ATO targets independent contractor arrangements

The Commissioner of Taxation (Commissioner) is targeting employers and principals who fail to adequately discharge their PAYG and superannuation guarantee obligations.

Whether a worker is an employee or a contractor is an issue that is often argued before courts and tribunals in Australia. The distinction is critical as getting it wrong can result in a liability to pay the superannuation guarantee charge (SGC) and other penalties.

Adding to the complexity is the extended definition of 'employee' in section 12(1) of the Superannuation Guarantee (Administration) Act 1992 (SGA Act), which deems certain individuals to be employees for superannuation guarantee purposes, even though they would otherwise be outside the scope of the SGA Act. In particular, section 12(3) of the SGA Act deems a person that 'works under a contract that is wholly or principally for the labour of the person' to be an employee for superannuation law purposes.