AGC Roof Maintenance Northern Division Pty Ltd v Chief Commissioner of State Revenue [2021] NSWCATAD 199
Background
The Applicant (“AGC”) conducted a business of roof installation and repair work, engaging employees and independent contractors (“Contractors”) to perform the work. While most of the Contractors were unrelated to the Applicant, some were former employees of AGC.
On 15 February 2018, the Respondent issued payroll assessment notices to AGC for the 2014 to 2017 financial years, assessing payments relating to some contracts with workers that AGC had classified as independent contractors, and exempt under the relevant contracts provisions.
The Applicant objected to certain parts of the assessment. The Chief Commissioner allowed the objection in part, and issued amended payroll tax assessment notices on 18 May 2019. The amendment assessments conceded that monies paid to some Contractors did not constitute taxable wages because one or more exemptions applied under s. 32(2) of the PTA. Some of the Contractors were considered by the Chief Commissioner to be common law employees and consequently monies paid to such contractors were assessed for payroll tax.
AGC sought administrative review by NCAT of the amended assessments.
The statutory framework
Pursuant to s. 32(1) of the PTA, “…a relevant contract… is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person—
(a) supplies to another person services for or in relation to the performance of work, or …”
Under s. 32(2) of the Act a contract is not a relevant contract if one of the following exemptions under s. 32(2)(a), (b) or (c) applies:
The 90-day exemption per s 32(2)(b)(iii). If the worker has supplied services for no more than 90 days per year, then the contract is not a relevant contract;
The provision of services to the public exemption in s 32(2)(b)(iv). If the worker supplies services of the same kind to the public generally then the contract is not a relevant contract; and
The 2-person exemption under s 32(2)(c). If the services are performed by two or more persons employed by, or who provide services for, the contractor, then the contract is not a relevant contract”.
Contractual arrangements
AGC described the contractual arrangements with independent contractors as follows:
- AGC allocates work to selected AGC Contractors based on their experience and qualifications.
- Price can be negotiated, although a default “profit share” arrangement applied under which AGC pays Contractors 42% of the profit on each job. For example, if a job is priced at $10,000 and the cost of materials is $2,000, the default profit share is 42% of $8,000. On some jobs the “profit share” going to the Contractor is higher than 42% by negotiation.
- AGC does not determine which day or days contractors work, nor does AGC determine which particular job is to be done on any particular day. Contractors tend to arrange their work a fortnight ahead and the only requirement imposed by AGC is that they contact AGC’s customers at least 24 hours before attending site.
- Depending on the work, Contractors deploy their own labour and decide how much labour to deploy. It is a matter for the contractor how long any particular job takes and how much labour the contractor deploys.
- Many Contractors advertise their services, have websites and vehicle signs, and work for other roofing companies and builders.
- The Contractor bears the risk that the profit share will be sufficient to cover the labour deployed.
- Contractors are generally free to work for others, though the Tribunal noted there was some evidence that some Contractors work almost exclusively for AGC.
- AGC insists that Contractors maintain public liability insurance, workers compensation and personal protection insurance, and have an ABN, as well as WHS equipment and certificates.
- AGC Contractors are not required to wear a uniform, but can choose to do, and uniforms are supplied by AGC at cost. Most Contractors refuse to wear AGC’s uniform, but are not allowed to wear clothing that promotes their own business when working on AGC jobs.
- Contractors have their own vehicles and do not have to display AGC signage, but are prevented from displaying their own signage on their vehicle.
The Tribunal noted that the Home Building Act 1989 (NSW) requires that individuals who do residential building work, defined to include roof plumbing work, must hold an endorsed contractor licence or work under the supervision of an endorsed licence holder (per s 13(1)). AGC and its related entities held relevant contractor licences and most of the AGC Contractors did not hold licences.
Submissions
AGC claimed that the workers whose remuneration was assessed by the Chief Commissioner for the relevant years were independent contractors, and one or more of the exemptions under s. 32(2) of the PTA should apply for the following reasons (see [10]-[24]and [60]):
- Each contractor was required to sign a written agreement and have an ABN;
- AGC does not dictate the dates a Contractor works or the particular jobs a Contractor undertakes; rather Contractors arrange their own work based on available jobs;
- Contractors deploy their own labour and each contractor determines how much labour is required to complete a job. Therefore the arrangement entered into with each Contractor did not specify the amount of labour required, and should be characterised as a “profit share” arrangement;
- Contractors advertise their services to the public; and
- Contractors must maintain their own public liability insurance, workers compensation and person protection insurance
The Chief Commissioner claimed that:
- the following characteristics of the arrangements pointed towards a common law employment relationship between the AGC and the Contractors (at [43]-[44]):
- AGC maintains some control over what the Contractors wear and while not requiring them to wear an AGC uniform does not allow them to wear clothing that would identify the Contractor’s own business;
- Some Contractors are identified on AGC’s website and presented as members of the AGC team; and
- Contractors were supervised by an AGC entity.
- AGC’s counting methodology used to support claims that the 90-day exemption applied was flawed, casting doubt on all the calculations made by AGC in this regard and supporting the conclusion that Chief Commissioner’s assessments made regarding certain Contractors should be affirmed.
Decision
The Tribunal reviewed the criteria for categorisation of a common law employee as outlined in previous authorities (see [27]-[37]), and concluded that only one Contractor was an employee, due to his close relationship and reliance on AGC.
The Tribunal relied principally on the following common law principles and case law:
- In recent times the more determinative test has been the business test, that is, whether the worker is working in the business of the other, rather than in their own business
- This test is strongly tied to notions of vicarious liability and the identification of the proper enterprise that created the risk that produced the tortious act (see Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 (“Hollis v Vabu”) at [42] and [47]).
- In Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161; [2006] HCA 19 at [31] the High Court found that a refrigeration mechanic was not an employee because he conducted his own business; the work done by the mechanic was done in pursuing his own business (at [33]).
- In Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448, [2010] FCAFC 52 at [46]–[47], the Court was persuaded by the fact that the work of the interviewers was to little commercial gain for the interviewers, that the interviewers took very little commercial risk and that they invested little save for their time and skills.
- Labels applied by parties are not decisive of the true legal character of the relationship (per ACE Insurance Ltd v Trifunovski (2013) 209 FCR 146; [2013] FCAFC 3 at [32] per Buchanan J).
- The use of an intervening corporate entity can be significant, however in some cases courts have placed little weight on the fact that a worker can or could contract through a corporate entity: see Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448; [2010] FCAFC 52 at [43]).
One of the workers that AGC claimed to be an independent contractor commenced as an employee estimator, and had worked for AGC for at least 14 of the last 17 years. At his request, he was engaged as an “independent contractor” because he wanted to earn more money, have more control over the hours and days he worked, and he wanted control over who he worked for.
The Tribunal considered the worker to be an employee, but noted that even if he was an independent contractor, his contract would have been a relevant contract and none of the relevant exemptions would have applied.
The Tribunal concluded that the remaining workers were independent contractors, of which 6 entities were entitled to exemption under s.32(2) of the Act, but 2 entities were not entitled to any of the exemptions.
Orders
The Tribunal made the following orders:
- The Chief Commissioner’s amended assessments be affirmed for 3 entities;
- The amended assessments be quashed in relation to 6 entities as they fell under one or more of the 90-day exemption, the provision of services to the public exemption and the 2-person exemption.
Link to decision
https://www.caselaw.nsw.gov.au/decision/17a97ea0cff5b93d1b9bef49