over the course of that term.[77]
  2. The Tribunal’s view is that there is no discernible product created or clear distinction between the service provided and result, and as such finds that this indica does not assist in determining the relationship between Mr Rowell and the Applicant.

Delegation

  1. The indicia of delegation was the most contested indicia in this matter. It was agreed by Mr and Mrs Storer and Mr Rowell that he was rarely absent during the Relevant Period and where he was unable to attend a scheduled lesson it was rescheduled for him or on some occasions he rescheduled it himself. It was agreed that Mr Rowell at no stage sought to delegate his lessons to someone else.
  2. The main disagreement between the parties is that the Applicant contended that whether or not Mr Rowell was aware he could delegate his work to someone else he had the right to do so and that this right was apparent in the terms of his engagement. The Respondent on the other hand contended that Mr Rowell did not have the ability to sub-contract.
  3. In his evidence Mr Rowell indicated that he did not believe that he could organise his work or tasks to be completed by another person engaged by him either with or without the approval of the Applicant. He wrote on the Superannuation Guarantee Questionnaire that he was “unsure to as the exact details of these situations, as no information on the actual policies of the business was ever made known to us ....”[78] Mr Rowell’s evidence which was supported by that provided by Mrs Storer was that he was verbally told that he was to complete the teaching himself. Mr Rowell further provided in the Questionnaire in relation to absences that “Once again this would vary on any given incident, however generally if the employee was unable to attend a day of work, they would notify the employer, and the work would either be assigned to another employee at the discretion of the employer, or if no substitute could be arrange, would be completed by the original employee at an alternative time arranged by the business, the employer, as well as the student/customer.”[79]
  4. The Tribunal considers that Mr Rowell’s evidence in his witness statement and at Hearing was consistent. While the Applicant submitted that Mr Rowell was vague in his evidence and changed his position, the Tribunal considers that Mr Rowell was unwavering in his evidence that he at no stage understood based on what he had experienced and seen while working for the Applicant during the Relevant Period and in the absence of any direct conversations or information on the issue from Mr or Mrs Storer, that he could have either with or without their approval arranged for someone else to come in and teach his lessons.
  5. The examples provided by Mr Rowell in his evidence about times when delegation or substitution of teachers occurred related to two separate occasions where he had been asked by Mrs Storer to step in for another teacher, once to fill in for the teacher who was leaving and from whom Mr Rowell took over from and once where he filled in for another teacher later in his engagement with the Applicant at the request of Mrs Storer. On both occasions Mr Rowell said that the arrangements were made by Mrs Storer and he was paid by the Applicant not by the other teacher. The other example referred to by both Mr Rowell and Mr and Mrs Storer related to a drum teacher who was going to be away for at least a month, Mr Rowell gave evidence which was not effectively disputed that on that occasion he made a recommendation for an alternative teacher to Mrs Storer who then contacted that person and she was then engaged to take the drum lessons and was paid by the Applicant not the drum teacher for whom she was filling in.
  6. Mr and Mrs Storer gave evidence that although Mr Rowell had the ability to delegate his work, he never chooses to. It was suggested that this was because he needed the money and preferred for his lessons to be rescheduled. Mr and Mrs Storer gave evidence that they would want to at least know who would be engaged as a subcontractor by Mr Rowell as their business involves teaching young children and they have child safety to consider. When pushed they also provided evidence that they would want to know that the subcontractor was capable of providing the lesson.
  7. The issue of the Applicant wanting to ensure that child safety was a primary consideration when allowing a teacher to take a lesson is reasonable. However, given the evidence provided that Mr Rowell was not required to have a police check until well after being engaged by the Applicant and Mrs Storer’s evidence that they require teachers to have checks done before starting however often have to continually follow them up, detracts from the weight that the Tribunal places on child safety being a primary reason for the Applicant wanting to approve any sub-contracted teachers rather than Mr Rowell not actually having the ability to sub-contract.
  8. The Applicant contended that the evidence in relation to delegation is that clearly the express written terms of the contract did not deal with delegation nor were there any verbal terms. Mr Rowell admitted that there had never been any discussion in which he was told he could not delegate. He was also not told he could not subcontract to another teacher on whatever terms he and that other teacher might have agreed.[80]
  9. The Applicant contended that without more than a simple contract that A engages B on a contract basis one would infer a right to delegate from contractual terms of that nature. The Applicant provided by way of an example if a factory has many employees, but out the front of the factory it has a large strip of lawn and it enters into a simple contract with a lawn mowing person to mow that law and says “I am engaging you on a contract basis” it is submitted that it would go without saying that the contractor, B could in turn subcontract the task, as long as he gets it done. So without more, the statement or the agreement between A and B that A has engage B on a contract basis must carry with it an implied term that B, in turn, can subcontract. It would only be otherwise if there was some express term precluding that.
  10. Based on that example the Applicant contended that Mr Rowell had an implied right to subcontract, whether he knew it or not and it is irrelevant whether he understood he had that right. The Applicant contended it is true that the Applicant might have wanted to have had some say in the identity of the delegate, or the subcontracted party, and the obvious example of that may be that party’s appropriateness to work with children.[81]
  11. The Tribunal considers this example provided by the Applicant to be flawed. The example situation is not comparable to that in question here. The Tribunal agrees that A would not be engaged with how the lawn mowing was completed, rather it was the result of the lawn actually being mowed that was important. The lawn mowing situation does not involve the provision of service by B to another person on behalf of or in connection with A, it is a situation where B is providing a service directly to A. In the present situation Mr Rowell is providing a service on behalf of the Applicant, assisting it to meet its contractual obligations to its students (and their parents).
  12. The Applicant contended that in relation to the identity of the worker, in this case it was virtually immaterial and the evidence bears that out powerfully. The fact that Mr Rowell who when engaged had almost no experience in the relevant field shows how unimportant it was for the Applicant to have that particular person, as opposed to any person, do the job.[82]
  13. The Respondent contended that the identity of the worker mattered and provided that:[83]

