State Tax Developments
WA payroll tax: employees or independent contractors
30.01.2009
The Western Australian Court of Appeal has held that consultants engaged by a financial broking business called Mortgage Force Australia Pty Ltd (“MFA”) to act “as its agent for the purpose of seeking and conducting interviews with consumers, receiving applications from consumers and passing the applications to” MFA for processing by financial institutions were independent contractors and not employees and, accordingly, commissions paid to them were not wages for the purposes of WA payroll tax (CSR (WA) v Mortgage Force Australia Pty Ltd ([2009] WASCA 24).
The Court held that, when all of the competing and, in some instances, conflicting features of the relationship between the parties were viewed and weighed in their totality, they militated decisively in favour of the conclusion that the consultants were independent contractors and not employees. The following factors were of particular significance in arriving at this conclusion:
- The agreement between the parties that the consultants would be independent contractors. This appeared to be a genuine statement of their intention. The relevant provisions were not a sham and they did not contradict the effect of the Deed of Appointment or the Consultancy Agreement as a whole.
- In the present case, less weight should be given to those provisions of the Deed of Appointment and the Consultancy Agreement which conferred on MFA the capacity to control, at least in some respects, the activities of the consultants than might be the case in other circumstances. This was because the capacity to control appeared to have been directed at protecting the goodwill of MFA’s business; in particular, the relationship between MFA and the financial institutions, and the goodwill attaching to the “Mortgage Force” name and logo. A capacity to control for this purpose was not inconsistent with the consultants having the status of independent contractors.
- The obligation of the consultants, at their own expense, to provide their own motor vehicles, mobile telephones and pagers (and, in some cases, their own laptops or personal computers), subject to any agreement which might be made in a particular case for reimbursement by MFA of expenses legitimately incurred in providing the services. A motor vehicle, mobile telephone, pager and laptop or personal computer comprised the substantial majority of the equipment required by the consultants to perform their services.
- The entitlement of the consultants, subject, relevantly, to the written approval of MFA, to appoint a “sub-agent” in his or her place for a significant period, and the contractual provisions relating to sub-agents and their appointment.
- The absence of any entitlement to annual leave, sick leave, long service leave, paid overtime, superannuation contributions, worker’s compensation coverage or other insurance coverage of any kind, paternity or maternity leave or any similar leave.
- The power of MFA to terminate the engagement of a consultant, at any time and without the consultant being in breach of his or her engagement, on giving a specified period of written notice.
