Taxation Review Authority held relocation drivers are independent contractors and not employees
2009 case note – TRA decided that the CIR was incorrect and held that the drivers were independent contractors - PAYE; independent contractor; employee.
The taxpayer engaged drivers to relocate its cars to different places in New Zealand. The taxpayer filed PAYE returns on the basis that the drivers were independent contractors. The Commissioner disagreed. The Tribunal decided that the Commissioner was incorrect and held that the drivers were independent contractors.
Impact of decision
The usual tests were applied to determine employer/ employee relationship. This case was largely dependent on its facts.
The taxpayer is a vehicle rental operator and engages drivers to relocate its cars to different places in New Zealand.
All the drivers entered into an agreement with the taxpayer which described them as independent drivers and not employees of the taxpayer. The agreement was labelled as "Relocation Driver Contract".
The taxpayer filed PAYE returns for the period 31 December 2002 to 31 August 2006 on the basis that the drivers were independent contractors. On 25 September 2006, the taxpayer was assessed $1,823,033.69 for PAYE for those periods on the basis that the drivers were employees.
Barber J held that the drivers were independent contractors for the following reasons:
- The drivers' work is not an integral part of the taxpayer's business.
- The performance of the driver's task, as set out in the agreement, provides for the efficiency and safety of the drivers. It does not constitute control of the task.
- The work and remuneration for the drivers are more consistent with the lifestyle of the drivers as independent contractors.
- The influencing factor is the agreement between the taxpayer and the drivers: It truly expresses the intention of the parties [paragraphs 32, 36-37, 87-88].
- The agreement is not a sham [paragraph 39].
Income Tax Act