This extract from a Far Work Commission unfair dismissal case is an excellent summary of the legal principles which determine an employee’s annual rate of earnings to assess whether they exceed the high income threshold.
“Was the Applicant’s annual rate of earnings and other amounts less than the
high income threshold?
[72] Assessment of the high income threshold involves two considerations. First,
consideration needs to be given to the applicant’s annual rate of earnings, which requires an
examination of several factors, including those set out in s 332 of the Act, and, because of a
reference in that section, potentially factors included in the regulations. Second, and separately,
consideration needs to be given to whether there are any amounts to be added to the person’s
annual rate of earnings because of factors included in the regulations. The sum of these two
considerations is what is compared against the high income threshold.
[73] The word ‘Earnings’ is described at s 332 of the Act, as:
332 Earnings
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(1) An employee’s earnings include:
(a) the employee’s wages; and
(b) amounts applied or dealt with in any way on the employee’s behalf or as the
employee directs; and
(c) the agreed money value of non-monetary benefits; and
(d) amounts or benefits prescribed by the regulations.
(2) However, an employee’s earnings do not include the following:
(a) payments the amount of which cannot be determined in advance;
(b) reimbursements;
(c) contributions to a superannuation fund to the extent that they are contributions to
which subsection (4) applies;
(d) amounts prescribed by the regulations.
Note: Some examples of payments covered by paragraph (a) are commissions,
incentive-based payments and bonuses, and overtime (unless the overtime is
guaranteed).
(3) Non-monetary benefits are benefits other than an entitlement to a payment of money:
(a) to which the employee is entitled in return for the performance of work; and
(b) for which a reasonable money value has been agreed by the employee and the
employer;
but does not include a benefit prescribed by the regulations.
(4) This subsection applies to contributions that the employer makes to a superannuation fund
to the extent that one or more of the following applies:
(a) the employer would have been liable to pay superannuation guarantee charge under
the Superannuation Guarantee Charge Act 1992 in relation to the person if the amounts
had not been so contributed;
(b) the employer is required to contribute to the fund for the employee’s benefit in
relation to a defined benefit interest (within the meaning of section 291-175 of the
Income Tax Assessment Act 1997) of the employee;
(c) the employer is required to contribute to the fund for the employee’s benefit under a
law of the Commonwealth, a State or a Territory.
[74] Whilst no regulations have been made for the purposes of s 332(1)(d) or s 332(2)(d) of
the Act, regulation 3.05(6) of the Fair Work Regulations 2009 (Cth) (Regulations) has been
made in respect of s 382(b)(iii) of the Act. Regulation 3.05(6) provides:
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If:
(a) the person is entitled to receive, or has received, a benefit in accordance with an
agreement between the person and the person’s employer; and
(b) the benefit is not an entitlement to a payment of money and is not a non-monetary
benefit within the meaning of subsection 332(3) of the Act; and
(c) the FWC is satisfied, having regard to the circumstances, that:
(i) it should consider the benefit for the purpose of assessing whether the high
income threshold applies to a person at the time of the dismissal; and
(ii) a reasonable money value of the benefit has not been agreed by the person
and the employer; and
(iii) the FWC can estimate a real or notional money value of the benefit;
the real or notional money value of the benefit estimated by the FWC is an amount for
subparagraph 382(b)(iii) of the Act.
[75] The wording of regulation 3.05(6)(c) implies that the Commission has a degree of
discretion in deciding whether it should consider a benefit for the purposes of assessing whether
the high income threshold applies to a person at the time of dismissal.84 Once it has been
determined that a benefit meets the criteria contained in regulations 3.05(6)(a) and (b), the
Commission must consider whether it is satisfied, having regard to the circumstances, that each
of regulations 3.05(6)(c)(i), (ii) and (iii) apply.
[76] In these types of cases, it is the Respondent that bears the evidentiary onus to support
its objection that the Applicant was not protected from unfair dismissal.85
5.1 Annual rate of earnings
[77] First, I must determine the Applicant’s annual rate of earnings. The term ‘annual rate
of earnings’ in s 382(b)(iii) of the Act refers to the annual rate of earnings at that time, and not
the annual earnings to that time (that is the amount earned in the 12 months to that time).86
[78] The Applicant submitted that at the time of his dismissal his annual wages amounted to
$141,343.28 plus compulsory superannuation, on-call allowances and a Christmas bonus. In
respect of his wages, the Applicant relied upon two payslips to evince the amount of
$141,343.28, one from during the period of employment and one at the time of dismissal.
