The Court found that annual salaries cannot be used to offset overtime and penalties across pay periods, and that employers must meet award obligations in each pay cycle with accurate time records. 

What has happened 

On 5 September 2025, the Federal Court handed down its verdict in Fair Work Ombudsman v Woolworths Group Limited; Fair Work Ombudsman v Coles Supermarkets Australia Pty Ltd; Baker v Woolworths Group Limited; Pabalan v Coles Supermarkets Australia Pty Ltd [2025] FCA 1092. 

The Court examined a range of issues and found both Coles and Woolworths breached workplace laws. The headline issue was clarified regarding the interaction between annual salaries and award entitlements under the Fair Work Act. It was ruled that annual salaries cannot be used to offset overtime, penalty rates, or allowances across multiple pay periods.  

Instead, employers must ensure each pay cycle independently satisfies the minimum conditions set out in the relevant award. This brings the effectiveness of annualised arrangements into question, as remediation payments may be required for any pay period in which award entitlements exceed the annualised salary. 

In addition to the offsetting matter, the Court considered a range of other issues, including: 

1. all-inclusive annual salary arrangements do not remove the requirement to keep records of entitlements. Employers must not only keep time and work records but also interpret and classify the time and work into a record of an employee’s entitlement. A breach of record-keeping requirements may shift the burden of proof to employers 

2. confirmation that leave and rostered public holidays not worked count as hours worked (e.g. for determining overtime based on cumulative time calculations) 

3. confirmation that for agreements to be effective, employees must also understand that they are forgoing rights under the Award 

4. approval of a methodology for calculating underpayments where records were incomplete or missing. 

A further case management hearing is listed for 2 October 2025. It is also possible that Coles and Woolworths may appeal the decision. 

Implications for employers 

If not appealed, this decision may have significant implications for employers that rely on annual salary arrangements to cover employee entitlements arising out of industrial instruments. Retrospectively, this may mean that wage underpayments could arise even where employees are better off on an annual basis. Going forward it may mean that employers need to retain better and more sophisticated records, calculate notional Award or EBA-based salaries for record-keeping purposes, and top up employee salary on a periodic basis if necessary. 

How SW can help 

Given the current uncertainty surrounding the case management hearing and its potential outcomes, we recommend that employers take this opportunity to review and assess any potential gaps or areas of exposure.  

SW can assist by: 

• conducting gap and risk assessments across employment arrangements, payroll systems, timekeeping processes, and record-keeping practices to identify where entitlements may not be met or where obligations are unclear 

• developing simple testing models to help clients estimate underpayment exposure and assess risk – whether using existing data or scenario-based assumptions 

• supporting clients to reconstruct detailed entitlement records using available time and attendance data (e.g. clock-in/out logs) and identify where further tracking or classification may be needed. 

Whether you have robust data or limited records, we can help you understand your exposure and take practical steps to reduce legal and financial risk. 

To find out how SW can tailor a solution to your organisation’s needs and safeguard your compliance, get in touch with our team today. 

Contributor  

Thomas Grimsey-Carr 

The post Federal Court of Australia rules annualised salary arrangements are not effective  appeared first on SW Accountants & Advisors.

The ATO’s Decision Impact Statement regarding the Full Federal Court’s decision in JMC Pty Ltd v FC of T [2023] FCAFC 76 highlights the importance of including genuine rights to subcontract, delegate or assign services in contracts between independent contractors and engaging entities if this aligns with commercial objectives.

Employers should review current contractual arrangements to ensure certainty over the application of extended meaning of employee under section 12(3) of the SGAA.

The Commissioner stated that if a contract includes such a right, the contract is not considered to be wholly or principally for the labour of the worker. This is not within the extended definition of “employee” under section 12(3) of the SGAA provided the contractual right is not challenged as being a sham, having been varied by the parties or unenforceable. Where the contract does not make it clear the ATO will form its position based on the available evidence of the contractual arrangement.

