oby is a full-time contract pilot with extensive experience in flying the “corporate big iron” jet aircraft, such as the Gulfstream GV 500, both internationally and domestically. As a contract pilot he agrees to provide his services as, for example, a Gulfstream qualified pilot for flights aboard an aircraft owned or operated by a client. Although Toby brings with him the requisite skills, experience, and training he must however abide by a client’s standard operating procedures which provide flight crews with relevant guidance and standardised procedures. This may require Toby to undergo training by the client before he is permitted to operate the client’s aircraft.

He has set up a company, Tobyair, for which he prepares an operating budget for each financial year. Based upon the budget he determines the hourly rates he charges his clients while acting on a client’s behalf as either an aircraft captain, first officer or, for the really long trips off-shore, second officer. As well as returning a profit to Toby’s company, these rates are designed to cover the cost of his training, his sickness and loss of licence insurance, public liability insurance, and superannuation. The rates do not cover the outgoings he incurs while under contract such as hotel accommodation, food, car hire/taxis, telephones which he passes on to a client at cost. As a contract pilot Toby is remunerated on the basis of an outcome; in other words he receives nothing from his client unless the contracted service has been provided to the client.

Toby is well-liked by his clients for, not only is he a first class pilot, he has a professional approach to his work in that he is prepared to assist his clients in all phases of a flight operation such as pre-flight checks, filing of the flight plans, weight and balance computations, refuelling, loading and unloading baggage, and anything else that can make the flight a success. He undertakes these “extras” in accordance with a client’s standard in-house procedures and as directed by a client’s staff. Toby also maintains a professional posture around his client; for example he makes sure that his attire is in line with the clients requirements, and he never discusses his clients with other people.

In your opinion, do you think for income tax purposes that Toby is an independent contractor or an employee when flying as a contract pilot? Your opinion must be supported by well-founded argument for if he is an employee, then the PAYG withholding, the superannuation guarantee obligations, as well as workers compensation and payroll tax fall upon his clients.

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