WA Flick & Co Pty Ltd v Commissioner of Taxation

The Commissioner decided that certain payments made by the taxpayer to its employees were "allowances" within the meaning of the definition of wages in s. 3 of the Pay-roll Tax Assessment Act; to this the taxpayer objected; the Commissioner disallowed the objection and, upon reference to the Board of Review, the decision of the Commissioner was confirmed.

The payments in question were made to employees in respect of the use of their motor vehicles in the service of the taxpayer between 1951 and 1956. It seems that before 1951 the taxpayer had provided vehicles for its employees to travel to premises to eradicate pests and to carry gear and chemicals for that purpose. The business of the taxpayer was Australia-wide. In 1951 the taxpayer changed its policy and gradually employees were required to provide their own vehicles so that by 1956 the taxpayer itself provided vehicles only in two or three exceptional cases, e.g., at Mount Isa, and it employed one hundred and thirty employees who provided their own vehicles. An advertisement published by the taxpayer in September 1956 and admitted to be typical stated "Ownership of a reliable vehicle and garage essential Car allowance on completion of training" and in a form issued to applicants for employment, it was stated that successful applicants were expected to: "1. Provide a reliable motor vehicle of recent vintage capable of carrying tools, equipment and insecticides. 2. Provide a shed garage etc. in which you can store your supplies of insecticides and materials"; in return for this and other considerations the taxpayer offered, inter alia: "3. A vehicle allowance consisting of a basic weekly amount and an amount per mile covered on legitimate company's business".

The vehicle allowance was not uniform throughout Australia but its content in each case was an element of a fixed amount per week to cover the first fifty miles travelled in respect of not merely the running costs of that mileage but amortization, repairs, servicing, tyres, &c. and eighty per cent of registration, insurance, interest on cost and so on, on the footing that the vehicle would be used eighty per cent on the taxpayer's business and twenty per cent privately. This would approximate £3 10s. 0d. per week. The other element in the vehicle allowance was a mileage rate for miles over fifty per week to cover running costs and eighty per cent depreciation at a flat rate of fifteen per cent per annum. In an ordinary country area the allowance paid would, in a typical case, amount to about £600 a year.

The Board of Review held that the matter was concluded against the taxpayer by the decision of this Court in Mutual Acceptance Co. Ltd. v. Federal Commissioner of Taxation [1] and with that view we agree. The decision in that case was that of a majority (Latham C.J., Starke and Williams JJ.; Rich and Dixon JJ. dissenting) and although the reasons of the Justices constituting the majority were not identical, it was decided that payments over and above salary to travellers - who collected instalments under hire-purchase agreements and who, in doing so, used their own motor cars - of a fixed amount agreed between the company and each traveller as representing an arbitrary and rough and ready assessment of two-thirds of the expenditure estimated as likely to be incurred by the traveller in using his motor car, were allowances paid to employees as such and were, therefore, "wages" as defined by s. 3 of the Pay-roll Tax Assessment Act; and that this was so notwithstanding that the expenditure actually incurred by a traveller using his car was always greater than the payments received by him. The differences that there are between the facts of that case and those of this, e.g., that the employees are required to provide a car and that the payments are intended to cover a great deal more than simply a percentage of their running costs in the employer's service, are all in favour of the Commissioner, but in our view it is not necessary to elaborate these differences because the effect of Mutual Acceptance Co. Ltd. v. Federal Commissioner of Taxation [1] is that "allowances paid to any employee as such" include a motor car allowance notwithstanding that it does not fully reimburse the employee for his expenditure in running his motor vehicle in his employer's service. That case requires that the allowance be looked at from the point of view of what the employer pays rather than what the employee makes and poses as the critical question, whether the payment is one which the employer makes to the employee because of something done in the service of the employer. As Williams J. said, the Act is concerned "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" [1] .

1. (1944) 69 C.L.R. 389. 2. (1944) 69 C.L.R. 389. 3. (1944) 69 C.L.R., at p. 406.