Shankland v Beta Alistine Pty Ltd [2007] NSWIRComm 111 | Case summary

(1) An application cannot be made for an order under this Division if the application relates to a contract of employment under which: (a) a remuneration package that exceeds the remuneration cap is paid or received (or is payable or receivable) during the period of 12 months immediately before the application is made (or, if the application concerned relates to a contract that has been terminated, immediately before the termination), or (b) a remuneration package is paid or received (or is payable or receivable) during a period of less than 12 months immediately before the application is made (or, if the application concerned relates to a contract that has been terminated, immediately before the termination) that would, if the remuneration package had been paid or received (or been payable or receivable) for a period of 12 months, have exceeded the remuneration cap. (2) An application cannot be made for an order under this Division by a person who is a partner carrying on a business if: (a) the application relates to a contract between that partner and the other persons carrying on that business in partnership, and (b) the share of the net profits, or payments contingent on the net profits, of the business that are paid to or received by (or payable to or receivable by) the applicant during the period of 12 months immediately before the application is made (or, if the application relates to a contract that has been terminated, immediately before the termination) exceed: (i) $200,000, or (ii) if an amount is prescribed for the purposes of paragraph (b) of the definition of "remuneration cap" in subsection (3) - that amount. (3) In this section: "contract of employment" means any contract or arrangement under which work is done by a person in the capacity of an employee, and includes a related condition or collateral arrangement with respect to such a contract. "employment benefit" means a benefit provided to an employee at the cost of his or her employer (being a benefit of a private nature) and, without limitation, includes: (a) contributions payable to a superannuation scheme by an employer in respect of the employee, including any liability of that employer to make any such contributions or to pay costs associated with that scheme, or (b) the provision by an employer of a motor vehicle for private use by the employee, or (c) any other benefit prescribed by the regulations for the purposes of this definition. "monetary remuneration" includes any performance-related bonus or incentive payment. "remuneration cap" means: (a) $200,000, except as provided by paragraph (b), or (b) any greater amount prescribed by the regulations (being a regulation that increases the amount by reference to increases in the amount referred to in section 83 (1) (b)). "remuneration package" means the total value of monetary remuneration and employment benefits payable or receivable under a contract of employment. 4 It was alleged by the respondents that the applicant's remuneration package exceeded the remuneration cap provided for by s 108A. In essence, the respondents asserted that it was the provision of a motor vehicle for private use to the applicant that, when quantified, in association with other elements of the applicant's remuneration package resulted in the remuneration cap being exceeded. 5 There was, and may yet be, controversy between the parties as to the extent to which the motor vehicle provided by his employer to the applicant was provided "for private use" as referred to in s 108A(3). However, the parties sensibly agreed that the respondents' strike out motion would stand or fall depending upon whether the amount of Fringe Benefits Tax ("FBT") paid by the employer with respect to the provision of the motor vehicle to the applicant was an "employment benefit" as defined in s 108A(3). 6 This judgment deals solely with this discrete point. 7 There is one further factual matter that needs to be referred to for the purpose of determining this issue and that concerns the provisions of the applicant's contract of employment. 8 Clause 6. of the contract of employment entitled "Remuneration" provided, in part, that the applicant would be remunerated by way of a total remuneration package which included the provision of "a fully maintained Motor Vehicle as described in Clause 7…." 9 Clause 7. is in the following terms: "7. MOTOR VEHICLE As part of The Total Remuneration Package, the Company shall make available to the Managing Director at its expense for his exclusive use, including during the period of the Managing Director's leave, a motor vehicle of a make, model and recommended retail price to be determined by the Managing Director PROVIDED THAT the motor vehicle selected by the Managing Director shall always reflect his status and position in the Company. The Company shall be responsible for the cost of purchase or leasing of the vehicle, and pay all registration, insurance, repairs, maintenance, petrol and running expenses of such motor vehicle, including FBT and GST, during the term of this Agreement. The Managing Director shall take reasonable care in the use of the motor vehicle and return it to the Company of (sic) the Termination Date." 10 It will be noted that Clause 7. states that the company as employer shall be responsible for the costs, inter alia, of "FBT…." 