A public ruling, when issued, is the published view of the Commissioner of State Revenue (the Commissioner) on the particular topic to which it relates. It therefore replaces and overrides any existing private rulings, memoranda, manuals and advice provided by the Commissioner in respect of the issue(s) it addresses.
Where a change in legislation or case law (the law) affects the content of a public ruling, the change in the law overrides the public ruling—that is, the Commissioner will determine the tax liability or eligibility for a concession, grant or exemption, as the case may be, in accordance with the law.
A project management firm engages a worker as a site supervisor. The site supervisor is responsible for overseeing all things that happen on-site. In this example, the site supervisor could be either a professional or a highly skilled or experienced tradesperson. The general manager of the firm may not have the technical skills and experience to be able to tell the site supervisor how to actually go about performing the work. However, the project management firm may be able to control or direct the site supervisor in relation to the general nature of the work to be undertaken, as well as incidental or collateral matters such as the hours of their attendance at the work site, the records they must maintain and the format of any progress reports.
The owner of a fishing boat engages a worker to captain the boat. The owner remains on shore, the captain has the day to day control over the boat and the crew while at sea and there is very little scope for the boat owner to control how the captain carries out their work while the boat is at sea. However, there is scope for the boat owner to give the captain directions on general matters such as what areas are to be fished and what fish are being sought, as well as incidental or collateral matters such as safety procedures on the boat and how the catch is to be processed and stored while at sea.
A construction company enters into a contract with various construction workers to perform tasks required for the construction of a building. The company pays the workers an hourly rate. The construction workers are not entering into a contract to produce a given result but rather are entering into a contract to provide services for an hourly fee.
A construction company enters into a contract with a landscaper to carry out the landscaping required for the building for a fixed fee of $10,000. The landscaper has entered into a contract to produce a given result for a fixed fee.
The owner of a mango farm engages a number of workers to prune trees. The workers are paid on the basis of the number of trees pruned. The workers are not entering into a contract to produce a given result but rather are entering into a contract to provide services at piecework rates.
A worker is engaged on a contract by a steel fabrication firm and is paid an hourly rate. It is claimed that under the terms of the contract the worker has the power to delegate. On the occasions when the worker has been unable to attend work (for example, due to illness), the steel fabrication firm has allocated the worker’s tasks to someone else, paid that other person (rather than the worker) and has not permitted the worker to provide a replacement. In this example, the worker does not have any real or practical power to delegate.
Lease or bailment arrangements
|Factor||Employee indictator||Independent contractor indicator|
|Control||The worker is subject to the direction of the business operator, or the direction of an employee of the business operator as to where, when and how the work is to be performed.||The worker is free to decide the manner in which they will complete the task and achieve the agreed result.|
|Payment||The worker is paid on a time basis or at ‘piece rates’.||The business operator pays the worker on the basis of a quote to achieve a set result (generally without regard for the time taken).
Payment is made to an interposed entity.
|Provision of labour/materials||The worker wholly or predominantly provides labour. The business operator supplies all or most of the materials and equipment necessary for the worker to perform their services. Where the worker provides their own tools or materials they are usually reimbursed or paid an allowance.||The worker supplies all or most of the materials, equipment and tools needed to complete the contracted work (not just tools of the trade or a motor vehicle used to drive to and from a work site).|
|Entitlements||The worker receives superannuation, sick leave, recreation leave or long service leave or is paid extra in lieu of such entitlements.||The worker makes provision for their own superannuation and is not entitled to sick leave, recreation leave or long service leave.|
|Tax||Income tax is deducted from the payments made to the worker.||Income tax is not generally withheld from the payments made to the worker. However, a worker can request a business operator to withhold tax payments made to them (see s.12–55 of Schedule 1 to the Taxation Administration Act 1953 (Cwlth)). In these cases, the voluntary withholding of tax is not necessarily indicative of an employer/employee relationship.|
|Hours of work||The worker works set hours (either by agreement with the business operator or under an award).||The worker works the hours necessary to complete the task to the standard and within the timeframes specified by the business operator.|
|Continuity||The worker has been working for the business operator for a continuous extended period of time.||The worker does not provide services to the business operator on a regular or continuous basis.|
|Representation to the public||The worker is recognised as part of the business operator’s business.||The worker is not seen as part of the business operator’s business, that is, the worker is recognised as operating their own business.|
|Responsibility for quality||The business operator, not the worker, is legally responsible for the quality of the work performed by the worker.||The worker is legally liable for the quality of the work performed.|
|Delegation||The worker is required to perform the work personally (they are not able to delegate or subcontract the work).||The worker employs others to assist them in doing the work, or is able to delegate or subcontract the work to other persons of their choice.|
|Insurance and licences||Maintained by the business operator.||The worker maintains relevant and necessary licences and insurance policies.|
|ABN||The worker does not have an ABN.||The worker has an ABN.|
|Risk||All risk is borne by the business operator.||The worker bears the commercial risk of deriving a profit or suffering a loss for the work performed and incurs significant expenses in deriving income. Payments are reduced to cover the cost of rectifying defects.|
|Dismissal/resignation||The business operator can suspend or dismiss the worker or the worker can cease to work for the business operator, regardless of whether the worker has completed any particular task or not.||The worker is free to choose whether to accept or refuse work from the business operator.|
Commissioner of State Revenue
Date of issue: 3 August 2011
|Public Ruling||Issued||Dates of effect|
|PTA038.1||3 August 2011||1 July 2011||Current|