While the ATO Decision Impact Statement does not have the same force of law as a public ruling, it marks the first time since the JMC Case that the ATO has stated explicitly that the existence of a right to delegate, subcontract or assign will exclude a worker from the extended definition of “employee” under section 12(3) of the Superannuation Guarantee (Administration) Act 1992 (SGAA).

The JMC Pty Ltd Case

In this case the appellant (JMC), a provider of higher education programs, engaged Mr H under a number of short-term contracts between 1 April 2013 and 30 June 2016 as well as between 1 July 2017 and 31 March 2018 to provide teaching services.

The contracts between JMC and Mr H included the following terms and conditions:

• Mr H would be paid an hourly rate for delivering lectures and marking exams
• Mr H would submit invoices specifying the teaching services provided along with timesheets and signed weekly lesson plans
• JMC would have a degree of oversight / control over Mr H (through JMC’s managing academic officer)
• Mr H was given the ability to subcontract or assign performance of services under the contracts, subject to written approval from JMC and
• JMC would have a right to deduct costs associated with a failure to give a timetabled lecture.

The Full Federal Court held that Mr H was not an employee of JMC within the ordinary meaning of the term or the extended definition in section 12(3) of the SGAAon the basis that there was a real right to subcontract, delegate or assign performance of services under the contracts despite the fact that the right was subject to written consent.

The ATO’s View

The Commissioner stated that if a contract includes such a right, even subject to consent from the engaging entity, the contract will not be considered to be wholly or principally for the labour of the worker. Therefore, a worker in these circumstances would not fall within the extended definition of “employee” under section 12(3) of the SGAA provided the contractual right is not challenged as being a sham, having been varied by the parties or unenforceable.

The ATO has confirmed that where the contract does not make it clear whether the worker has a right to delegate, subcontract, or assign their work, or is found to be a sham, the ATO will form its position as to the application of section 12(3) of the SGAA 1992 based on the available evidence of the contractual arrangement.

How we can help

The ATO’s Decision Impact Statement on the JMC case highlights the importance of including genuine rights to subcontract, delegate or assign services in contracts between independent contractors and engaging entities if this aligns with commercial objectives.

We suggest employers review current contractual arrangements in place to ensure you have certainty over the application of extended meaning of employee under section 12(3) of the SGAA.

We can assist in ensuring you have appropriate measures in place and make suitable disclosures regarding employment tax obligations where necessary. Get in touch with your SW contact to discuss what this decision and subsequent ATO decision impact statement means for your business.

Contributors

Maxwell Pratt

Rahul Sanghani

The post Employee or contractor | ATO Decision Impact Statement appeared first on SW Accountants & Advisors.

This paradigm shift for Victorian non-profit private schools mandates proactive measures in establishing processes and templates, upskilling staff, and addressing potential challenges, ensuring a seamless transition into compliance with payroll tax obligations. While other jurisdictions have not announced any similar changes, the Victorian legislation paves the way for other jurisdictions to follow suit. 

Starting from 1 July 2024, Victorian non-profit private schools with an income per student exceeding $15,000 will be subject to payroll tax. Employers must assess their own liability for payroll tax, regularly submit returns and make payments, typically monthly, to the Victorian SRO.

While navigating these changes seem supposedly straightforward, there is a good reason the SRO is one of the most active agencies with their data matching and compliance programs. Schools need to ensure that processes are well designed, to avoid common errors, minimising manual input and intervention and align with other submissions to other Government authorities (e.g. workers compensation, trainees and STP). This will also prevent overburdening existing employees with another time-consuming monthly process.

