What allowances, and in particular, what motor vehicle allowances are to be included in the rate of earnings calculation for the purpose of determining whether an employee’s income exceeds the high income threshold, and in many cases therefore, whether the employee is protected from unfair dismissal?
Here is a statement of the legal principles from a recent decision of the Fair Work Commission.
“Both parties referred me to a number of cases of the Commission where the tension between whether a payment made in some way in respect of a motor vehicle was resolved as an allowance or reimbursement.
In Ni Mhorain v UON Pty Ltd 11 (Ni Mhorain) the applicant in that matter was initially provided with a motor vehicle with a nominal value of up to $20,000. Sometime later the applicant and her employer “agreed to substitute the provisions of the company motor vehicle with a car allowance.”12 In deciding that the car allowance was not a reimbursement contemplated by s.332(2)(b) of the FW Act, Deputy President Clancy said:
 In Ms Ni Mhorain’s case, the employment contract had already provided for the reimbursement of travel expenses, outlining that ‘some travel may be required at Company expense and direction’ and the entitlement for Ms Ni Mhorain to be reimbursed for ‘reasonable travelling and entertainment expenses in connection with business and affairs of the Company upon receipt by the Company of details… [Endnote deleted]
n Pasznicki v Expro Group Australia Pty Ltd 13 (Pasznicki) Deputy President Binet considered the treatment of a car allowance where the applicant in that matter received $120,000 gross salary per annum and a “vehicle allowance of AUD 15,600 per annum”.14 The Deputy President found that the applicant was entitled to reimbursement for use of his private vehicle which he did receive and that this was totally separate to his vehicle allowance. The Deputy President also found that the “vehicle allowance was, in effect, simply an alternative way to describe a portion of [the applicant’s] cash wages.15 The Deputy President therefore concluded the vehicle allowance was part of the applicant’s earnings.
In Sinclair v Spotless Management Services Pty Ltd T/A WA Laundries 16 (Sinclair) Commissioner Roe considered if a “Tool of Trade – Vehicle Allowance” of $15,500 per annum should be included in earnings. In that case the Commissioner observed:
 The contract of employment states under the heading “Tool of trade – vehicle allowance”
“You will be provided a vehicle allowance for the purpose of compensation for using your own vehicle in connection with official business related purposes. The amount of the allowance is $15,500 per annum payable in equal instalments in each pay period. The Vehicle Allowance is provided to you as an expense allowance and as such does not form part of your ordinary pay when calculating the value of other employment related entitlements. Further in the event your position or employment conditions change and as a consequence of this change the Company considers that regular use of your own vehicle is no longer required for you to perform your duties, then the allowance will cease.” [ Endnote deleted]
The Commissioner found that “[o]n its face the employment contract makes it clear that the amount is intended to be a reimbursement in compensation for using the employee’s own vehicle at least in part for work purposes…” 17 For this reason the Commissioner found that the amount should not, on its face, be included in earnings.
In Davidson v Adecco Australia Pty Ltd T/A Adecco 18 (Davidson) Commissioner Booth considered whether a “travel allowance of $16,000 per annum”19 should be included in earnings or not. In that case, where the contract stated that the allowance could only be used in accordance with Adecco policy, the Commissioner found that the amount could not be considered as earnings under s.332 of the Fair Work Act.20
In Fitzhenry v Linde Material Handling Pty Ltd 21 (Fitzhenry) Deputy President Sams found that a car allowance was a reimbursement of expenses based on the restrictions in the contract of employment which, whilst requiring the employee to provide their own vehicle limited the make and colour and maintenance of the vehicle. The Deputy President found that “the applicant was not able to freely choose the vehicle he preferred and he was required to obtain a vehicle which was in keeping with the Company’s image.”22
In McDonnell v Qube Ports & Bulk Pty Ltd T/A Qube Ports 23 (McDonnell) Vice President Watson was required to determine the value of the private usage of a company owned vehicle provided to the employee in that matter. There was no dispute that the vehicle in that case was a tool of trade. That case did not involve a contest as to whether an amount paid was a reimbursement or an allowance.
What is apparent from each of the above cases, which has dealt with whether a car allowance should be treated as reimbursement or as earnings, is that in each case the contract under which the allowance was paid or the factual circumstances of the receipt of payment where there is no explicit contractual term was critical to a determination of the matter.
It is more likely that a vehicle allowance will be treated as earnings in circumstances where an employee in receipt of such an allowance is also entitled to reimbursement for travelling expenses and/or where the employer has no control over how a vehicle allowance is spent (Ni Mhorain and Pasznicki) .
A vehicle allowance is more likely to be treated as a reimbursement of expenses where the employer controls how the allowance might be spent (see Davidson and Fitzhenry) or it is clearly contemplated to be in compensation for costs incurred (Sinlcair).
I accept that the decision in McConnell is not a relevant consideration in the matter before me. In that case the vehicle was supplied to the employee by the employer. The decision in that case rested on the apportionment of private usage of the vehicle for the purpose of determining how much of its value should be apportioned to earnings. I have therefore not had regard to it.”
Monteiro v Valco Group Australia Pty Ltd (2018) FWC 1520 delivered 21 March 2018 per Bissett C