For superannuation guarantee purposes, the common law definition of an “employee” is extended to include those who might otherwise qualify as independent contractors under the common law tests. Under the superannuation guarantee legislation, if “a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract”.
In a recent decision of the Administrative Appeals Tribunal, the Tribunal had to decide if crew members aboard a fishing vessel were employees within the extended definition of “employee” as set out above. If the crew were employees within the extended definition, the taxpayer would have been required to make superannuation contributions in respect of those individuals. In what some might regard as a surprising outcome, the Tribunal held that the fishing crew were not in fact employees.
The taxpayer operated a commercial fishing vessel out of a central port in Queensland, fishing in waters around the Great Barrier Reef for periods of up to 10 days per trip. Each day the main vessel would be moored at sea, and the crew would head off in a number of smaller motorised boats (called “dories”) for a day’s fishing. The dories would return at the end of each day, and a record made of the catch from each dory.
At the end of the trip the catch was sold by the taxpayer to a wholesaler, and the crew would in turn be paid under separate contracts between the taxpayer and each crew member. Under those contracts:
- the parties were described as joint venturers for the purpose of a single voyage
- vessel maintenance costs during the voyage were the taxpayer’s responsibility, but all parties contributed toward operating costs of the vessel (up to $1500 or 25% of gross catch)
- each of the parties were entitled to a fixed share of the gross proceeds of sale
- each party bore their own costs of sickness and accident insurance, and it was agreed that no party was liable for any accident occurring at sea.
Other relevant facts were that:
- the crew could either bring their own equipment, or have it supplied
- crew were responsible for cleaning the dories on their return to port, and theoretically a crew member could subcontract this work out if they so chose (but never in practice did so)
- the crew members could obtain an advance from the taxpayer to buy personal supplies for the voyage, and the advance would be deducted from the fish payments
- the Captain was responsible for safety matters at sea, however the decisions about where to fish were always made jointly with the crew
- the fishing members enjoyed significant autonomy in their fishing operations on the dories, which would travel for several miles from the mothership.
Ultimately the Tribunal found that the taxpayer and crew were operating as joint venturers. The Tribunal found that a joint venture existed as the taxpayer provided the vessel, skipper and marketing arrangements, and the crew in turn brought their skills and preferred equipment along for the venture (and could leave at any time if they so decided, albeit subject to the practical limitations of being at sea). The Tribunal also had regard to the lack of supervision and control of the crew, the wide degree of autonomy enjoyed by the fishermen as to where they fished in the dories, and also the fact that each of the crew members were required to maintain their own insurance.
The Tribunal also found that the extended definition of “employee” under the SG legislation did not make any difference to the characterisation of the crew as joint venturers. The Tribunal was not satisfied that the fishing agreements were “wholly or principally for the labour of the person”, but rather, the agreements were joint venture agreements intended to produce fish for sale. Whilst the crew did in fact contribute labour under the agreements, the distinguishing factor was that the remuneration was on the basis of an outcome (ie similar to the common law “results” test), rather than for the labour itself.
Following the decision of the Tribunal, the Commissioner released a Decision Impact Statement. In the DIS, the Commissioner stated that “the case is limited to its own facts and does not provide any authoritative guidance on cases concerning whether a worker is an employee for the purposes of the SGAA”. This treatment is in line with the statements made by the Tribunal that the case does not provide any authoritative guidance for the fishing industry at large and that “each case turns on its own peculiar set of facts”.
Accordingly, taxpayers should not treat the decision as a departure from the existing law.