[79] The Applicant submitted that the compulsory superannuation contributions were
excluded pursuant to s 332(2)(c) and the allowances and bonus were excluded pursuant to
s 332(a) because they were payments the amount of which could not be determined in advance.
[80] The Respondent submitted that at the time of his dismissal the Applicant’s Salary was
$141,797.00. Mr Scarrott explained why the Applicant’s payslips stated the amount of
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$141,343.28, and that the amount of $141,797.00 had been confirmed for the Applicant by the
Respondent’s HR Department on 15 November 2022, while he was applying for a home loan.87
[81] Having considered all of the evidence on this point, I find that the Applicant’s Salary
amounted to $141,797.00. Regarding the on-call allowances and the Christmas bonus, I am
satisfied that these could not be determined in advance and note that at hearing the Respondent
did not contend otherwise.
5.1.1 Company vehicle
[82] It has been accepted that, where an employee is provided with a fully maintained vehicle
for use in the course of her or his employment and the employee also uses that vehicle for
private use, the value of that private use can be included in the employee’s annualised
earnings.
88
[83] The Applicant stated that his wages were reduced by the agreed monetary amount of
$10,783.00 because he had elected to take the company vehicle and in addition, he made a
weekly contribution of $129.20 to the Respondent for the Colorado. The Applicant said the
amount of $10,783.00 was the agreed money value of the non-monetary benefits as identified
in s 332(1).
[84] Regarding the company vehicle, the Applicant submitted that if a Level 8 employee
elected to take a company vehicle, his or her wages would decrease by $8000.00. If a Level 9
or 10 employee elected to take a company vehicle, his or her wages would decrease by
$10,000.00 (an amount less than the $10,783.00 the Applicant notes that his wages were
decreased by).
[85] The Applicant noted that the standard vehicle offered was a Toyota Camry (or a vehicle
equivalent to a Toyota Camry) but he was given an option of driving a more valuable vehicle
if he paid a contribution towards the cost of that vehicle. The Applicant elected to take a higher
level vehicle (the Colorado) and paid a weekly contribution of $129.20 to the Respondent for
that vehicle. The Applicant’s annual contribution for the company vehicle was $6,718.40.
[86] It is apparent from the Respondent’s submissions that it did not consider that it had
reached an agreement with the Applicant regarding the reasonable money value of the company
vehicle. However, it did acknowledge that the private use of a motor vehicle is properly
included as a benefit for the purpose of assessing whether an employee falls within the high
income threshold and further noted that provision of a motor vehicle for business purposes does
not form part of the remuneration for this purpose.
[87] Regarding the personal use of the company vehicle by the Applicant, the Respondent
referred to the evidence of Mr Scarrott and premised its submissions on the proposition that
travel to and from work is categorised as personal use. The Respondent surmised that the
Applicant drove an average of 34,916.93km per year,89 approximately 43% of which was
driving to and from work.90
[88] The Respondent observed that although the Applicant had regular meetings with the
Respondent’s other offices, these were largely conducted electronically, and the Applicant did
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not regularly travel to the Respondent’s suburban offices.91
It was the Respondent’s view that
it was reasonable to assume that at least 50% of the company vehicle usage was personal.
However, the Respondent added that if this amount was found not to be a reasonable estimate
(which was denied), the Respondent submitted in the alternative at least 43% of the Applicant’s
company vehicle use was personal, being his travel to and from work.
[89] The Respondent provided two figures for the value of the company vehicle. Both
calculations were based on the ‘Fewings approach’ as referred to at paragraph [91] and used
the amount of $1.29 for the cost per kilometre of the Colorado. The figure of $1.29 had been
extracted from the RAC Car Running Costs Guide 2022.92
The first figure, being based on 50%
personal use, amounted to $22,521.42. The second figure, being based on 43% personal use,
amounted to $19,368.42.
[90] Section 332(1)(c) provides that earnings include the agreed money value of any nonmonetary benefits. Where there was no value agreed between the parties for the Applicant’s
private use of the vehicle, regulation 3.05(6) allows the Commission to make a determination
as to the value of the benefit of the company vehicle.
[91] In the absence of an agreed sum, the process generally used to determine the value of
the use of a company vehicle is that described in Kunbarllanjnja Community Government
Council v Fewings (Fewings).
