Contractor truck drivers not ‘employees’ for superannuation guarantee — time to review your arrangements

16 May 2023

The recent case of Jamsek v ZG Operations Australia Pty Ltd (No 3) (Jamsek) has clarified the application of the superannuation guarantee (SG) regime to truck drivers.

The calculation of SG contributions by employers operating in the transport and logistics industry remains a focus area of the Australian Taxation Office (ATO). Further commentary on this issue has been written in a previous article.

Who is an ‘employee’ for the super guarantee?

Under the SG scheme, employers must contribute at least 10.5 percent of an employee’s ordinary time earnings to that employee’s superannuation fund. This statutory obligation applies to all employers in respect of their full-time, part-time and casual employees.

Where you engage contractor truck drivers to provide logistics and delivery services, a threshold issue which arises is whether each driver is in fact an ‘employee’.

The term ‘employee’ is defined in section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and refers to its ordinary ‘common law’ meaning. Under common law, an individual is an ‘employee’ if there is a contract of service between the individual and their employer, under which the individual is remunerated for their personal labour and skills.

Independent contractors may be deemed employees

Under section 12(3) of the SGAA, the term ‘employee’ is broadened beyond regular employment relationships to include persons who may not otherwise come within the ordinary meaning.

Section 12(3) provides that if a person works under a contract that is wholly or principally for the labour of that person, that person is an employee. It is irrelevant whether that person contracts with you using an Australian Business Number (ABN).

This section is intended to capture certain arrangements with independent contractors. Where a person is engaged as a contractor, the ATO considers that a contract will be ‘wholly or principally’ for the labour of that person where the individual:

  • is remunerated (wholly or principally) for their personal labour and skills;
  • must perform the work personally (there is no right to delegate); and
  • is not paid to achieve a result (e.g. upon the completion of a project).

(Superannuation Guarantee Ruling 2005/1)

If your contractor arrangements fall within this extended definition of ‘employee’ (even if your contractors hold ABNs), you may be liable to pay SG contributions on their behalf, despite the fact that your contracts may exclude such contributions.

Jamsek — Drivers not deemed to be employees

In Jamsek, the Full Federal Court unanimously held that two truck drivers were not employees under the expanded definition in section 12(3) of the SGAA.

Broadly, under the facts, two truck drivers were employed by ZG Operations Australia Pty Ltd (ZG). In the mid-1980s, the drivers altered their working arrangements with ZG. Each driver set up a partnership with his wife, and each partnership entered into a contract with ZG for the purchase of trucks to provide delivery services.

Under the new arrangements, the partnerships were wholly responsible for the trucks, including the maintenance of those trucks and other costs such as insurance. Further, the partnerships were able to delegate work to substitute drivers with agreement from ZG.

The drivers argued that ZG was responsible to pay SG contributions on their behalf, as the contracts were principally for their personal labour and skills.

Decision of Full Federal Court

The Court held that the SG regime did not apply to require the payment of SG contributions under the new arrangements. The Court stated that section 12(3) had the following three elements which must be satisfied for the extended definition to apply:

(a)   there should be a ‘contract’;
(b)   which is wholly or principally ‘for’ the labour of a person; and
(c)   that person must ‘work’ under that contract.

The Court confirmed that section 12(3) only applies where the deemed employee is a natural person who is a party to the contract in their individual capacity. In this case, there was no ‘contract’ between ZG and the individual drivers. The drivers were not parties to the contract in their individual capacities; rather, they were parties, with their wives, to their respective partnerships.

Further, the contracts were not wholly or principally ‘for’ the labour of the drivers. Rather, the contracts were also for the provision of equipment – being the trucks. The Court noted that the trucks (for which the partnerships were wholly responsible) were ‘obviously integral’ to the provision of the delivery services under the contracts.

The Court concluded that the drivers did not work ‘under’ the contracts, because the drivers were not parties to the contracts in their individual capacities. The Court confirmed that the ordinary meaning of the phrase ‘works under a contract’ and the word ‘labour’ each point to an individual worker in their individual capacity.


The decision in Jamsek is significant as it confirms that where an individual performs work for you through an entity such as a company, partnership or trust, the individual is not your employee for the purposes of the SG regime.

This is because the company, trust or partnership (not the individual) has entered into the contract. This conclusion is consistent with the ATO position in SGR 2005/1.

The decision also indicates that where drivers provide their own trucks and prime movers under contracts, which they are required to maintain and insure, this will be a significant factor in supporting the position that a contract is not principally for the labour of the person, but rather for the provision of equipment.

The right to delegate work may also indicate a contract is not for the labour of a person. However, if the right to delegate work requires approval, this will not in itself prevent a driver from constituting a deemed employee. In contrast, an unfettered right to delegate work will more strongly indicate that a contract is not for the labour of a specific person.

Accordingly, it is preferable for businesses to contract directly with entities such as companies, partnerships and trusts, rather than individuals. This factor will be critical in ensuring an individual is not a deemed employee.

Where it is necessary to directly enter into contractor arrangements with individuals, contracts should be closely reviewed to consider the following issues:

  • whether the contract is principally for the provision of equipment, rather than the provision of labour services;
  • if there is a right to delegate work, whether that right is unconstrained (which is preferable) or requires approval of the principal; and
  • whether the drivers are paid to ‘produce a given result’ (which is preferable), rather than paid for their labour.

We await further comment from the ATO following this decision, such as a decision impact statement. In the meantime, the Jamsek decision will provide businesses with more clarity regarding the application of the SG regime to their arrangements with drivers. Employers should also closely consider the ATO’s Draft Practical Compliance Guideline (Draft PCG 2022/D5) which assists taxpayers in assessing whether individuals are employees or independent contractors.

Contact us

If you would like to discuss your SG compliance in light of the Jamsek decision, or are currently the subject of an ATO review or investigation, please contact our Tax team.


Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48

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