For the purposes of liability to make compulsory superannuation contributions, the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act) deems certain individuals to be employees even if they are contractors.

A contractor will be deemed an employee for the purposes of the SGA Act in the following circumstances:

• there is a contract;
• that is wholly or principally for the labour of a person; and
• the person must work under that contract.

The operation of the deeming provisions will trigger obligations on the person paying the contractor to make Superannuation Guarantee contributions on those payments.

The extended operation of the SGA Act was considered by the Full Federal Court in Jamsek v ZG Operations Australia Pty Ltd (2023).

Consideration of the contract

For the deeming provisions of the SGA Act to apply, the worker must be a party to the contract where a payment is made by the other party in return for the worker’s labour. The worker must be a natural person who is a party to the contract in their individual capacity, rather than in any other capacity, such as a partner or trustee of a personal service trust.

There can be other parties to the contract. For example, a dentist could work under a tripartite service agreement to which the corporate trustee of the worker’s family trust is a party. However, the contract for the performance of work must be with the worker.

In Jamsek v ZG Operations Australia Pty Ltd (2023), the contract was with a partnership formed by the two truck drivers. As a result, the deeming provisions in the SGA Act did not apply. The drivers entered into the contract on behalf of the partnership, and each of the partners was a party to the contract in their capacity as a partner, not in their individual or personal capacities. A partnership cannot be deemed to be an employee by the SGA Act.

Was the contract wholly or principally for the labour of a person?

Whether the contract is wholly or principally for the labour of the person is to be assessed from the perspective of the party receiving the services by reference to the terms of the contract.

A contract is not wholly or principally for the labour of the person if:

• it leaves the contractor free to do the work themself or to employ other persons to carry it out (this applies, even if the contractor actually performs the bulk of the work under the contract or the parties expected this); and/or
• the contractor has undertaken to produce a given result.

In Jamsek v ZG Operations Australia Pty Ltd (2023), the Court ruled the payment based on hours worked, rather than items delivered, and an agreed 45-hour working week pointed against the contracts being characterised as stipulating a given result. In addition, the contracts provided for payment for 9 hours each working day, even though it was possible that less work would be required in a day.

The fact the contract required the partnerships to deliver goods subject to the company’s reasonable directions also counted against the contract being results-based.

However, the Court found the contract was not wholly or principally for the labour of the two drivers because:

• the provision of the delivery service under the contracts required the use of a substantial capital asset, being the trucks, for which the partnerships were wholly responsible. The partnerships took on all costs and risks associated with the trucks, and as part of this service, the partnerships were also responsible for maintaining insurance;
• the partnerships were able to delegate the work to a substitute driver with agreement from the principal; and
• the client received a single integrated benefit being a delivery service to be carried out by the partnership, using the partnership’s resources at the partnership’s risk, and fully insured at the partnership expense. The labour component was not the principal benefit.