Both Mr and Ms Storer accepted without hesitation that the relationship between the teacher and the student was an important part of the teaching environment. Both of them accepted that the expectation was that the teacher would teach out the term and both of them accepted that parents would be disappointed if their child’s teacher were to change frequently.

So, this reality really dispenses with the delegation issue as a real indicia of concern in this matter. It’s just not the kind of work where Mr Rowell could at his discretion simply arrange for anyone to turn up and do the job. It’s not tiling, it involves an existing relationship. Now, true it is that when he was taken on, he was relatively inexperienced but it was accepted that he performed his work to a generally good standard and even if it were accepted that he was able, although he didn’t know it, to substitute another person at his own instigation, this is not a case where he had a right to delegate in the relevant sense.

  1. The Tribunal agrees with the contention of the Respondent that the identity of the worker did matter. The evidence before the Tribunal was unanimous that it was important that the teacher builds rapport with the student and that this assists the learning process and the satisfaction of the parents. It is unreasonable to suggest that it was open to Mr Rowell to arrange for different people at any stage, let alone different people to regularly undertake his lessons given that lessons were ordinarily provided to children, some whom have siblings engaged in other lessons with the Applicant, the evidence was clear that the Applicant’s main objective in offering the other instrument lessons was to keep the parents happy.
  2. The Tribunal accepts that Mr Rowell had limited experience when he was engaged by the Applicant and that in reality at that stage it was immaterial to the Applicant whether it was Mr Rowell or another person who could teach guitar that they engaged, however once he had passed the trial stage that position changed, the Applicant required consistency for the students.
  3. The evidence showed that the Applicant had a contractual obligation to ensure that the lessons that the student (or their parents on their behalf) had paid for in advance were provided to them. This was not the obligation of Mr Rowell.
  4. Despite Mr and Mrs Storer giving evidence that Mr Rowell was able to delegate his work with their approval and the Applicant contending that such a right was implied into the engagement arrangements, the Tribunal considers that the reality of the relationship between the Applicant and Mr Rowell was that it was Mr Rowell who was required to deliver the lessons himself. The relationship was one for Mr Rowell’s services and required Mr Rowell not someone else to provide those services.
  5. There was no evidence advanced by the Applicant of any examples of other instrument teachers engaging in a subcontracting/delegation arrangement. The Tribunal was not convinced when looking at the evidence provided by Mr and Mrs Storer in totality and the processes undertaken when rearranging lessons, that Mr Rowell ever had a true ability to delegate his work.
  6. On weighing the evidence before it, the Tribunal considers that this indicia favours the existence of an employment relationship.

