Editors --- "Income: age pension; whether employee or self employed contractor" [2009] SocSecRpr 23; (2009) 11(3) Social Security Reporter, Article 1

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Income: age pension; whether employee or self employed contractor

SMITH and SECRETARY TO THE DFHCSIA

(2009/483)

Decided: 29th June 2009 by A. Sweidan

Background

Smith was granted age pension with effect from 4 April 2003. At the time of claiming age pension, Smith informed Centrelink that he was self employed as a journalist in a business called ‘Crowsnest Syndications’. Throughout the relevant period, Smith provided Centrelink with profit and loss statements for Crowsnest Syndications and (after April 2004) for a new business he had established and which was known as ‘Neil Smith Features.’

On 24 July 2007, a data matching exercise revealed that, in the 2005/06 financial year, Smith had declared income from employment of $34,328 to the Australian Taxation Office. He had declared $0 income from employment to Centrelink during that financial year. Smith was contacted about the discrepancy and he advised Centrelink that he had been doing freelance writing for Community Newspapers and The Sunday Times. Smith informed the Centrelink officer that he issued invoices to The Sunday Times for the work he completed for them and completed timesheets in relation to this work for Community Newspapers.

Centrelink commenced an investigation into Smith’s employment arrangements and determined that he had under-declared his income, on the basis that he was an employee of Community Newspapers and The Sunday Times and therefore the full amount of his income, without deductions, was to be taken into account when calculating his entitlements to age pension. Centrelink determined that he had been overpaid age pension, totaling $36,151.50, for the period 3 May 2003 to 1 February 2008.

Smith sought a review of Centrelink’s decision, which was affirmed by the SSAT. Smith then sought a review before the AAT.

The issues

The issue before the AAT was whether Smith was an employee or a self employed/independent contractor in relation to the work he performed for Community Newspapers and The Sunday Times during the relevant period.

Discussion

The AAT considered Smith’s employment relationships with Community Newspapers and The Sunday Times, and made the following comparisons:

Community Newspapers

With the exception of work performed in relation to the Mandurah Coastal Times Motoring Section (which is considered separately below), Community Newspapers classified Smith as an employee, who was employed as a Casual Reporter.

Smith’s employment with Community Newspapers was subject to a high level of control by the editor. The editor could direct him as to what copy was to be written by him, the way in which the copy was to produced, and the time and place that the work was to be undertaken.

Community Newspapers provided Smith with tools (such as computers, telephones, stationary etc) to complete his work.

While Smith was not eligible to be paid annual leave or sick leave, Community Newspapers paid superannuation for him and tax was deducted from his salary prior to payment.

Smith’s salary was prescribed under the Community Newspaper’s Editorial Bargaining Agreement.

The Sunday Times

The Sunday Times considered Smith to be an independent contractor, from whom they purchased final copy.

Smith was not directed to produce specific news items or reports and could use his own initiative to decide what he would write about. Smith had total control over the manner, timeliness and other elements of performing his duties.

The Sunday Times did not provide Smith with any of the tools and equipment required by him to prepare the copy or reports.

Smith was not paid annual leave or sick leave. No superannuation payments were made in relation to Smith, nor was tax deducted from payments made to him.

Smith was paid an agreed rate for purchase of the copy he wrote. He was paid via invoices.

The Sunday Times held no public liability or other insurance in relation to Smith.

The AAT's Conclusions

The AAT found that Smith’s employment relationship with Community Newspapers during the relevant period was that of employer/ employee and not one of an independent contractor, except in relation to work he performed for Community Newspapers in connection with the Mandurah Coastal Times Motoring Section. In relation to the work performed in connection with the Man-durah Coastal Times Motoring Section, the AAT found that Smith sent Community Newspapers an invoice for a flat negotiated fee in relation to this work and was not subject to the same level of direction and control as he was as a casual reporter for Community Newspapers. The AAT concluded that the work performed in relation to the Mandurah Coastal Times Motoring Section was work undertaken as an independent contractor, but that otherwise the work performed by Smith for Community Newspapers was performed as an employee.

In relation to The Sunday Times, the AAT concluded that the work performed by Smith was performed as an independent contractor. The AAT was satisfied that the nature of Smith’s arrangements with The Sunday Times was consistent with an independent contractor providing services to The Sunday Times.

The AAT found that, as the full amount of Smith’s income with Community Newspapers as a casual reporter during the relevant period had not been taken into account in calculating his entitlement to age pension, he had been overpaid social security benefits. The AAT found that, as Smith was an employee in relation to Community Newspapers, he was not entitled to deduct expenses from his income, as section 1072 of the Social Security Act 1991 applied.

The AAT concluded that Smith owed a debt to the Commonwealth (which would have to be recalculated), which should be recovered. The AAT found that there was no basis for waiving the right to recover the overpayment.

Formal decision

The Tribunal set aside the decision under review in so far as Centrelink had found that Smith’s employment relationship with The Sunday Times was that of an employee and substituted a decision that Smith was an independent contractor in relation to that work. However, the Tribunal affirmed the decision that

Smith was an employee of Community

Newspapers during the relevant period and remitted the matter to Centrelink to recalculate the quantum of Smith’s age pension debt.

[S.O.]