In the recent decision of Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 (16 June 2020) , the Full Federal Court found that a dentist fell within the extended definition of ‘employee’ under s12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SG Act). Section 12(3) broadly provides that an employee is a person who is working ‘under a contract that is wholly or principally for the labour of the person.’
Dr Moffet was a dentist who ran his own dental practice through his family trust. He then sold the practice to Dental Corporation Pty Ltd (Dental Corporation). As part of the sale, Dr Moffet was to continue to provide his services as a dentist to the practice, under the terms of a services agreement. Relevantly, the services agreement provided Dental Corporation with two sets of benefits:
Dr Moffet’s personal services as a dentist, practice manager, etc; and
Dr Moffet’s promise that the practice would achieve a minimum cash flow which was backed up by a right in Dental Corporation to reduce his monthly drawings by 50% until any shortfall was made good.
The Full Federal Court found that while those two benefits were conceptually distinct, they could not be disentangled, and so the services agreement was ‘wholly or principally for the labour’ of Dr Moffet. Accordingly, while Dr Moffet was found not be a common law employee, he fell within the extended definition of employee under s 12(3) of the SG Act.
This case is an important reminder that super guarantee (and other employee related taxes) can apply to independent contractors. In particular, they can apply in allied heath practices which have traditionally taken the view that super guarantee and employee related taxes don’t apply to their structures (another example being payroll tax as seen in the Optical Superstore case). It is therefore important for employers to review whether their contractor arrangements trigger any employee related obligations and, for super guarantee, consider whether they should take advantage of the super guarantee amnesty.
To discuss further or for more information please contact:
Philippa Briglia
Senior Associate
T +61 3 9611 0173
E pbriglia@sladen.com.au
Phil Broderick
Principal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au