How to prepare for payroll tax changes

At a high level, schools newly subject to payroll tax will need to take steps before the obligations begin, including:

1. register for payroll tax and PTX express
2. review internal systems, processes and data to address risk areas such as:
   • treatment of pay codes | ensure that pay codes are set up correctly to accurately disclose taxable wages in the required categories, including salaries, commissions, leave, allowances, superannuation, and more
   • treatment of contractors | the relevant contract provisions extend payroll tax obligations to all service-based arrangements, with taxpayers needing to assess each non-employee worker against a series of 8 exclusions
   • grouping | The payroll tax grouping provisions can be complex, and if caught can result in the reduction of available payroll tax thresholds
   • data matching and investigation risks | it is not sufficient to get the taxable wage amount correct. Schools should ensure that disclosures align with other submissions to minimise the risk of investigation.
3. understand their systems and available data and developing a robust monthly process, including:
   • a process and documentation for data extraction and review
   • a working template for calculations
   • a review and lodgement process and controls
   • documentation of important payroll tax positions, process and methodology.
4. maintain ongoing processes for compliance with changing law and regular testing of existing processes.

How SW can help

As this is uncharted territory for many schools, our SW payroll tax experts are offering a comprehensive package to assist school finance teams get up and running with their payroll tax processes. This package includes:

• understanding the payroll systems and data, as well as the process for engaging contractors.
• working with the team to get detailed descriptions of pay codes and determine payroll tax positions (including recommendations to restructure pay codes if needed).
• designing an Excel-based model (e.g. using PowerQuery/PowerPivot) in conjunction with the school for monthly and annual payroll tax reconciliations.  This template is designed to source information from raw data files (e.g. payroll reports) and produce the required breakdown for payroll tax returns with minimal manual manipulation.
• documentation of methodology and positions (including a matrix of pay codes, descriptions and payroll tax positions).
• payroll tax training for staff members including use of the model.
• assistance with the preparation of the first payroll tax return and ad hoc support for 6 months for queries that arise after handover process
• review of the first annual payroll tax reconciliation.

We offer complementary initial discussions for us to understand the school systems and processes as well as data sources as well as highlight discuss any risk areas.

Contributors

Zainab Ayub

The post Victorian private schools navigate new payroll tax norms appeared first on SW Accountants & Advisors.

On 4 September, the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 (Bill) was introduced into Parliament. Among the sweeping reforms proposed in the Bill, arguably, the change to the definition of ‘employee’ in the Fair Work Act 2009 (FW Act) may most warrant further consideration.

The new definition will reverse recent High Court cases (CFMMEU v Personnel Contract Pty Ltd; ZG Operations Australia Pty Ltd v Jamsek) establishing that in circumstances where there is a comprehensive written contract, the question of whether an individual is an employee of a person is to be determined solely with reference to the rights and obligations in the terms of that contract. This provided businesses with practical certainties as the classification of individuals as employees/contractors that was clear at the beginning of working relationships would remain consistent throughout the working relationship.

Instead, the definition of ‘employee’ and ‘employer’ under the FW Act will revert to be determined by reference to the real substance, practical reality, and true nature of the relationship between the parties. Effectively, the conduct of the parties after a contract is entered into will be considered under the ‘multi-factorial assessment’ in determining if there is an employment relationship. This means that businesses may engage an individual with the understanding that they are hired as an independent contractor, but later could be deemed an employee.

Navigating employer obligations – a new challenge

A significant issue that does warrant further consideration is that the new definition of ‘employee’ will only apply to the FW Act, while the definition of ‘employee’ in other Federal and State legislation is proposed to remain unchanged. Given businesses will have multiple overlapping obligations and responsibilities for each ‘employee’ (depending on which Act you’re referring to), the selective application of this new definition can lead to further complexity and fragmentation in complying with employer obligations.

As shown in the graphic below, businesses may be required to provide ‘employee entitlements’ to individuals taking into account post-contractual conduct under the FW Act, but not necessarily under other legislation. For example, this could lead to a worker being entitled to only those minimum pay and work entitlements provided by the FW Act, but not entitled to superannuation, workers’ compensation or long service leave. The increased complexity means there is a higher risk that businesses get it wrong. Practically, even where a business understands its various obligations and has the in-house capability to get it right, it is likely to increase the complexity of their internal processes and may require significant changes to their internal HR/payroll systems.