11 The respondents argued that the liability of the company as employer under the contract of employment was to make payments of FBT, that this therefore became a contractual liability and that the FBT cost to the employer would therefore constitute part of the employment benefit provided to the applicant at its cost, thereby falling within the definition of "employment benefit" in s 108A(3). 12 It was common ground that whilst a number of decisions of this Court, both at appellate and single judge level, had made reference to s 108A and, in passing, FBT, there was no authority precisely on point. Accordingly, I may approach the matter as one involving the construction of the provisions of s 108A. 13 There are a number of indicia that, in my opinion, lead in the aggregate to a construction of s 108A and in particular the definition of employment benefit which result in a conclusion contrary to that contended for by the respondents. They are as follows: 1) There is a reference in s 108A(1)(a) and (b) to a remuneration package which is paid or received, or payable or receivable. This must be a reference to that which is paid or payable to, or received or receivable, by or on behalf of the applicant. 2) The definition of "remuneration package" refers to the aggregation of the "value" of monetary remuneration and employment benefits. The reference to "value" is more indicative, in my opinion, of a value to the employee. It would be odd and almost nonsensical to refer to a value of something to the employer. In the same vein, "value" should be contrasted with "cost". The definition of "remuneration package" involves assessing in monetary terms the value to the employee of the benefits that are payable to or receivable by him or her pursuant to the contract of employment. 3) Indeed, there is a reference to "cost" within the definition of employment benefit itself. This is not intended, in my opinion, to refer to the quantification of the cost but is more indicative that the benefit is payable by the employer to the employee's account and as an expense of the employer. 4) In terms of the provision of a motor vehicle, the definition of employment benefit directs attention to the resultant benefit to the employee. 5) FBT is a tax on the value of certain benefits, referred to as "fringe benefits" that are provided, in general terms, by employers to employees or to associates of employees, associated with the employment relationship. The tax is payable by an employer who provides the fringe benefit. The manner in which the tax is calculated and the circumstances in which it applies to the provision of a motor vehicle is a matter of some complexity to be determined by the relevant statute and rulings issued from time to time by the Commissioner of Taxation. Hopefully, these brief observations, which are all that it is necessary to make to determine these proceedings, are non-controversial. 6) Although Clause 7. of the applicant's contract of employment compels the employer to pay FBT, this contractual compulsion is also reflective of the compulsion to pay FBT provided by the relevant taxation legislation. The mere fact that an employer is liable to pay FBT on the provision of a motor vehicle to an employee whether by statute or contractual obligation is not determinative, in my opinion, as to whether or not the liability to pay FBT is an employment benefit for the purpose of s 108A(3). 7) FBT is, as I have said, a tax payable by an employer for the provision of certain benefits to employees. Whilst there is a cost to the employer, by reason of the payment of FBT, that tax cannot constitute a benefit provided to an employee for the purpose of the definition of employment benefit in s 108A(3). The emphasis, as I have said, is directed to the assessment of the value of the benefit in the hands of the employee. Clearly, the acquisition or leasing costs of a vehicle, as well as the cost of registration, insurance, repairs, maintenance and running costs and the like, would all fall within the rubric of a value to the employee, because these are costs which he or she would have to bear personally if it were not for the provision of a motor vehicle for private use by the employer. It matters not that an employee providing his or her own vehicle might acquire one of a lesser value, because the applicant has clearly contracted to have included within his remuneration package a motor vehicle of a make, model and recommended retail price determined by, and selected by, him. FBT falls outside this concept. 8) The obligation of an employer to pay FBT on a fringe benefit made available to an employee may be contrasted with the tax payable on salary and other remuneration and which is deducted by an employer from monies received by an employee. This tax, deducted under the PAYG scheme, is tax which is payable by the employee as income tax and which is compulsorily collected for the Australian Taxation Office by employers. That tax clearly is to be taken into account when determining the amount of remuneration payable by an employer to an employee for the purpose of s 108A. 14 I conclude, therefore, that the FBT payable by the applicant's employer arising out of the provision to him of a motor vehicle, which shall be assumed only for the purpose of this interlocutory judgment to include private use, is not an employment benefit under s 108A(3). 15 It must follow, therefore, that on the basis upon which this matter was agreed to be considered by the Court, the motion should be dismissed. The applicant has foreshadowed an application for indemnity costs. On this basis, I shall reserve costs.

Shankland v Beta Alistine Pty Ltd

At a glance

Court

Decision date

Before

Source

Judgment (17 paragraphs)

Parties

Cited By (2)