Mutual Acceptance Co Ltd v Federal Commissioner of Taxation

69 CLR 389

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(Judgment by: Dixon J)

Mutual Acceptance Co Ltd
v Federal Commissioner of Taxation

Court:

Judges: Latham CJ
Rich J
Starke J

Dixon JWilliams 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

Hearing date: SYDNEY 15 November 1944; 4 December 1944;
Judgment date: 4 December 1944

Sydney

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Judgment by:
Dixon J

The question for our consideration arises out of the definition of "wages" in the Pay-roll Tax Assessment Act 1941-1942, s. 3.

The Pay-roll Tax Act 1941 imposes a tax on all wages paid or payable by any employer and requires it to be paid by the employer who pays or is liable to pay the wages.

The Assessment Act, which is incorporated by the Tax Act, provides that, subject to and in accordance with the provisions of the former, the tax imposed by the latter shall be levied and paid on all wages paid or payable by any employer and that the tax shall be paid by the employer who pays or is liable to pay the wages (ss. 12 and 13).

"Wages" is defined by s. 3 to mean 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. The definition then proceeds to say that, without limiting the generality of the definition, the word shall include four specified cases. One is the payment under prescribed contracts to the extent to which it is attributable to labour. Another relates to the remuneration of company directors. A third brings in payments by way of commission to insurance canvassers and collectors. The fourth specifies the provision by the employer of sustenance or quarters and the like as consideration or part consideration for the employee's services. There is a sub-section which fixes for the purpose of assessment the monetary equivalent of the sustenance, etc, so provided.

The question we must decide turns, in my opinion, upon the meaning in this context of the word allowance. For I cannot think that the ordinary meaning of the word "wages" would cover the payments with which the case is concerned.

"Allowance" is one of the many words which take their meaning from a context rather than affecting or controlling the meaning of other words of the context in which they occur. For, considered alone and at rest rather than at work with other words, it means the allowing of a thing or a thing allowed. It is only by its application that you discover the kind of thing in mind.

In the present case I think that the whole context and subject matter shows that the definition of wages is dealing with the emoluments of employment paid in money or made over in kind to an employee by an employer. The figure of speech "pay-roll" used to describe the tax and supply a title to the Acts gives some indication of the subject taxed. In the definition of "wages" the two first words "wages" and "salary" refer to ordinary forms of remuneration for work done. "Commission" covers percentage rewards and "bonuses" occasional or periodical additions whether contracted for or voluntary. The next word "allowances" seems to me naturally to follow as an attempt to make sure that any other kind of gain or reward allowed or conceded by the employer to the employee for his work is brought within the definition. In language borrowed from Lord Esher, it is intended to cover any payment beyond the agreed salary of the employee for services or additional services rendered by him (Burgess v Clark ^[F12] , at p. 738). That remuneration for work is the subject is further shown by the four specified cases I mentioned above as included in the definition.

The payment made by the appellant company which the Commissioner says falls within the definition is a separate and distinct amount of money provided by the employer not in respect of the employees' work, but as a subvention towards expenditure. The employees are travellers for the collection on behalf of the appellant company of instalments payable under hire-purchase agreements. They are paid a fixed wage and a commission on the amount collected. These payments are, of course, assessable to pay-roll tax. But certain of the travellers provide and use motor cars for the purpose of collecting the instalments. The cars are neither owned nor provided by the company, their employer. To each of them who so provides and uses a motor car, the employer makes a fixed additional weekly payment in respect of his use of the motor car in connection with the employer's business. There are four different rates adopted, and they are applied according to the area which the traveller is employed to cover. The rates are fixed amounts agreed between the employer and the employee as representing an arbitrary and rough and ready assessment of a sum about equal to two-thirds of the expenditure estimated as likely to be incurred by the travellers in so using the motor cars. They have not been calculated by reference to and do not vary with the actual cost of using the cars in connection with the employer's business, but, in fact, the cost to each traveller is higher than the amount of the weekly payments made to him in respect of the use of the motor car.

Upon these facts, which are precisely stated in an agreed case, I think that, as a matter of law, the payments in question cannot form part of the wages assessable to pay-roll tax. The amount is not a payment contributing to or forming part of the emoluments or gains of the employee and is not paid to him in respect of his work. It is, I think, nothing to the point that an indiscriminate lump sum paid to an employee providing his own tools or apparatus in respect of his work including the use of his implements might be taxable in its entirety. That consequence arises, not from any intention on the part of the legislation to bring into tax the consideration paid by an employer for the use by an employee of his own implements or chattels, but from the circumstance that no separate or divisible consideration for that advantage is, in the case supposed, payable to the employee. That the consequence was unintended sufficiently appears, I think, from that part of the definition of wages that provides for the inclusion of any payment made under prescribed classes of contracts to the extent to which the payment is attributable to labour. It shows that in the case of an independent contractor the remuneration for labour is to be separated out from the consideration for the use of the materials and plant. How improbable it is that the legislation meant to apply an opposite policy in the case of master and servant.

It appears to me that the agreed fact that the weekly payment in issue is made in respect of the use of the employee's motor car in connection with the employer's business is decisive. It means that it is a distinct and separate sum paid for a distinct and separate consideration beyond the work done, the services performed. Neither the employer nor employee meant it to be a gainful consideration, and in fact it was not gainful.

In my opinion the question in the case stated should be answered: No.