Super guarantee not payable for salesperson

Section 12 of the Superannuation Guarantee Assessment Act 1992 (SGAA) deals with the question surrounding whether a worker is an employee or a contractor. Broadly speaking, the superannuation guarantee scheme will apply to an employee of an organisation, whereas an independent contractor will not.

In relation to this section of SGAA, the Commissioner of Taxation recently handed down a decision in a Private Binding Ruling. The facts in this case were as follows:

  • The worker negotiated the sale of the organisation’s product to its customers.
  • Under the terms of the agreement, the worker would be entitled to a commission payment from the organisation, over a base price for the sale of the product.
  • The worker provided an invoice with an ABN for their commission. The commission varied from sale to sale.
  • The worker was not obligated to sell the product for the organisation as they could carry on any other form of business and/or employment of their choosing.
  • The amount of commission paid to the worker was based on the sale price they negotiated in excess of the base price.
  • If the worker did not sell the product, they received nil payments from the organisation.
  • The worker did not require specific equipment, tools or plant outside of general office equipment.
  • The worker under the agreement was paid by the organisation for interstate travel costs incurred by the worker when visiting customers, including hire car, accommodation and flights.
  • The worker was provided with office consumables and clothing for use by the organisation.
  • The organisation did not schedule tasks for the worker and they were not supervised.
  • The product was made available to the worker for the minimum price, and what they sold the product for over that minimum price was the commission that was invoiced to the organisation.
  • The worker was providing services to at least one other business at the same time they were selling the organisation’s product.

Under section 12 of the SGAA, an “employee” for super guarantee purposes includes both a common law employee and workers who are engaged under a contract wholly and principally for their labour. This is often referred to as a “contract of service”.

While the circumstances regarding whether the worker was a common law employee is a question of fact and degree, the Commissioner determined that the worker was not. The worker was providing services to other businesses which, above all other factors, satisfied the notion that the worker was running an independent business of their own.

The other section which is relevant in regards to whether the worker was a super guarantee employee is under s 12(3). It states that a worker is an employee if the individual is not paid to achieve a result. While this can be interpreted in many different ways, the Commissioner decided that as the only payment was a commission the worker did not come under the appropriate definition.

Effectively, the worker was not entitled to superannuation guarantee under s 12 of SGAA.