Published on 9/08/2011

On 29 July 2011 the Victorian State Revenue Office released Revenue Ruling PTA.038 – Determining whether a worker is an employee. The Ruling provides information about employment relationships to assist employers, principals and their professional representatives in determining whether their workers are common law employees and applies from 1 July 2011. It is important to note this Ruling is not intended to be definitive advice in determining and employer/employee relationship or a principal/independent contractor relationship exists, as the facts of each case will vary.

On 29 July 2011 the Victorian State Revenue Office released Revenue Ruling PTA.038 – Determining whether a worker is an employee. The Ruling provides information about employment relationships to assist employers, principals and their professional representatives in determining whether their workers are common law employees and applies from 1 July 2011.

The Ruling highlights a number of areas which help determine the correct relationship of a worker and the Ruling takes the view of this from the courts perspective. In a common law relationship there is a contract of service which is based on a ‘mutuality of obligation’. This includes some of the following factors which are considered by the courts in determining whether a worker is an employee:

Control and direction;
Contract and practical relationship;
Contract to achieve a given result;
Independent business;
Power to delegate;
Risk;
Provision of tools and equipment; and
Other factors.

The Ruling also goes onto state an employer/employee relationship will generally not exist where there is a lease or bailment arrangement. Also an employment relationship under common law cannot exist between a principal and an interposed entity i.e. a company. However, payments to inter-posed entities may still be subject to payroll tax in some circumstances.

The Ruling provides a table outlining employee and independent contractor indicators in relation to the abovementioned factors the courts take into consideration in determining a workers employment status. To view the table or for further information regarding Revenue Ruling PTA.038 please see the link below:

Revenue Ruling PTA.038

Comment
This Ruling is important as State Governments come under increased revenue pressure and will actively pursue opportunities to increase their revenue base.

Questions
Please contact Michael van Schaik, Associate Director, Employment & Remuneration Services. Phone: +61 (0) 3 8635 1835
Email: mvanschaik@moorestephens.com.au

Authors: Michael van Schaik and Steven Rocca

Contact

Michael van Schaik
T +61 3 8635 1800
mvanschaik@moorestephens.com.au