Tax implications of a ‘casual worker’

In a recent decision, the Full Court of the Federal Court has found that a ‘fly-in fly-out’ worker (Mr Skene) was not a casual worker for the purposes of the Fair Work Act 2009 (Fair Work Act).

In WorkPac Pty Ltd v Skene, the Full Court considered the definition of ‘casual employee’, deciding that a casual employee is an employee who has:

‘no firm advance commitment from the employer to continuing and indefinite work according to an agreed pattern of work’.

The Full Court found that Mr Skene had such an ‘advance commitment’ from his employer as he was part of a roster that was set 12 months in advance. On this basis, the Full Court found that Mr Skene was entitled to annual leave under the National Employment Standards in the Fair Work Act. For a more detailed account of this decision please see the article prepared by Partner Kylie Groves.

Tax implications

The taxation implications of this decision are potentially significant for employers engaging workers who have historically, and incorrectly, been treated as casual workers.

Employers making ‘back payments’ of annual leave, whether before or after a termination will generally be subject to Pay As You Go withholding obligations. Employers may also have superannuation guarantee and payroll tax obligations in respect of ‘back payments’ of annual leave. These outcomes can also extend to situations where an employer has not paid annual leave to a worker engaged as a contractor, but who is, in reality, a common law employee.

We encourage any employer impacted by this decision to contact us if they require advice about their employment tax obligations.