Risk

  1. The questionnaires competed by Mrs Storer and Mr Rowell both express that Mr Rowell did not guarantee his work, nor was he responsible for any mistakes he may have made. The risk for Mr Rowell appears to be limited to if students did not re-enrol, he would not have that particular lesson scheduled for the next term. However, given that the remuneration provided to Mr Rowell in relation to the lessons were much less than that provided to the Applicant, which when combined with the potential impacts of students or their families returning for piano/keyboard lessons or lessons, the commercial risk lies more fairly with the Applicant.
  2. Consequently, the Tribunal considers that this indicia is more consistent with the existence of an employment relationship.

Tools and Equipment

  1. The evidence before the Tribunal is that the Applicant either personally or by requiring the student to acquire their own resources provided everything that Mr Rowell needed to teach his lessons. Mr and Mrs Storer both gave evidence of the facilities available at each of the Applicant’s schools which included the availability of books for parents or students to purchase, computers or ipads, instruments, backing material and amplifiers and leads. Mrs Storer’s evidence was that students predominately bought their own guitar and there was also a guitar available in the relevant room.
  2. Mr Rowell’s evidence was that he was provided with everything he needed by the Applicant. Although he liked to use his personal guitar he did not always do so and on those occasion used the guitar on the Applicant’s premises. Mr Rowell told the Tribunal that in some instances he would source his own teaching materials in accordance with a students interest, however that did not seem to be the norm.
  3. Based on the evidence before it, the Tribunal does not accept the Applicant’s contentions that Mr Rowell provided all of his own tools and equipment required to teach his lessons. The Tribunal considers that this indicia points to a relationship of employment.

Rational for different arrangements with different workers

  1. The Applicant drew the Tribunal’s attention to the decision of MWWD v Commissioner of Taxation [2020] AATA 4169 (MWWD) and asked that the Tribunal have particular regard to it. The Applicant contended that:[84]

.... It is a fairly recent decision... that usefully draws together the concepts and it – it has a couple of important parallels with this case. ... it’s accepted that the distinction between employee on the one hand and independent contractor on the other is, so the authorities say, rooted fundamentally in the difference between a person who serves the employer in the employer’s business, as opposed to a person who carries on a business of their own, and that is a crucial distinction, of course, that pervades the authorities.