93 The ‘Fewings approach’ is as follows:
- a) determine the annual distance travelled by the vehicle in question;
- b) determine the percentage of that distance that was for private use;
- c) multiply the above two figures to obtain the annual distance travelled for private
purposes;
- d) estimate the cost per kilometre for a vehicle of the type used. This information can be
obtained from the RACV, NRMA or like motoring organisations; and
- e) multiply the annual distance travelled for private purposes by the estimated cost per
kilometre. The result is the value of the motor vehicle component of the remuneration.
[92] To recap, the Full Bench in Fewings further observed that the party advancing the
proposition that an applicant is excluded from the relevant provisions of the Act (protection
from unfair dismissal) carries the burden of establishing the evidentiary basis upon which such
a determination can be made.94
[93] In Sam Technology Engineers Pty Ltd v Bernadou,
95 the Full Bench observed that it did
not take issue with the method of apportionment adopted by the Full Bench in Fewings and
considered it entirely appropriate for circumstances in which an employee had a companysupplied vehicle (from which she or he derived a benefit) and a reasonable monetary value had
not been agreed for its private use. It continued that the Fewings method of apportionment was
appropriate to enable the Commission to estimate the real or notional value of the benefit, in
the manner contemplated by regulation 3.05(6) of the Regulations, which deals with benefits
other than the payment of money.
[94] I have, however, found in the circumstances that it is unnecessary to adopt the Fewings
method of apportionment, on the basis that the parties had reached an agreed money value of
the company vehicle.
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[95] At hearing, Mr Scarrott was taken to page 180 of Part 2 of the Digital Hearing Book.
That page set out six tables: three tables at the top of the page and three tables directly
underneath. Mr Scarrott explained that the top tables detailed the remuneration where an
employee was not assigned a vehicle with her or his position.96
Regarding the bottom tables,
Mr Scarrott explained that they set out an employee’s remuneration where a motor vehicle is
included for the position and where it is just a standard motor vehicle.97
[96] Much was made by Mr Scarrott that the tables on page 180 of Part 2 of the Digital
Hearing Book referred to the adoption of standard motor vehicles (i.e. not the Colorado).
Further, Mr Scarrott explained that the top tables had different figures to the bottom tables, with
the difference being the value of the standard motor vehicle.98
[97] In cross examination, Mr Scarrott was asked whether the Applicant had elected to take
a higher level motor vehicle, to which Mr Scarrott responded ‘yes’.99
Mr Scarrott also
confirmed that the Applicant was making an additional after tax payment each week to the
Respondent for the company vehicle (a weekly contribution of $129.20 to the Respondent,
amounting to an annual contribution for the company vehicle of $6,718.40).
100
When asked
about why the Applicant made the additional contribution, Mr Scarrott gave evidence that it
was the contribution for the additional cost of a non-standard vehicle and the FBT associated
with that.101
[98] Having weighed all the evidence regarding the company vehicle, I consider that the
Applicant was entitled to the company vehicle, which was a benefit. That benefit was provided
in return for the performance of work, and the parties had agreed a reasonable money value for
the benefit – its value for the purpose of s 332(1)(c) of the Act amounting to $10,783.00.
5.1.2 The laptop computer and mobile phone
[99] The Applicant observed that the Respondent had alleged that the Applicant received
non-monetary benefits in the form of a mobile phone and a laptop computer. The Applicant
submitted that the Respondent had failed to produce evidence about how the values of those
two items had been calculated and had calculated amounts which were excessive.
[100] For the purpose of calculating the Applicant’s annual rate of earnings, including
amounts worked out under the Regulations, the Applicant said that he had incorporated the
Respondent’s figures for the mobile phone and laptop computer:
Mobile phone $816.00
Laptop computer $131.19
[101] In the circumstances, I am content to find that the agreed costs of both items, namely
the mobile phone and the laptop computer, amounted to $816.00 and $131.19, respectively.
5.1.3 Fringe benefits tax
[102] The Respondent submitted that due to the supply of the company vehicle, the Applicant
received a series of annual payments and salary adjustments made to reduce both his and the
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Respondent’s FBT liability. The Respondent noted that the FBT year runs 1 April to 31 March
and in respect of the Applicant the following payments had been, and would be, received:
- a) on 31 March 2022, the Applicant received a payment of $5,795.24 (gross) (2021–
2022 March Adjustment Payment);102
- b) on 31 March 2023, the Applicant was to receive a payment of $4,254.55 (gross)
(2022–2023 March Adjustment Payment).
