The dancer pushed himself up off the floor as the thumping bass from the dance music faded from the club. Sweat dripped down his sculpted body as he got his breathing back to normal. Adjusting his g-string, he pushed his hair out of his brilliant blue eyes and looked at the club manager sitting in front of the stage. “We good?” He asked. “Yep, we’re good” said the manager.
Jumping off the stage, his muscles flexing the dancer approached the manager to be handed a packet of papers. “Get these completed and back to me before your first shift” he said. Package in hand he headed to the change room.
Letting his mind go blank, he lathered up his tools of trade. The shower washed the sweat and oil down his body, rivulets flowing round sculpted muscle and perfect anatomy. Dried off and dressed in a tight white tee and bum hugging Levi’s the dancer opened the packet of papers labelled dancers pack. Inside he found a dancers protocol, a fire information form, a dancers tips fact sheet and an application form for an ABN.
There you are, enjoying your lap-dance watching his gorgeous abs dance in the light as he gyrates above you. His skimpy outfit highlighting all the important bits of his physique, obviously a uniform since all the other gorgeous dancers are wearing the same. Suddenly, you wonder – is he a contractor or an employee of this club?
Maybe I’m the only one who thinks these things during a lap-dance – tax geek and all. In reality, there has been a recent case that considered this actual fact – although I’m not implying it occurred due to the auditor enjoying a private dance!
The dilemma of determining whether a worker is an employee or a contractor has been a tricky one. The ATO has a checklist to work through, Workcover authorities offer similar ones. Unfortunately, nowhere is it legislated what makes a person one or the other. What is clear from recent decisions is that just having an ABN doesn’t make a worker a contractor.
This issue has become even more relevant with the passing of the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018. This now means that if a business hasn’t withheld and reported tax when it should have the entire payment made is not deductible. If you’re paying a contractor that should really be an employee and be on wages you won’t be able to claim the payments. So as a business you’re paying someone, then getting taxed on it yourself. Potentially it means the same money could be taxed twice assuming the payee is declaring the income – not a great outcome for business, awesome for the tax man.
Back to the lap-dance.
The case in question was actually to do with payroll tax in Queensland - Universal Supermodels Pty Ltd v Commissioner of State Revenue  QCS 257. Universal Supermodels Pty Ltd was in the business of adult entertainment in the way of sexy dancing with a number of clubs operating in Queensland.
Patrons paid a cover charge to enter the clubs. The dancers performed onstage and between their sets would wander the floor chatting to patrons. There were also hostesses, who were employees, who helped the dancers interact with patrons mainly to facilitate private sessions. For private dances patrons paid a fee set by the club to the receptionist. The dances weren’t completely private, according to the law they had to be observed by a controller to make sure no funny business went on. Sexy not sex.
Dancers were initially provided with a uniform (g-string, short dress, long dress and bikini – not your usual workday wear), the cost of which was then deducted from their pay. Until the uniform was paid off the dancer had to hand it back at the end of each shift. The dancers each had an ABN and operated on a cash basis. They received 50% of the money paid to the club for private dances and paid the club 50% of their tips. Each day they signed a tax invoice and were paid. No sexy dances meant no pay, but sometimes the club would take pity and give the dancers a fifty just to lift their spirits if nobody wanted them to be their private dancer. 
Rosters were drawn up based on the dancers availability as they provided to the club. Some dancers had regular customers and so had built up goodwill but the dancers weren’t allowed to hand over contact details or have any contact with customers outside of the club.
It was obvious all the dancers provided was their skilled labour - the club controlled how much they could charge, provided all their equipment and even though they advised availability the club decided when and where they would work. Pretty clear then, you would think, that they are employees. This was the decision Boddice J came to.
What muddies the waters particularly in this case, and adds to the confusion over employees v contractors, is that the ATO had previously determined the dancers were contractors for GST purposes. Say what, I hear you all shriek!
Universal Supermodels had relied on the outcome of an ATO review of club they had since acquired. This audit had come about as part of the ATO’s adult industry project in the mid 2000s. Obviously, the ATO weren’t looking at payroll tax – that’s not their job. What they did consider was GST and PAYG compliance. As part of this process they looked at how the club conducted it’s relationship with it’s dancers. The ATO decided, according to the clubs accountant, that the dancers were contractors and needed ABNs. So the club, with the help of the ATO, made sure the dancers complied.
As part of this project the ATO issued a number of interpretative decisions and fact sheets specific to the adult entertainment industry.
So, what changed? Apart from the fact that we are considering different tax regimes and different jurisdictions the idea of what is an employee is a court interpretation. It’s not legislation.
It seems that our tax collectors and decision makers are leaning further towards instances when all that is supplied is labour then the worker will be an employee. A big factor in this decision has been control – the dancers cannot offer their services directly to the public as they don’t have the licence. There had to be an intermediary for them to work which then meant a large element of control over how and when they work.
This could equally be applied in many professional service industries – not as sexy and titillating – but still providers of usually purely labour, often ar agreed on place and times.
If you have agreements with contractors just for labour, it’s time to take a closer look, before one of the revenue agencies does it for you.
 This is a fictional account, the authors imagining (and she has a very good imagination) of what may have been the process for hiring exotic dancers. In no way does she have any experience of this not having the skillset for exotic dancing. Nor does she assist any clients who work in the industry, although she has an amazing niece that performs burlesque @sassymuffin. Any resemblance to any person living or deceased or real situation is purely coincidental.
 Please note – the closest the author has had to a lap-dance outside of her imagination is her husband waggling at her on his way to the shower.
 The business held an adult entertainment licence and a liquor license. As such it was bound by the Adult Entertainment Code in accordance with the Liquor Act 1992 (Qld). This allows a person to perform an act of explicit sexual nature but not actual sexual intercourse, masturbation or oral sex, the touching of the genitalia, placing faces in close proximity of genitalia, or soliciting any person for the purposes of prostitution
 Universal Supermodels Pty Ltd v Commissioner of State Revenue  QCS 257, para 7
 Ibid, para 8
 Ibid, para 11
 Ibid, para 12
 Ibid, para 32
 Now you’re all singing “I’m your private dancer”, Private Dancer, Tina Turner, Mark Knopfler, John Carter 1984
 Universal Supermodels Pty Ltd v Commissioner of State Revenue  QCS 257, para 29
 Ibid, para 25
 Ibid, para 12
 Ibid, para 45-47
 ATO ID 2004/186 – GST and adult entertainment services