  1. The Respondent contended that the facts in MWWD were different from the present case as in that case there was a clear rationale for engaging two different lessons of staff to do the same work, which does not exist in the present case. Further the Tribunal’s findings in relation to the intention of the worker, an experienced mechanic, who was entering into the relationship with his eyes wide open having received advice from his accountant as indicating that the terms of the contract and what was intended by the parties had a solid foundation.[85]
  2. The Tribunal accepts that the legal principles set out by Deputy President McCabe in MWWD are instructive and that the reasons for decision draw those legal principles together in regard to the specific facts of that case. The Tribunal considers that its reasons for decision in this matter are not inconsistent with the legal principles set out in MWWD or other relevant Court and Tribunal decisions.
  3. To that regard the Tribunal notes that the Applicant has at all times been clear that it operates a music tuition business and its core operations comprise teaching music (principally piano and keyboards) to children via a set of curriculum devised by specialist music educators (using the Forte Method) and that the teaching other instruments was a non-core part of the business.
  4. Based on Mr Storer’s evidence the Applicant engages piano/keyboard teachers as employees as:
  5. Mr Storer’s evidence in relation to why the Applicant engages other instrument teachers as contractors was because the teaching of other instruments was a non-core, adjunct activity of which he and Mrs Storer were unable to have any significant input into so they decided to out-source that aspect of the teaching operations of the Applicant’s business to external contractors.
  6. Mr and Mrs Storers evidence was that the other instrument teachers engaged by the Applicant were all aged between 18 and 21 and in the case of Mr Rowell with no to little previous teaching experience.
  7. The Applicant contended that in this case there is clear division as shown in the employment contract for employees and the intensive training they are provided, whereas the adjunct people who teach other instruments get no training at all, and in fact do not even have to have any experience to get the job. There is a commercial and economic rationale for it. The Applicant contended that the Tribunal should be confident that the taxpayer has not been engaged in a nefarious attempt to undermine the rights of a select group of young, vulnerable people.[86]
  8. While the intention of Mr and Mrs Storer was that the Applicant would engage Mr Rowell as a contractor, as the instrument he taught was outside their expertise, overall when considering this argument as rational for classifying the relationship between the Applicant and the two different types of teachers differently is not persuasive. Mr and Mrs Storer are experienced musicians and were happy for the effective supervision of the delivery and quality control of other instrument lessons to be provided by the students and their parents, and as outlined above they exerted a level of control over the way in which Mr Rowell provided lessons. There is no suggestion that Mr Rowell or the other instrumental teachers were remunerated in a way that encouraged them to be more effective or that made working arrangements that were anything other than an employment arrangement attractive.
  9. The Tribunal agrees with the submission of the Respondent that the present case is distinctly different to that of MWWD where there was a clear reason as to why the arrangements were different between the two classes of workers. Therefore, while the principles of the decision in MWWD apply, the overall outcome is dependent upon the facts of which are markedly different in the present situation.

Conclusion

  1. Having taken the approach of considering each indicia individually and together with an intuitive appreciation and assessment of the whole relationship, the Tribunal has formed the view that the relationship between Mr Rowell and the Applicant during the Relevant Period was one of employment.

During the Relevant Period was Mr Rowell an employee of the Applicant within the extended definition of “employee” set out ins section 12(3) of the SGA Act?

  1. As the Tribunal has found that Mr Rowell was an employee of the Applicant within the ordinary meaning of “employee” for the purposes of section 12(1) of the SGA Act, it is not required to consider the extended definition of employee.
  2. However, for completeness the Tribunal notes that as expressed in paragraphs 25 to 26 above the Tribunal considers that the principles set out in Dental Corporation are relevant when considering whether the extended definition of “employee” set out in section 12(3) of the SGA Act is met. The Tribunal’s discussion in relation to the delegation and results indicia outlined above would be relevant in this regard.

CONCLUSION

  1. On balance, having considered the evidence before it, the Tribunal is not satisfied that Mr Rowell was an independent contractor.
  2. The Tribunal finds that Mr Rowell was an “employee” in accordance with the ordinary meaning of the word pursuant to section 12(1) of the SGA Act and therefore was not required to consider the expanded meaning of “employee” pursuant to section 12(3) of the SGA Act.
  3. The Applicant has not discharged its onus to prove that the assessments for the Relevant Period are excessive or otherwise incorrect. As a consequence of the Tribunal finding that Mr Rowell was an employee of the Applicant during the Relevant Period, superannuation guarantee payments were payable by the Applicant on Mr Rowell’s behalf.
  4. In this matter the calculation of the superannuation guarantee charge for the Relevant Period is not in dispute. The Respondent submitted that should the Tribunal find that Mr Rowell was an employee of the Applicant, an order should be made that the Superannuation Guarantee Assessment for the quarter ended 31 March 2016 be amended in accordance with the new individual Superannuation Guarantee shortfall calculation provided at Annexure B to the Respondent’s Statement of Facts, Issues and Contentions. Such an order would correct the individual Superannuation Guarantee shortfall which will also require a recalculation of the nominal interest component. The need for such a correction has arisen as the assessment did not take into consideration the payment of $400.25 made to Mr Rowell by the Applicant on 4 March 2016.[87] The Applicant does not dispute this point.[88] The Tribunal accepts that it is appropriate for the objection decision to be varied in the proposed terms.

