The Full Court of the Federal Court has handed down a decision with potentially far-reaching ramifications for the manner in which principals deal with superannuation in respect of independent contractors (Dental Corporation v Moffet [2020] FCAFC 188).


Dr Moffet was a dentist who sold his practice to Dental Corporation.  Mr Moffet, his company called Immediate Dental, and Dental Corporation entered into an Acquisition Agreement and a Services Agreement.  Under the Services Agreement, Dr Moffet was obliged to provide his services as a dentist at the practice.

The Services Agreement terminated in November 2014.  Dr Moffet brought proceedings in the Federal Court alleging that he was an employee of Dental Corporation and was entitled to be paid accrued annual leave and long service leave.  He also claimed superannuation.

The trial judge held that, at common law, Dr Moffet was not an employee of Dental Corporation but was an independent contractor conducting his own business.  This disposed of the claims for leave.

On the issue of superannuation, the trial judge held that Dr Moffet was an employee for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth) (Super Act) and so was entitled to superannuation contributions on the earnings he received under the Services Agreement.  This conclusion rested on the section 12(3) of the Super Act which defines “employee” to include a person working under a “contract that is wholly or principally for the labour of the person”.

The trial judge relied on a decision of Bromberg J in On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 82 (On Call), in which it was held that section 12(3) would apply where an independent contractor provided personal services in an employment-like setting which was not of a domestic or private nature. In determining what an employment-like setting was, Bromberg J thought it was appropriate to ask whether “in all the circumstances, the labour component of the contract in question could have been provided by the recipient of the labour employing an employee.”

In coming to this view, Bromberg J considered, but ultimately decided not to follow, a number of earlier decisions of the High Court and the NSW Court of Appeal  (Neale v Atlas Products (Victoria) Pty Ltd (1955) 94 CLR 419; World Book (Australia) Pty Ltd v Commission of Taxation (1992) 27 NSWLR 377; Vabu Pty Ltd v Commissioner of Taxation (1996) 81 IR 150)) which dealt with the meaning of “contract that is wholly or principally for the labour” of the person.  Those cases decided that the relevant question to be asked is whether the person is working for himself/herself or whether the person is providing labour in the service of another.  In each of these cases a concern was expressed that if the phrase was construed too broadly a range of relationships (including arrangements between a householder and a tradesperson for work on the house or between a solicitor and barrister in respect of a court case) would be brought within the purview of the legislation creating problematic results.

In On Call, it had been held that the relevant persons were employees at common law and so were entitled to superannuation contributions under the “standard” definition of employee in section 12(1) of the Super Act.  Bromberg J’s conclusions about section 12(3) were therefore obiter and this aspect of the judgment received little attention.  The significance of the first instance result in the Moffet case is that it was the first time a person was found to be entitled to superannuation contributions under section 12(3) of the Super Act despite being found to be operating his/her own business.

Dental Corporation appealed the finding in relation to section 12(3) of the Super Act to the Full Federal Court. Dr Moffet cross-appealed on the finding that he was not an employee at common law.


The Full Court upheld the conclusion that Dr Moffet was not an employee under the common law definition and so the outcome in relation to annual leave and long service leave did not change.

The Full Court concluded that Bromberg J’s interpretation of section 12(3) was not correct because “it has no textual anchor in the provision and constitutes a gloss on the provision”.

The Full Court held that section 12(3) requires that: (a) there should be a contract; (b) which is wholly or principally “for” the labour of a person; and (c) that the person must work under the contract.  In relation to (b) the word “for” requires an inquiry into the purpose of the contract from the perspective of the person who is receiving the benefit of the labour.  The definition is satisfied if the labour component is predominantly what the contract is “for” so far as that party is concerned.  In the Services Agreement Dr Moffet promised to supply dentistry services which included treatment of patients, management of the dental practice, determination of fees and maintenance of patient records.  The Full Court regarded these services as comprising the labour of Dr Moffet.  In addition, it was agreed in the Services Agreement that the practice would generate a minimum cash flow and Dr Moffet was required to reimburse Dental Corporation if it did not.  The Full Court considered whether the minimum cash flow promise meant that the labour component of the dentistry services could not predominate.  The ultimate conclusion was that the two could not be disentangled and so the contract was wholly or principally for the labour of Dr Moffet.


The Full Court did not refer to refer to the earlier cases we have mentioned above (Atlas, World Book, Vabu) or Superannuation Ruling SGR2005/1 which states a contract under which a person is engaged to produce a result (ie. where the person is operating his/her own business) cannot be a contract that is wholly or principally for the labour of the person.

The interpretation which the Full Court has placed on section 12(3) of the Super Act would appear to leave no room for considerations of that kind.  All that must be considered is whether there is a contract under which a person does work, and whether from the perspective of the party receiving the work the contract is predominantly for the labour (ie. performance of personal exertion or activity) of the person.

The decision must be taken as reflecting the current law on the meaning of section 12(3) of the Super Act, with the result that many contractual relationships that have until now been considered to be outside the compulsory superannuation system are simply not.  It is probable that numerous and substantial claims for superannuation shortfalls will result.

There is no word yet as to whether Dental Corporation will seek special leave to appeal to the High Court.  Nor is there any indication that the ATO will release a revised superannuation ruling.




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