Mutual Acceptance Co Ltd v Federal Commissioner of Taxation
69 CLR 389(Decision by: Latham CJ)
Mutual Acceptance Co Ltd
v Federal Commissioner of Taxation
Judges:
Latham CJRich J
Starke J
Dixon J
Williams J
Subject References:
Taxation and revenue
Pay-roll tax
Collection of instalments due under hire-purchase agreements
Vehicle provided and allowance paid by employer
Liability to tax
Legislative References:
Pay-roll Tax Assessment Act 1941 No 2 - s 3
Judgment date: 4 December 1944
Sydney
Decision by:
Latham CJ
This case raises the question whether certain payments made to employees of the appellant company are "wages" within the meaning of the Pay-roll Tax Assessment Act 1941-1942.
The Pay-roll Tax Act 1941, s. 3, imposes a tax upon all wages paid or payable by an employer. The Act (s. 2) incorporates the Pay-roll Tax Assessment Act 1941. Section 3 of the latter Act defines "wages" as follows:"`wages' means any wages, salary, commission, bonuses or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to any employee as such and, without limiting the generality of the foregoing, includes-
- (a)
- any payment made under any prescribed classes of contracts to the extent to which that payment is attributable to labour;
- (b)
- any payment made by a company by way of remuneration to a director of that company;
- (c)
- any payment made by way of commission to an insurance or time-payment canvasser or collector; and
- (d)
- the provision by the employer of meals or sustenance or the use of premises or quarters as consideration or part consideration for the employee's services".
The case states that the appellant company employs travellers to collect instalments due under hire-purchase agreements. The travellers are paid a weekly wage, together with a commission based on the amount collected. The weekly wage and the commission are plainly included within the definition of "wages" contained in the Act. Some of the travellers provide motor cars for the purpose of collecting the instalments. These travellers are paid fixed sums in respect of the use of their motor cars, such payments being described by the appellant as "car allowances." The question is whether these payments are "allowances" within the meaning of the definition of "wages." These additional payments are fixed sums of 25s., 32s. 6d., 35s. or 37s. 6d. a week, according to the size of the territory which the traveller has to cover and the size of the motor car used by him. The payments roughly represent about two-thirds of the expenditure estimated as likely to be incurred by travellers in using the car.
It is contended for the company that the allowances are a partial reimbursement of actual expenditure, and for that reason are not included within the definition of "wages" in the Act. If an employer were to give a traveller employed by him a sum for the purpose of purchasing a railway ticket to enable him to travel, it could not be contended that such a sum was part of the wages of the employee. It is argued that the car allowances are of the same character.
Under par. (a) of the definition in s. 3 classes of contracts may be prescribed, and then payments made under such contracts to the extent to which the payments were "attributable to labour" would be included within the definition of "wages." It was contended that this phrase provided a qualification or limitation which should be applied to the terms "commission, bonuses or allowances" contained in the earlier part of the definition, and that payments by way of commission, bonuses or allowances should be held to be wages only in so far as such payments were attributable to labour. If, therefore, a payment was made for the purpose of enabling an employee to provide a motor car, such a payment was (it was argued) made really for the use of the car (though not strictly for the hire of the car), so that it could not be regarded as attributable to labour, and therefore could not be described as "wages" within the definition. In my opinion pars. (a) to (d) of the definition cannot be used to show that the preceding words of the definition should be construed in some limited sense. Those paragraphs are introduced by the words "without limiting the generality of the foregoing." Thus the phrase "to the extent to which that payment is attributable to labour" cannot be applied to the earlier part of the definition for the purpose of limiting the general words contained therein.
The payments (in cash or kind) which are included in "wages" are payments made "to any employee as such." They therefore comprehend only payments made to an employee in connection with and by reason of his service as an employee or in respect of some incident of his service. Thus a merely personal gift by an employer to a person who happened to be an employee would not be included within "wages," though a bonus paid to employees because they were employees would be so included.
Further, the payment must be made "to any employee." If money is given to an employee in order to enable him to make a payment to a third person on behalf of his employer, such money cannot be regarded as paid to the employee-as in the case already mentioned of providing an employee with money for the purpose of purchasing a railway ticket. Money is paid to an employee only when he, after receiving it, becomes the owner of the money, having the complete disposition and control of it. Money which is held by an employee on behalf of his employer cannot be regarded as paid to the employee within the meaning of the definition. Such money remains the money of the employer and is not "paid" by him when it is placed in the hands of an employee who holds it on his employer's account. The facts stated in the present case show that the employee is at liberty to spend the car allowance as he chooses without accounting to the employer in any way for his expenditure. The payments are made to employees in respect of an incident of their service, namely the use of a motor car, and because they are the employees of the employer. Accordingly, in my opinion, they fall within the description of payments made to employees as such.
It is contended, however, that they are not "allowances" within the meaning of the section, and that the only allowances which are included within the definition are allowances which are in the nature of remuneration for services. "Allowance" in the relevant sense is defined in the Standard Dictionary as meaning:"That which is allowed; a portion or amount granted for some purpose, as by military regulation, operation of law, or judicial decree: also, a limited amount or portion, as of income or food; as, an allowance of rations; an allowance for costs; an allowance for tare or breakage; an extra allowance for services; to put one on an allowance of bread." When the word is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service. Expense allowances, travelling allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of a service. Tropical allowances, overtime allowances, and extra pay by way of "dirt money"are allowances as compensation for unusual conditions of service.
The latter class of allowances represents higher wages paid on account of special conditions, and may fairly be described as part of wages in the ordinary sense. A victualling allowance has been held to be part of the wages of a seaman (The Tergeste [F1] ). Allowances which are wages in the ordinary sense are, however, included in the word "wages" itself where it appears in the definition. If the word "allowances" were limited by construction to allowances which fell within the ordinary concept of "wages," the result would be that the word "allowances" in the definition would have no application, and would not operate to extend the ordinary meaning of the word "wages." It would have no significance or effect. Accordingly, in my opinion it is proper to reject the contention that only such allowances as are remuneration for services are included within the word "allowances" in the definition.
It was also argued for the company that in so far as an allowance was expended by an employee in the course of rendering his service it could not be regarded as wages and that only what might be called the profit element in the allowance could at most be so regarded. The Pay-roll Tax Assessment Act, however, looks at wages from the point of view of an employer. The tax is assessed upon what he pays or is bound to pay as wages (s. 12). He is bound to make monthly returns of wages paid or payable (s. 18). It would be quite impracticable for employers to comply with this provision if they had to ascertain how much, if any, of the allowance represented a personal benefit (or "profit") to the employee. In Midland Railway v Sharpe [F2] , a similar argument was used in relation to the ascertainment of "earnings" for purposes of workers' compensation in a case where a "lodging allowance" was paid. It was held that the allowance was wages [F3] and was earnings, whether or not the workman made any profit out of it. Lord Davey said: "If the appellants are right, you would in every case have to analyze the remuneration by way of wages or salary which has been paid to an ... employee, and to ascertain the conditions of his labour, and what expenses he was put to, or might be put to, in order to earn that remuneration. It would be impossible to analyze that in every case, and I think that cannot have been within the contemplation of the legislature in framing the Act" [F4] . In my opinion these observations are equally applicable to the Pay-roll Tax Assessment Act.
The payments made to the travellers employed by the appellant company are allowances in the sense that they are payments made to employees of the company as such, that is, in respect of an incident of their service, and the moneys when paid are at the complete disposition of the employees. In my opinion they are allowances within the meaning of the definition and the question in the case should therefore be answered in the affirmative.