Selling Agency Agreements and Independent Contractors

As a result of industry demand EAC has amended its Selling Agency Agreement to allow for the insertion of details of a Conjunction Agent. Conjunction Agents generally operate from the Principal Agents office as Independent Contractors. For the purposes of this article we have set out the reason below as to why the Independent Contractor needs to be included within Selling Agency Agreement.

One test which is used to determine whether there is an employment relationship between a Principal Agent and Independent Contractor by the Australian Taxation Office (ATO) is what is known as the 80/20 test. If the person relies on the principal for 80% or more of their income then the person may actually be an employee. If the person relies on the principal for less than 80% of their income it may be that the relationship is truly a contract for service and not an employment relationship.

Most real estate businesses engage independent contractors based on exclusivity – the independent contractor is not permitted to work for any other business during the relevant period.

On the other hand, the contractor is entering into agency agreements as a conjunction agent and deriving income from individual vendors rather than the principal.

Essentially, the difference between an employee/employer relationship and a principal/contractor relationship is that one involves a contractor of service and the other is a contract for service. The employee is employed in service to the employer but a contractor is a party to a contract providing services for the principal.

Clearly if the relationship is one of employment there are obligations for the employer to pay wages, leave entitlements, payroll tax, income tax, superannuation, workers compensation, records retention and vicarious liability etc. Heavy penalties apply for the failure to fulfil these obligations.

By having the Independent Contractor nominated on the Selling Agency Agreement, it creates a relationship where the Independent Contractor is directly contracting with the Vendor and therefore deriving their income directly from the Vendor and not the Principal Agent.

The eForms system will be updated to include this new section and remove the ACN requirement from the Licensee section on Wednesday 1st of March. Paper forms will be updated when the next print run occurs for the Selling Agency Agreements.

In the eForms system the Conjunction Agent details are indicated on screen using the heading “in conjunction with”. To make sure that they print out correctly if you want the conjunction details, tick the box next to this heading. If you don’t tick this box the conjunction details will not be included.

This advice has been provided by Greg Jemmeson of Jemmeson & Fisher Solicitors and Accountant who work with EAC to ensure the ongoing compliance of our printed and online real estate forms.

As an EAC Member you and your team can obtain expert legal advice from Jemmeson & Fisher on issues affecting day-to-day agency practice inclusive as part of your membership. Just contact them on 02 9267 6263 and let them know you are an EAC Member.

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