Independent contractors sector hopes High Court case gives clarity on superannuation guarantee

Australia’s independent contracts sector will be closely monitoring the outcome of a High Court case set down for March, in which polling company Roy Morgan Research will attempt to challenge the validity of the superannuation guarantee charge.

Roy Morgan Research has fought a long-running battle with the Australian Taxation Office over the classification of a group of workers it used to conduct interviews.

Roy Morgan classified the workers and independent contractors, but the ATO said they were employers and as such, Roy Morgan was required to make superannuation payments on their behalf via the superannuation guarantee charge, which forces companies to make contributions on behalf of workers.

In cases before the Administrative Appeals Tribunal and the Federal Court, the ATO’s classification of the workers as employees was upheld.

However, Roy Morgan Research also claimed the superannuation guarantee was unconstitutional on the grounds that the SGC was not actually a tax. Roy Morgan says the charge is not a tax because it is not charged for public purposes, but is instead charged to private individuals.

In mid-December, Roy Morgan was granted leave to appeal to the High Court and to make its case on whether the SGC is constitutionally invalid.

Ken Phillips, chief executive of the Independent Contractors Association, was surprised leave to appeal was granted, but says the sector will now be watching the case closely.

“I didn’t remotely think that the High Court would grant leave to appeal, so this case now must be considered very seriously,” he says.

“Either the High Court wants to shut down the debate or Roy Morgan has got a case.”

Phillips says he hopeful the case will at least provide the sector with more certainty about which workers are subject to superannuation and which are not.

He says the vexed question of whether workers should be classified as contractors or employees continues to great confusion and he says the SGC legislation only compounds the problems.

“It’s a woeful piece of legislation in determining who is in and who is out in terms of paying super.”

Robert Jeremenko, senior tax counsel at the Tax Institute, is also surprised that the High Court has agreed to hear the appeal.

“It could be hugely significant case because it could leave the Government with no way to force employers to pay super.”

He says that in that case the Government would probably be forced to look at putting legislation in place very quickly to close this loophole.

While the significance of the case is not under question, Roy Morgan’s chances may well be.

In the Federal Court decision handed down in May 2010, Justices Patrick Keane, Ross Sundberg and Susan Kenny gave a blunt assessment, saying that “history is not on Roy Morgan’s side in its challenge to the validity of the SGC Act and the SGA Act” if two recent cases were anything to go on.

“In neither case was any question raised as to the constitutional validity of the legislation. It may be said that in these cases the High Court was not called on to express even a tentative view as to the validity of the legislation; but it is fair to say that the absence of even an expression of concern as to the validity of the exaction in question is a reason for treating Roy Morgan’s arguments on the constitutional issues with circumspection.”