Delivery drivers were common law employees

The Administrative Appeals Tribunal (AAT) has found that drivers employed by a taxpayer were common law “employees” of the taxpayer and not independent contractors, upholding the Commissioner’s assessments.

The taxpayer (Ferrac International Pty Ltd, the trustee for the Farant Family Trust) had an agreement with a company for the delivery of the company’s bakery products. During the relevant period, the taxpayer engaged a number of “drivers” to make the deliveries. The Commissioner audited the taxpayer in relation to its obligations under pay-as-you-go (PAYG) withholding, superannuation guarantee and FBT and determined that all of the drivers whom the taxpayer paid throughout the relevant period were common law “employees” of the taxpayer and not “independent contractors” as the taxpayer argued. The Commissioner’s conclusion was based on a number of factors, including that:

• the contractors were paid solely for their labour;

• they did not own or lease their own vehicle; and

• they did not have any control and did not delegate any of the work.

The AAT said the supermarkets for which the taxpayer held the delivery contracts associated the taxpayer’s workers as being its employees. The workers identified themselves as being part of the taxpayer’s business and they wore a vest displaying the taxpayer’s business name. The packers signed in and out of the supermarkets identifying themselves as being part of the taxpayer’s business. The AAT said they did not carry on their own businesses and the taxpayer held the risk.

An assessment of tax liability and penalty was issued and the taxpayer’s objection was disallowed.

The AAT found that the relevant drivers were “employees” of the taxpayer throughout the quarters ended 30 September 2009 to 30 June 2011 and that the taxpayer had failed to withhold amounts from the payments it made to them in those quarters for the purposes of s 12-35 of Sch 1 to the Taxation Administration Act 1953 (TAA). The AAT said it followed that the taxpayer was liable, pursuant to s 16-30 of Sch 1 to the TAA, to pay the Commissioner a penalty equal to the amount that it failed to withhold. The AAT considered the taxpayer had not discharged its burden of proof, on the balance of probabilities, that the assessment was excessive. It also found there was nothing in the particular circumstances of the case to warrant a remission of the administrative penalty imposed.

Re Trustee for the Farant Family Trust and FCT [2013] AATA 358, www.austlii.edu.au/au/cases/cth/AATA/2013/358.html.