An alignment of the definition of employee across the various obligations which would involve co-operation between the State/Territory Governments and the Federal Government would go a long way to providing clarity and certainty for businesses. At the very least, a consistent definition across Federal Legislation should be considered.

In recognition of the complexity, the Australia Taxation Office (ATO) has historically had softer penalties for the inadvertent misclassification of employees and has recently been consulting on practical guidance that employers can rely upon to reduce ATO scrutiny.

ATO’s compliance approach

The Draft Practical Compliance Guideline 2022/D5 provides the factors the ATO takes into consideration in applying compliance resources to review worker classification (note that this has yet to be updated for the recent High Court cases mentioned previously). These factors include:

• whether there is evidence that both parties agreed to the arrangement to have a given worker classification
• whether both parties understand the tax and superannuation consequences of the classification
• whether specific advice confirming the worker classification was sought from an appropriately qualified third party, such as a solicitor or tax professional
• whether the performance of the arrangement has deviated significantly from the contractual rights and obligations agreed by the parties, and
• whether the correct tax, superannuation, and reporting obligations are being met.

While this guidance only applies to obligations administered by the ATO and is still in draft, it contains practical steps which if followed reduce the risk of misclassification across various obligations significantly. Therefore, it is prudent for businesses to consider the level of risk their current arrangements face and take proactive steps to ensure they have ‘low-risk arrangements’. By ensuring internal processes consider the factors above, this may reduce the likelihood of the ATO applying compliance resources to review the business’ worker arrangements and increase the likelihood of correctly classifying workers.

How SW can help?

The SW Team has expertise in assisting businesses and employers in complying with their employment obligations. By analysing contract language, payment schedules, delivery timelines and termination clauses, we provide businesses with the confidence that they are complying with the correct worker classification.

Considering the complexity of navigating employer obligations, our dedicated team designed a process that is considered low risk by the ATO.

Understanding and Setup – understanding the processes and controls that are in place to classify worker arrangements followed by designing a compliance program based on factors in the ATO practical compliance guideline to reduce risk.

Outsourced or co-sourced assistance – assistance with the classification of workers for various obligations, documentation as well as ongoing compliance activities.

In addition, SW can assist with more comprehensive, once-off review or advisory needs:

• conduct a comprehensive review of your assisting agreements and structure
• provide tailored advice on compliance and potential exclusions
• assist with private rulings for prospective arrangements with the relevant tax authority
• assist with voluntary disclosure if needed
• data analytics services to focus attention on higher risk arrangements across all suppliers paid.

Contact the SW Team today to schedule a consult and ensure that your business is prepared. Our expert team is here to support you every step of the way.

Contributors

Eric Lay

Zainab Ayub

The post Proposed changes to the definition of ‘employee’: Closing loopholes or opening uncertainty? appeared first on SW Accountants & Advisors.

On 15 December 2023, the ATO released the following two draft publications for public comment:

• Draft TR 2022/D3 – Income Tax – PAYG withholding – Who is an employee
• Draft PCG 2022/D5 – Classifying workers as employees or independent contractors – ATO compliance approach.

Draft TR 2022/D3 replaces TR 2005/16 from 15 December 2022 and has mainly been updated to reflect recent court cases.

Key features of ATO draft publications

A business’ employment tax obligations can vary based on how a worker is classified. Correct classification is important to ensure that both the business and the worker satisfy their tax and superannuation obligations correctly.

TR 2022/D3 – Who is an employee?

The draft TR 2022/D3 explains the meaning of “employee” for PAYG withholding purposes. In accordance with the earlier High Courts cases, the Commissioner states:

• the totality of the contractual arrangement between parties will determine the classification of the worker, and
• the substance of the contractual arrangement, rather than the labels used in it, will be of primary importance.