[103] The Respondent submitted that it is the 2021–2022 March Adjustment Payment (being
the adjustment that would have applied had the Applicant not been dismissed) that should be
taken into account when calculating the Applicant’s income, not the 2022–2023 March
Adjustment Payment. Acknowledging that the relevant question is not how much the employee
earned in the 12 months prior to their dismissal but rather what they were earning, per annum,
at the time of their dismissal, the Respondent submitted that if the 2021–2022 March
Adjustment Payment did not form part of the Applicant’s relevant income, then the 2022–2023
March Adjustment does.
[104] At hearing, a simple question was asked of Mr Scarrott, which was who had received
the amount of $3,651.00 as referred to in the ‘Payroll Advice’ dated ‘31/03/2022 To
31/03/2022’.103
That same Payroll Advice included the figure of $5,795.24 (2021–2022 March
Adjustment Payment). At this juncture, it is important to acknowledge that the Applicant
purports having never received either the Payroll Advice or any payment of $3,651.00 or
$5,795.24. After a series of questions, it was proposed to Mr Scarrott that ‘it’ (the 2021–2022
March Adjustment Payment) was purely done to remove the Respondent’s liability for FBT, to
which Mr Scarrott clarified it was not to avoid the liability but rather to pay the FBT.
104
Mr Scarrott did explain that as part of salary packaging there was a FBT exemption amount of
$30,000.000 (gross).105 The net amount that is able to be salary packaged is, said Mr Scarrott,
$15,899.00.
106 Mr Scarott said that if these company vehicle amounts were not adjusted, they
would reduce the amount of $15,899.00 by $3,651.00.107
[105] The application of regulation 3.05(6) and the determination of the amounts flowing from
it requires consideration of the three questions:
- a) firstly, was the Applicant entitled to receive the 2021–2022 March Adjustment
Payment and the 2022–2023 March Adjustment Payment in accordance with an
agreement, or were they something else?;
- b) secondly, were they ‘non-monetary benefits’ within the meaning of section 332
(3)?; and
- c) thirdly, if they were not non-monetary benefits, am I able to be satisfied of the
elements within regulation 3.05(6)(c)? Those elements go to whether I should
consider the benefit for the purpose of assessing the high income threshold, that
a reasonable money value has not been agreed, and that I can estimate a real or
notional money value of the benefit.
[106] The case of Rofin Australia Pty Ltd v Newton (Rofin’s Case), a decision on appeal in
the Australian Industrial Relations Commission, develops the word ‘benefit’ according to the
statutory framework then prevailing regarding the maximum remuneration an employee could
earn regarding a ‘specified rate’ in order to make an unfair dismissal claim under the Workplace
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Relations Act 1996 (Cth).108 The issues before the Full Bench were characterised in the
following way:
It was common ground in the hearing before the Commissioner that, for the purposes of
s 170CC(3), the employee’s rate of remuneration included the annual salary of $52,000.00 and
superannuation of $3,200.00, making a total of $55,120.00. What was in dispute was whether
there were any non-pecuniary benefits that should have been taken into account and, if so,
whether the sum total of those benefits amounted, in dollar terms, to more than $8,880.00 per
annum.
The employer contended that non-pecuniary benefits arising out of the provision of the motor
vehicle should be taken into account. These benefits consisted of $3,405.00 for fringe benefits
tax, $7,738.00 for depreciation, $2,748.00 for finance charges, $750.00 for insurance charges,
$440.00 for registration, $47.00 for RACV membership and $3,206.00 for fuel and repairs. The
employer estimated that the employee used the vehicle for 95 per cent of the time for personal
reasons. On this basis, it contended that the employee’s rate of remuneration exceeded the
specified rate.
109
[107] In Robinson v AJ Gandel,
110 Wilson C observed that Rofin’s Case established two
propositions, one of which is relevant for current purposes. The apposite proposition relates to
genuine salary sacrifice arrangements:
[g]enerally where an amount is paid by an employer other than to an employee and other than
on behalf of or at the direction of the employee, such an amount would not amount would not
fall within the ordinary meaning of the word “remuneration”.111
[108] In Rofin’s Case, the Full Bench held that the particular facts were not of a salary sacrifice
arrangement and that the FBT paid was not to be included in consideration of the employee’s
rate of remuneration.
