Topic – Employee v Contractor
Facts
Betty delivers bread for the Italian Bread Shop (“IBS”) based in Albany. IBS bakes and
distributes a variety of Italian breads and cakes. Betty delivers the products of IBS
throughout the Far North from Whangarei to the Cape Reinga.
Betty is paid on an hourly basis calculated as follows:
Delivery fee $45.99
GST @15% $6.90
Made up as:
Commission $32.00
Petrol $7.50
Depreciation on Vehicle $3.50
other vehicle charges $2.99
Note that the charges are based on an average week and simply divided by the average
number of delivery hours to calculate an estimated hourly cost.
Betty owns her own van, which she bought with a bank loan of $12,500. She is required to
wear the company uniform and paint the van in the IBS colours, which are green, white and
red. The IBS logo is also put on the van.
Betty reports to IBS at 4 am in the morning for her first pickup and normally makes two more
pickups during the day. Her delivery agreement with IBS is for seven days a week and she
has to provide a relief driver when she is not available (which in the weekends is her partner).
Betty issues IBS with a GST invoice each month. Betty has her own personal computer with
which she does all her accounts.
Other terms of the agreement are:
• Betty must install and maintain a radio-telephone on her delivery van.
• Betty must maintain a continuous goods services license.
• Betty must take out insurance cover in respect of the vehicle, goods and
employees.
• Betty is entitled to be paid by the 25th of the following month.
• Betty must not jeopardise IBS’ earnings or reputation.
The agreement may only be terminated if Betty does not have a continuous goods services
license, if she takes intoxicating liquor or drugs while working, has a criminal conviction, she
fails to adequately undertake her duties, or, on four weeks written notice. Betty started this
operation on 1 April 2019.
Required
3
Advise Betty whether she is an independent contractor or an employee for income tax
purposes. Support your answer by references to the relevant sections of the Income Tax Act
2007 and Case Law.
Allocation of marks
Marks for the case study are allocated on the basis of the professional judgment of the marker
and will be based on the following:
– the presentation, structure, legal writing style and referencing.
– the quality and reasoning behind your opinions provided in the answer.
– the effectiveness of the report in communicating your opinions.
Your report must:
• be word-processed (font Times New Roman, size 12) and 1.5 line spaced.
• use appropriate headings.
• use formal language and legal writing style, with clear, succinct explanations.
• be no more than 1,000 words in length, excluding the reference list and footnotes.
This is an absolute maximum. Include a word count on the final page.
• be correctly referenced so that the advise given conforms to the New Zealand Law
Style Guide (published by Thomson Reuters, 3rd edition, 2018).
• The full case name should be stated – see examples in the New Zealand Taxation –
Principles, Cases and Questions, Table of Cases or New Zealand Law Style Guide.
Penalty for late submission of assessment items
The penalty for late submission will be a reduction by 5% or one grade (e.g. B+ to B) per day
up to a maximum of five days. An assessment item will not be marked if it is more than five
days late.
Extensions and other Special Consideration Applications (SCAs)
Students may apply for an extension or for special consideration where there are exceptional
circumstances.
The SCA online request form is available through Blackboard. Access the form via the
“Special Consideration” tab at the top of the Blackboard home page once you have logged in.
Follow the instructions provided.