The Commissioner has emphasised that even if a worker is an independent contractor, Superannuation Guarantee (SG) may be payable if the worker satisfies the extended definition of an employee under SG rules.

PCG 2022/D5 – Classification of workers

The draft compliance guide PCG 2022/D3, provides the Commissioner’s approach to audit activity based on a business’s risk profile, where he believes that the classification of workers is not being applied correctly. The key components considered by the Commissioner when determining the risk profile are:

Very Low risk – arrangements that satisfy all the following criteria will be considered low risk and will not attract ATO compliance activity:

• the parties agree on and understand the intended classification
• the substance of the arrangement agrees to the contractual terms
• the classification has been supported by advice from a qualified professional.

It will also be considered very low risk when an employer decides to voluntarily treat all workers as employees.

Low risk – Arrangements that satisfy all the following criteria will be considered low risk and will not attract ATO compliance activity:

• The parties agree on the intended classification.
• The substance of the arrangement agrees to the contractual terms.
• The classification has been supported by advice from a qualified professional.

Medium risk – Arrangements that satisfy the following criteria will be considered medium risk

• The parties agree on the intended outcome.
• The classification has been supported by advice from a qualified professional.

High risk – All arrangements that do not satisfy very low, low or medium risk criteria will be considered high risk. They will also be considered high risk if one of the parties coerced the other to accept the arrangement or one of the parties made false or misleading representations to the other party.

Key takeaways to minimise risk of ATO review

1. It is important for businesses to discuss the tax implications of being an independent contractor with the worker.
2. Obtain professional advice to support the position adopted for the class of workers.
3. When an arrangement with a worker changes, businesses should re-assess their classification.
4. Where disgruntled worker lodge an unpaid superannuation query and the ATO determines that the arrangement is considered:
   • very low risk – they will advise the worker accordingly and not take any further action
   • low risk – the ATO will apply compliance resources to test if that worker satisfied the definition of an employee
   • medium risk – the ATO will apply compliance resources to an arrangement (e.g. for a group of workers)
   • high risk – Compliance resources will be given the highest priority to an arrangement (e.g. for a group of workers) and businesses may be subject to higher penalties.
5. This PCG does not provide employers protection from payroll tax and workcover classification of workers.

How SW can help

Reach out to your SW contact or our team to assist in ensuring your employees are classified correctly to minimise the risk of an ATO review.

Contributors

Rahul Sanghani

Sabrina Camilleri

The post Employees vs Contractor ATO risk ratings now out appeared first on SW Accountants & Advisors.

With so much change going on for business, Sharon Burke and Janelle McPhee spent time running through the latest superannuation impacts that all businesses need to know before 1 July 2022.

There were several modifications to superannuation designed to make it easier for people to grow retirement savings and create opportunities for those who are younger, older and low-income earners.

The updated legislation will affect who is required to be paid superannuation, the Super Guarantee (SG) rate and who needs to meet the work test for voluntary contributions. For individuals working casually or working part-time across multiple jobs, they currently may not receive any superannuation contributions at all from employment.

If you missed out on joining us this morning, you can watch our webinar here:

Thank you to everyone who attended, and click here for more events that may be of interest.

Contact us

If you would like help with your superannuation obligations or payroll needs, please reach out for assistance to your key SW advisor.

Expert Speakers

Sharon Burke
Partner, Business and Private Client Advisory
SW 

Janelle McPhee
Associate Director, Business and Private Client Advisory
SW 

The post Superannuation changes 2022/23 webinar appeared first on SW Accountants & Advisors.

Careful consideration, planning and record keeping should be undertaken throughout this financial year in respect of work related home office expenses in order to maximise the deduction at year end.

