The Trustees of the Estate of George Adams (Deceased) v. The Commissioner of Pay-roll Tax (Victoria).

Members: Gibbs J

Stephen J
Mason J
Murphy J
Wilson J

Tribunal:
High Court of Australia

Decision date: Judgment handed down 2 September 1980.

---

Stephen J.

The facts of this matter, as well as the relevant provisions of the Pay-roll Tax Act 1971 (Vic.) as amended, appear from the reasons for judgment of my brothers Mason, Murphy and Wilson JJ.

The question is whether or not the appellants are liable to pay-roll tax on sums paid by them to a large number of their employees during the year ending 30 June 1977. The Act selects as the criterion of liability the payment of taxable wages by any person who pays any wages - sec. 8, read with the definition of ``employer'' in sec. 3(1). However, the effect of sec. 6 of the Act is to make the present payments ``taxable wages'' so long as they fall within the definition of ``wages''. The presently relevant part of that definition consists of the words ``bonuses... paid... to an employe as such''.

Were it not for the circumstance that the appellants, who are the trustees of the trusts of the will of the late George Adams, made the payments pursuant to the terms of the testator's will, there could be no doubt but that the payments are ``wages'' as defined, attracting liability to pay-roll tax accordingly. They are otherwise appropriately described as bonuses and, as the evidence establishes, were paid to the recipients because they were employees and because of the worth of their services as such employees.

The appellants contend that, because the payments have the character of sums paid by the trustees of a will pursuant to the terms of that will, they cannot also fall within any part of the statutory definition of ``wages''. Yet it is within undoubted legislative competence to attach fiscal liability to payments of any description, for that purpose selecting any characteristics of payments as criteria of liability. The legislature has here enacted that payments which answer the description of ``wages'', as defined, will carry fiscal consequences and has failed to exempt from those consequences payments which also bear other descriptions relevant in other circumstances. The question is simply whether or not the payments in question do meet the statutory description of ``wages''. If so, fiscal consequences follow.

In the present case the testator, by the terms of his will, and the appellants, by the way in which they have chosen to exercise the discretion conferred upon them by that will, have combined to confer upon these payments qualities which result in their falling squarely within one part of the statute's definition of ``wages''. Their combined efforts have resulted in payments being made by persons, the appellants, who are undoubtedly employers, to persons who are no less clearly their employees. And because these payments were made to particular recipients solely because they were employees whose services proved of particular value to the employers, they could not better answer the description of amounts paid to ``employees as such''. They answer no less happily the description of ``bonuses'', being ``occasional or periodical additions whether contracted for or voluntary'' - per Dixon J. in
Mutual Acceptance Co. Ltd. v. F.C. of T. (1944) 69 C.L.R. 389 at p. 403 , and see In
re the Income Tax Acts (No. 3) 29 V.L.R. 735 at pp. 741-2 and The Oxford English Dictionary: ``bonus''. In the absence of any statutory exemption in favour of payments made pursuant to the terms of a will, the fact that these payments possess that character will not avail the appellants: that fact is simply irrelevant to the appellants' liability to tax, as is the existence of any equitable remedies available to enforce such duties as the appellants may have as trustees of the will of the deceased.

---

ATC 4429

It is no accident that the actions of the testator and of the appellants should have combined to confer upon amounts payable under the terms of this will the character of ``bonuses paid to an employe as such''. In doing so they have acted no differently from the general run of employers who make payments to their employees over and above ordinary wages or salaries, payments which are commonly described as bonuses. The testator intended that his successful business as ``a conductor of sweep consultations'' should continue to be carried on by his trustees after his death, and he directed that a share of its net profits should periodically be distributed by them in such proportions amongst such of the employees for the time being engaged in the business as they should think fit. He thereby ensured that there would exist a relationship of employer and employee between his trustees and the employees of his business and that some at least of those employees would, as members of the class of ``employees for the time being'', receive payments from the trustees.

The appellants, as trustees, in their turn decided that their selection of particular employees and their determination of how much each selected employee should receive would be determined by reference exclusively to an employee's ``worth to the business''. They thus ensured that it would be each recipient's qualities as an employee that determined what, if any, half-yearly payment he would receive. There is, therefore, no unreality in treating these payments as bonuses. They serve, and are intended by the appellants to serve, precisely those purposes for which employers customarily pay bonuses to their employees.

Having so arranged matters, no doubt much to the benefit of the efficient conduct of the business, it follows that the fiscal burden of this legislation, which imposes a tax upon those who pay ``bonuses... to an employee as such'', falls upon the appellants.

I would dismiss this appeal.