ANOTHER COMMISSIONER OF TAXATION APPEAL – THE ATO CONTINUES TO PUSH THE BOUNDARIES OF SUPERANNUATION GUARANTEE COMPLIANCE FOR EMPLOYERS

Last month, the Federal Court dismissed an appeal by the Commissioner in relation to the decision in Trustee for Peter Hatfield Trust v FCT [2024] AATA 3428. In that case, the (former) Administrative Appeals Tribunal held that a worker, who worked for ‘Hatfield Plumbing’ for over ten years, had not been paid his superannuation guarantee entitlements. The Federal Court decision can be found here: https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2025/182.html

Whilst the ATO had originally assessed the worker as an employee for superannuation guarantee purposes (giving rise to a large, historic superannuation guarantee charge liability), the Tribunal found against the ATO’s determination that the worker was engaged under a contract “wholly or principally for the labour” of the worker.

The Commissioner appealed to the Federal Court. In a brief but considered judgment, Logan J found that the worker was an independent contractor for superannuation guarantee purposes, noting the worker:

• had freedom to refuse jobs and how he completed jobs from the principal;

• provided his own vehicles and essential tools;

• had no contractual provision for leave, termination or prohibiting delegation; and

• negotiated with the principal and set his own hourly rate, held his own insurance and would invoice on completion of the job.

In summary, Logan J found no error of law in the Tribunal’s decision, noting that the worker was not an employee but “was engaged to produce a result, time and time again… For these reasons, the appeal is dismissed.”

However, according to the Federal Court website, on 13 March 2025, the Commissioner issued a notice of appeal.

The Commissioner has a history of litigating similar matters, including the recent decisions in JMC and Jamsek.

The ‘extended’ definition of a worker for superannuation guarantee purposes remains a sleeper issue for many businesses who engage contractors. A determination by the ATO that the worker was entitled to superannuation guarantee payments can be a catastrophic outcome given the punitive nature of the SGC regime.

The anticipated reform for the ‘Payday Super’ regime (Exposure Draft published 14 March 2025) will hopefully reduce the punitive aspects of these laws and provide more certainty for employee/contractor boundaries.

The team at SMAILES KRAWITZ has experience in dealing with superannuation matters, including SGC compliance, SMSF trustee and disqualification matters, dealing with ATO audits, and representing taxpayers before the Administrative Review Tribunal or Federal Court.

The material in this article is provided only for general information. It does not constitute legal or other advice.

Limited Liability by a scheme approved under Professional Standards Legislation.

Read the Smailes and Krawitz Disclaimer HERE.

Alan Krawitz18 March 2025