Jun 07, 2023 / News

Superannuation Newsletter Edition 17

When is a worker an employee?

Although not part of the Budget, it is worth noting a recent case on the extended definition of “employee” in the super guarantee legislation.

An employer’s obligation to make super contributions is governed by the Superannuation Guarantee (Administration) Act 1992. In some situations the Act extends this obligation to workers who would not normally be considered employees, so it is important to understand where this may happen.

In particular, sec 12(3) of the Act extends the requirement to make super contributions beyond common law employees to a person who “works under a contract that is wholly or principally for the labour of the person”. The two key elements that will result in an obligation to make super contributions are that the contract with the worker:

  • Is at least principally for labour (and not, for example, principally for the provision of equipment), and 
  • Must be for the labour of that person (the worker must not have the ability under the contract to substitute someone else to do the work).

A recent case involved truck drivers who provided their own trucks and operated partnerships with their respective wives to provide delivery services to a company, ZG Operations Australia Pty Ltd. The truck drivers had hoped to be entitled to super contributions, either as common law employees or under the extended definition of sec 12(3).

In 2022 the High Court ruled that the truck drivers were not common law employees, and the Federal Court in Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48 recently ruled that neither are they employees under the extended definition of sec 12(3).

In particular, the Federal Court considered that in this situation:

  • The contract was for labour and a substantial element of non-labour (the provision of the truck), and that the non-labour element predominated;
  • The contract permitted the worker to delegate the performance of work under the contract, and
  • The workers were engaged under the contract for a result.

There may be situations where a detailed examination of the terms of the contract and a quantitative analysis of the components being provided are necessary to determine if there is an obligation to make super contributions for a worker. 

Please contact your Nexia Edwards Marshall advisor if you would like any assistance or advice on this issue. 

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.