Mutual Acceptance Co Ltd
v Federal Commissioner of Taxation

Judges: Latham CJ
Rich 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

Sydney

Judgment by:
Williams J

The relevant facts and provisions of the Pay-roll Tax Act 1941 and of the Pay-roll Tax Assessment Act 1941-1942 are set out in the reasons for judgment of the Chief Justice and I need not repeat them. The tax is imposed on all wages paid or payable by an employer. Wages are defined in s. 3 of the Assessment Act. The definition is so wide that it can include payments which would not be part of the taxable income of the employee. The section expressly provides that the generality of the opening words is not to be limited by the specific instances which follow. It is wide enough to include the full remuneration for which the man is engaged to work (Abram Coal Co Ltd v Southern ^[F13] , at p. 308).

In the present case the appellant is liable to make three classes of payments to its travellers under their contracts of employment, namely, (1) wages, (2) commission, and (3) sums called car allowances in respect of the use by them of their own motor cars. The amounts payable to employees under contracts of employment may vary indefinitely and be sub-divided into various classes. Employees may receive a certain wage, and be left, out of that wage, to bear all the expenses such as clothing, travelling, and board and lodging that are involved directly or indirectly in placing themselves in a position to earn it, or they may be paid a certain wage and in addition receive other recompense in cash or in kind expressly or impliedly to cover all or certain of their expenses, direct or indirect. These additional payments would all be properly described as allowances in the ordinary and natural grammatical meaning of that word. In order to do their work it is necessary for the travellers to use cars. This is an expense to which they are put in the course of their employment. If the appellant did not make the car allowances it would either have to provide cars for the travellers or increase their wages or commission. But I am unable to see any distinction in substance between such an allowance and another allowance to meet any of the expenses, direct or indirect, already mentioned. Contrast, for instance, an allowance of tea-money to employees who have to work back with the car allowance in question. In each case the employee would be entitled to the payment and it would become his property, whether he actually partook of an evening meal or used his car or not, and irrespective of the amount he actually expended on his meal or car.

As the definition of wages in the Pay-roll Tax Assessment Act includes any allowances paid or payable in cash or in kind, it seems necessarily to follow that all three classes of payments are part of the travellers' wages as defined by the Act. It was contended for the appellant that the car allowances to the travellers were not part of their wages, because wages as defined by the Act only included payments in cash or in kind which were of some pecuniary benefit to the employee, whereas the car allowances were a mere reimbursement for the special expense to which the travellers were put because it was necessary to use their cars in order to do their work. But the definition of wages includes any allowance paid or payable to any employee as such.

The allowances were part of the earnings of the employees (Midland Railway v Sharpe ^[F14] ). The effect of that decision was abrogated by a statutory provision that where the employer has been accustomed to pay to the workman a sum to cover any special expenses entailed on him by the nature of his employment, the sum must not be reckoned as part of his earnings: See Jones v International Anthracite Collieries Co ^[F15] , at pp. 162, 163; Woodhouse v Turnerising Roofing Co Ltd ^[F16] ; Halsbury's Laws of England, 2nd ed., vol. 34, p. 934. But the Pay-roll Tax Assessment Act contains no such provision, and it is not, as I have said, concerned with pecuniary benefit in the sense of the profit that an employee derives from the payments which he receives from his employer, but with the actual remuneration which he is entitled to receive in respect of his employment, quite irrespective of the expenses to which he has been put to earn that remuneration. The car allowances are in a very similar position to the cash allowance paid to the detective in Fergusson v Noble ^[F17] to purchase plain clothes in lieu of uniform which was held to be a payment accruing to the officer by reason of his employment and part of the emoluments of his office. They are just as much allowances in the ordinary acceptation of the word as the victualling allowances referred to in The Tergeste ^[F18] , or the allowances of members of the armed forces referred to in such cases as Collins v Collins ^[F19] , Jones v Amalgamated Anthracite Collieries Ltd ^[F20] ; M'Mahon v David Lawson Ltd ^[F21] , and Heaney v B. A. Collieries Ltd ^[F22] .

For these reasons I am of opinion that the question asked in the case stated should be answered in the affirmative.