Examples of WFH deductions you may be able to claim

• Heating, cooling and lighting
• Telephone call and phone rental costs relating to landline and mobile phones
• Internet data costs
• Decline in value of furniture and fittings such as desks, chairs, shelving and cupboards which you use for work-related activity
• Decline in value of office equipment such as computers, laptops, tablets, smart phones and printers which you use for work related activity
• Computer consumables such as printer ink and stationery
• Costs of repairs to home office furniture and fittings
• Home office cleaning expenses.

The rules:

• Expenses incurred must be directly related to work;
• Must have been paid out of own pocket; and
• Cannot have been reimbursed by the employer.

What has changed?

From 1 March 2020 to 30 June 2022, an actual home office is not required in order to claim home office expenses. 

Prior to 1 March 2020, a home office was required to be a designated room or area in the home set aside just for work, not shared by other people and not used for other purposes.

The ATO will now allow home office expenses to be claimed when working from the kitchen table or from a sofa.

Methods to calculate your WFH claim

1. Shortcut method

Using the short cut method, a tax deduction of 80 cents can be claimed for each hour worked from home.

This method covers costs such as:

• Electricity and gas
• Telephone
• Internet
• Decline in value of equipment and furniture.

This method is suitable for those working from home, without a dedicated home office space and making do. 

If there are multiple individuals working from home, each individual can claim 80 cents per hour. This includes both members of a couple living together.

2. Fixed rate method

Using the fixed rate method, a tax deduction of 52 cents can be claimed for each hour worked from home.

This method covers costs such as;

• Electricity and gas
• Decline in value of furniture and fittings
• Repairs to your home office equipment, furniture and furnishings
• Cleaning.

To use this method, you must have a dedicated workspace in your home. 

After claiming using the fixed rate, a claim for telephone, internet and decline in value of technology items, stationery and computer consumables can also be made.

3. Actual cost method for home expenses

Using the actual expenses method, the claim is calculated by calculating the actual expenses incurred to produce income when working from home.

This may include the following expenses:

• Electricity and gas
• Decline in value of furniture and fittings
• Decline in value of decline in value of telephones, computers, laptops or similar devices
• Phone expenses
• Internet expenses
• Cleaning
• Computer consumables and stationery.

For example, any electricity costs claimed will need to be calculated by looking at the cost per per kilowatt of power and the number of hours used for work related purposes. Similarly, telephone expenses bills will need to be itemised. Calls and data incurred specifically for work related purposes will need to be summarised.

Common mistakes made when calculating WFH claims

• Not apportioning shared bills.  Mistakenly individuals often claim the entire monthly bill even though the cost of that bill is shared with others.  For example, if the monthly internet bill is $100 and it is shared by two individuals, the claim is then $50 per individual and not the full $100
• Not having a good understanding how the depreciation rules work.  Assets purchased such as desks, chairs, filing cabinets, computers and printers have different “working lives” therefore, specific depreciation rates should be applied
• Claiming home office expenses when there is not a dedicated room or office in your home
• Claiming a too high a work-related proportion for a particular type of expense.  For example; the personal use of telephone or internet should not be claimed
• Not keeping appropriate records to substantiate the expense
• Not making a WFH claim when you are entitled to .80 cents per hour. This adds up.

What should you do prior to year end in order to maximise WFH claims

• Keep record of the number of hours worked from home each week over the financial year.  This could be a diary or timesheet; and
• Keep receipts for all eligible expenses so each method can be considered to work out the highest claim.

How can SW help

• Provide further information and discuss which method suits your circumstances best
• Advice around how to ensure the maximum tax benefit is obtained with minimal administration workload
• Review expenses incurred and advise which expenses are eligible and can be claimed
• Provide assistance with determining the useful life of assets and assist with calculating decline in value of work related items
• Assist in calculating work related claims using the three methods and provision of workpapers to support the claim in the event of an audit.

Contributors

Janelle McPhee

The post What can you claim working from home? appeared first on SW Accountants & Advisors.