DECISION

  1. The objection decision:

(a) as it relates to the Superannuation Guarantee Assessment for the quarter ended 31 March 2016 is varied in accordance with the new Individual Superannuation Guarantee shortfall calculation provided at Annexure B to the Respondent’s Statement of Facts, Issues and Contentions; and

(b) is otherwise affirmed.

I certify that the preceding 148 (one hundred and forty eight) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

................[SGD]....................................................
Associate

Dated: 28 May 2021

Date of hearing:
29 and 30 April 2021
Counsel for the Applicant:

Solicitors for the Applicant:
Mr Anthony Hurren

JL Lawyers Pty Ltd
Counsel for the Respondent:
Mr Sam Ure
Solicitors for the Respondent:
Australian Taxation Office

[1] Exhibit 1, Joint Hearing Book, T Documents, T2, page 16, Notice of Objection Decision.

[2] Exhibit 1, Joint Hearing Book, T Documents, T2, pages 16-25, Notice of Objection Decision and Reasons for Decision.

[3] Exhibit 1, Joint Hearing Book, T Documents, T3, page 27, Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer.

[4] Exhibit 1, Joint Hearing Book, Supplementary T Documents, ST1, page 134, Olias Pty Ltd – Historical Company Search.

[5] Exhibit 1, Joint Hearing Book, T Documents, T3, page 27, Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer.

[6] Exhibit 1, Joint Hearing Book, Applicant’s Revised Statement of Facts, Issues and Contentions, page 161, paragraph 1.

[7] Exhibit 1, Joint Hearing Book, T Documents, T29, page 107, Website Extracts.

[8] Exhibit 1, Joint Hearing Book, Supplementary T Documents, ST2, page 136, Terms and Conditions – Forte School of Music.

[9] Exhibit 1, Joint Hearing Book, Supplementary T Documents, ST2, page 136, Terms and Conditions – Forte School of Music.

[10] Exhibit 1, Joint Hearing Book, T Documents, T3, pages 26-42, Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer and T4, pages 43-58, Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee.

[11] Exhibit 1, Joint Hearing Book, T Documents, T5, pages 59-68, Notice of Position and Audit Position Paper.

[12] Exhibit 1, Joint Hearing Book, T Documents, T3, pages 26-42, Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer.

[13] Exhibit 1, Joint Hearing Book, T Documents, T4, pages 43-58, Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee.

[14] Exhibit 1, Joint Hearing Book, T Documents, T5, pages 59-68, Notice of Position and Audit Position Paper.

[15] Exhibit 1, Joint Hearing Book, T Documents, T3, pages 26-42, Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer.

[16] Exhibit 1, Joint Hearing Book, T Documents, T4, pages 43-58, Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee.

[17] Exhibit 1, Joint Hearing Book, T Documents, T6, pages 69-73, Letter from Hu Partners.

[18] Exhibit 1, Joint Hearing Book, T Documents, T7-T28, pages 74-106, Notice of Assessment of Superannuation Guarantee Charge and Superannuation Guarantee Shortfall and/or Choice Liability Calculation for the Relevant Period.

[19] Exhibit 1, Joint Hearing Book, T Documents, T31, pages 112-116, Objection Form – for Tax Professionals and T32, pages 117-122, Letter from Hu Partners.

[20] Exhibit 1, Joint Hearing Book, T Documents, T33, pages 123-132, Objection Decision.

[21] Exhibit 1, Joint Hearing Book, T Documents, T1, pages 1-15, Application for Review.

[22] Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 35-36.

[23] Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 at [102].

[24] Dental Corporation Pty Ltd v Moffet  [2021] HCATrans 16. 

[25] Section 14ZY of the TAA 1953.

[26] Section 14ZZ of the TAA 1953.

[27] Section 14ZZK(b)(i) of the TAA 1953.

[28] Exhibit 1, Joint Hearing Book, Witness Statement of Stuart Storer, pages 176-185 and Exhibit 2, Supplementary Witness Statement of Stuart Storer and attachments.