[109] However, in Chang v Ntscorp Ltd (Chang),112 Hamberger SDP reached a different view
about the FBT in circumstances where he considered the value to be attributed to a motor
vehicle pursuant to the Fewings approach. In Chang, it was not possible to estimate the cost
per kilometre for a vehicle obtained from the RACV or NRMA because of the age of the motor
vehicle in question (figures were not provided for an aged vehicle).113
It was in those
circumstances that Hamberger SDP drew upon the evidence available to provide a good
estimate in relation to the actual cost of operating the vehicle. He did so by adopting the NRMA
methodology for estimating such costs substituting estimates of actual costs for industry
averages.114
[110] Hamberger SDP observed that the main criteria used by the NRMA in deriving its cost
estimates are depreciation, opportunity cost, vehicle registration and insurance, fuel, vehicle
maintenance and FBT. Turning to FBT, it was observed that the NRMA includes FBT as a
factor in calculating the cost for a business in operating a vehicle. Hamberger SDP
acknowledged that the Full Bench in Fewings indicated that one should use the costs calculated
by motoring organisations and as such this supported the inclusion of FBT.115
[111] Turning to Rofin’s Case, where the Full Bench concluded that the Commissioner was
not in error in concluding that, in the circumstances of the case in question, any FBT paid by
the employer in relation to the provision of a motor vehicle should not be included as a non-
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pecuniary part of the employee’s ‘rate of remuneration’ for the purposes of determining whether
the specified rate was exceeded, the Senior Deputy President stated that the Full Bench focused
on the fact that FBT is a tax paid by the employer. Hamberger SDP noted that the Full Bench
said that it is not paid to the employee, nor on behalf of or at the direction of the employee, and
‘such an amount would not fall within the ordinary meaning of the word “remuneration”.’
116
However, the Senior Deputy President observed that the Full Bench recognised it might be
appropriate to include FBT in a genuine ‘salary sacrifice’ situation.
[112] In Chang, the Senior Deputy President proposed in circumstances where the
Commission must estimate a real or notional money value of the benefit in question:
…While employees pay income tax on their salary, they do not on fringe benefits. As a matter
of administration, FBT is payable by the employer. However failure to include FBT in the value
of a fringe benefit would be (significantly) to underestimate its value to the employee.117
[113] Drawing upon the decisions of both Rofin’s Case and Chang, I consider the preferred
approach in the circumstances is not to include the amounts of the 2021–2022 March
Adjustment Payment or the 2022–2023 March Adjustment Payment. The Respondent’s
evidence is that the two adjustments (the 2021–2022 March Adjustment Payment and the 2022–
2023 March Adjustment Payment) are made due to the supply of the company vehicle. Unlike
the case of Chang, it has proved unnecessary to adopt the Fewings approach because of my
finding that the company vehicle was assigned an agreed value by the parties. It is observed
that in Chang the Senior Deputy President included the value for the fringe benefit in
circumstances where he was of calculating the value of the motor vehicle component of the
applicant’s remuneration. In this case, it is unnecessary to undertake that exercise. The
evidence of Mr Scarrott, when asked about salary sacrifice in respect of the motor vehicle, was
that the drop in the Applicant’s wages ($10,783.00) was because of him taking a company
vehicle and that company vehicle being a higher level car.118
6 Conclusion
[114] The Respondent pressed that its jurisdictional objection should be upheld because when
the benefits afforded to the Applicant were taken into account, the Applicant was earning
between $166,367.16 and $171,060.85 at the time of dismissal and was therefore earning in
excess of the high income threshold. That assertion cannot be upheld on the evidence before
me.
[115] I have found that the Applicant’s earnings consisted of the following:
Wages $141,797.00
Agreed value of the motor vehicle $10,783.00
Mobile phone $816.00
Laptop computer $131.19
Total $153,527.19
[116] As the Applicant’s earnings did not exceed the high income threshold of $162,000.00,
he is a person protected from unfair dismissal by virtue of s 382 of the Act. The Respondent’s
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jurisdictional objection cannot be sustained and is therefore dismissed. Directions will shortly
issue to the parties and the matter will be set down for a hearing on merits and remedy.”
Lonnie v WA Council on Addictions Incorporated [2023] FWC 673 ðelivered 20 April 2023 per Beaumont DP