This has highlighted a shift away from the checklist type multi-factorial test, where a valid agreement exists. The High Court found that where parties have entered into a valid and comprehensive written agreement, the terms within the agreement establish the legal character of their relationship.

Below are summaries of the two High Court decisions.

ZG Operations Australia Pty Ltd & Anor v Jamsek & Ors

This High Court case was an appeal from a judgment of the Full Federal Court of Australia.

Mr Jamsek and Mr Whitby were initially employed as drivers by ZG Operations Australia Pty Ltd. In 1985 or 1986 both the individuals set up partnerships, purchased their trucks and signed written agreements with ZG Operations to deliver goods.

The agreements stipulated that Mr Jamsek and Mr Whitby were to be at the exclusive disposal of ZG Operations for 9 hours a day, 5 days a week. The men drove trucks with the company logo and wore ZG branded clothing. They provided invoices to ZG Operations which were then paid to their respective partnerships.

The Full Federal Court of Australia found Mr Jamsek and Mr Whitby were employees of ZG Operations, given the level of control exerted by ZG Operations over the men and the requirement they be at the company’s disposal 9 hours a day, 5 days a week.

The High Court overturned the Full Federal Court decision and found that given neither party questioned the validity of the principal/contractor agreement or regarded it as a sham, the agreement was valid and determined the legal character of the relationship, being that of a principal and independent contractor.

Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd

This case concerned Mr McCourt, a British backpacker who had travelled, resided, and worked in Australia temporarily on a working visa.

Mr McCourt signed a contract with a labour-hire company, Personnel Contracting Pty Ltd, trading as Construct, which described his position as a contractor. Mr McCourt was assigned to two construction sites owned by Hanssen, a client of Construct. During the assignment, he was under the direction of Hanssen employees, although there was no contractual relationship between Hanssen and Mr McCourt. Mr McCourt supplied basic equipment, had recurring patterns of work and set start/finish times.

After his engagement with Construct concluded, Mr McCourt, with the Construction, Forestry, Maritime, Mining and Energy Union, brought an action against Construct seeking compensation and penalties for alleged breaches of the Fair Work Act 2009, on the basis that Mr McCourt was an employee of Construct.

The matter was heard by the Federal Court and later the Full Federal Court where it was decided that Mr McCourt was a contractor based on the multi-factorial test.

On appeal, the High Court unanimously overturned the Full Federal Court’s decision and held that Mr McCourt was an employee of Construct. The High Court found that the multifactorial test approach taken by both the Federal Courts was problematic as it is impressionistic and can lead to inconsistency and considerable uncertainty.

The High Court suggested the characterisation of whether a person is an employee or an independent contractor is determined by reference to a consideration of the legal rights and obligations of the parties under the contract.

The High Court found:

• Construct retained a right of control over Mr McCourt, which was fundamental to Construct’s business as a labour-hire agency
• Construct was entitled to determine for whom Mr McCourt would work and, once assigned, he was required to supply his labour to the client
• Mr McCourt had no right to exercise any control over what work he was to perform or how it was carried out
• The description of Mr McCourt as a ‘self-employed contractor’ was not determinative and did not change the character of the relationship created.

In both cases, the High Court highlighted the importance of applying the terms of the agreement where a valid agreement exists in assessing whether a worker is a contractor or an employee. Merely describing an individual as a contractor in the agreement is not sufficient to support an independent contractor relationship. The contract will need to be considered in its entirety to determine the relationship.

How SW can assist

These cases demonstrate the need to review contractual arrangements you have on foot and seek appropriate tax advice. We can assist in ensuring you remain compliant and make suitable disclosures regarding employment taxes. Please get in touch with your SW contact if you would like to discuss what these decisions mean for your business.

Contributors

Rahul Sanghani

E rsanghani@sw-au.com

Tom Warrington

E twarrington@sw-au.com

The post Employee or contractor? High Court decisions appeared first on SW Accountants & Advisors.