[29] Transcript, page 13.

[30] Transcript, page 14.

[31] Exhibit 1, Joint Hearing Book, Witness Statement of Stuart Storer, pages 176-185.

[32] Exhibit 2, Supplementary Witness Statement of Stuart Storer and attachments.

[33] Exhibit 2, Supplementary Witness Statement of Stuart Storer and attachments – Sample Employment Contract used by the Applicant in respect of Piano/Keyboard Teachers.

[34] Exhibit 2, Supplementary Witness Statement of Stuart Storer and attachments – Forte Teacher Manual.

[35] Transcript, pages 12-37.

[36] Exhibit 1, Joint Hearing Book, T Documents, T3, pages 26-42, Superannuation Guarantee – Status of the Worker Questionnaire – Principal/Payer.

[37] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, pages 168-172.

[38] Transcript, page 40.

[39] Transcript, pages 41-42.

[40] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, page 169, paragraphs 7-9.

[41] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, pages 168-172.

[42] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, page 169, Paragraphs 10-12.

[43] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, page 169-170, paragraph 13.

[44] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, page170, paragraph 14.

[45] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, pages 170-171, paragraphs 16-20.

[46] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, page 171, paragraphs 21-24

[47] Exhibit 1, Joint Hearing Book, Witness Statement of Irene Storer, page 171, paragraph 22.

[48] Transcript, pages 40-57.

[49] Exhibit 1, Joint Hearing Book, T Documents, T4, pages 43-58, Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee.

[50] Exhibit 1, Joint Hearing Book, Witness Statement of Jayden Rowell, pages 186-192.

[51] Exhibit 1, Joint Hearing Book, Witness Statement of Jayden Rowell, pages 186-192.

[52] Transcript, pages 66-118.

[53] Transcript, pages 109-111.

[54] Transcript, pages 112-118.

[55] Exhibit 1, Joint Hearing Book, Applicant’s Amended Statement of Facts, Issues and Contention, pages 161-167 and Respondent’s Statement of Facts, Issues and Contentions, pages 141-160.

[56] Exhibit 3, Respondent’s Outline of Argument.

[57] Transcript, pages 127-128 and 132.

[58] Exhibit 1, Joint Hearing Book, Emails between Mr Rowell and Mr Storer, pages 138-140.

[59] Transcript, pages 121-122.

[60] Transcript, pages 132-133.

[61] Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 at [68].

[62] Transcript, page 134.

[63] Transcript, page 145.

[64] Transcript, page125.

[65] Transcript, page 122.

[66] Transcript, pages 142-143.

[67] Transcript, page 123.

[68] Transcript, page 135.

[69] Transcript, page 145.

[70] Transcript, page 136.

[71] Transcript, pages 136-137.

[72] Transcript, pages 145-146.

[73] See Marshall v Whittaker’s Building Supply Co Ltd [1963] HCA 26; (1963) 109 CLR 210 at 217 and Hollis v Vabu Pty Ltd [2001] HCA 44.

[74] Transcript, page 127.

[75] See On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [282].

[76] Exhibit 3, Respondent’s Outline of Argument, page 7, paragraph 28.

[77] Exhibit 1, Joint Hearing Book, Applicant’s Amended Statement of Facts, Issues and Contention, page 165, paragraphs 36-37.

[78] Exhibit 1, Joint Hearing Book, T Documents, T4, page 53, Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee.

[79] Exhibit 1, Joint Hearing Book, T Documents, T4, page 53, Superannuation Guarantee – Status of the Worker Questionnaire – Worker/Payee.

[80] Transcript, page 123.

[81] Transcript, page 124.

[82] Transcript, page 126.

[83] Transcript, page 140.

[84] Transcript, page 127.

[85] Transcript, pages 143-144.

[86] Transcript, page 129.

[87] Exhibit 1, Joint Hearing Book, Respondent’s Statement of Facts, Issues and Contentions, page157- 159, paragraphs 89-90 and Annexure B.

[88] Transcript, pages 63-64.

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