3 min read

Calculating personal use of a work motor vehicle allowance

The Case

Monteiro v Valco Group Australia Pty Ltd T/A Valco Group Australia


In November 2017, Valco Group Australia Pty Ltd T/A Valco Group Australia (Valco) terminated Mr Monteiro’s employment. Mr Monteiro lodged an unfair dismissal claim to the Fair Work Commission (FWC).

Valco lodged a jurisdictional objection against Mr Monteiro’s unfair dismissal application. Valco argued that Mr Monteiro was not covered by a modern award or enterprise agreement, and earned above the high-income threshold. As such, Valco argued that Mr Monteiro could not commence unfair dismissal proceedings.

To determine whether Mr Valco’s earnings were above the high-income threshold, the FWC considered whether Mr Monteiro’s motor vehicle allowance should be included in the high-income threshold calculation.

Mr Monteiro argued that his motor vehicle allowance was a reimbursement and should not be included in the calculation of his annual earnings.

Section 332 of the Fair Work Act 2009 (Cth) (FW Act) states an employee’s earnings includes:

  • the employee’s wages;
  • amounts applied or dealt with in any way on the employee’s behalf or as the employee directs;
  • the agreed money value of any non-monetary benefits; and
  • any amounts or benefits prescribed by the Fair Work Regulations 2009 (Regulations).

An employee’s earnings does not include:

  • payments of which the amount cannot be determined in advance;
  • reimbursements;
  • contributions to a superannuation fund; and
  • amounts prescribed by the Regulations.

The Verdict

The FWC found that the motor vehicle allowance was not a reimbursement as:

  • Mr Monteiro and Valco had entered into an agreement that Mr Monteiro could use the motor vehicle allowance as he wished and it was not a reimbursement; and
  • superannuation and taxation were paid on the motor vehicle allowance, which would not be payable if the money was paid as a reimbursement.

As such, at first instance, the FWC found that Mr Monteiro’s earnings were $151,496 per annum (of which $21,311.48 was car allowance). This was above the then high-income threshold of $142,000. The FWC dismissed Mr Monteiro’s unfair dismissal claim.

Mr Monteiro lodged an appeal with the Full Bench of the FWC, arguing that:

  • the car allowance was a reimbursement; and
  • if it was not a reimbursement, then given Mr Monteiro was required to use his car for work, the FWC was required to calculate the personal use component of the motor vehicle allowance and only use that proportion of the allowance in its calculations.

Mr Monteiro argued if this had occurred, his earnings would be under the high-income threshold and hence he would be entitled to proceed with his unfair dismissal claim.

The Full Bench of the FWC agreed that errors had been made at first instance. If the motor vehicle allowance was not a reimbursement, the FWC should have calculated the personal use value of the motor vehicle allowance by determining the percentage of the total distance travelled by Mr Monteiro for private purposes.

The Full Bench of the FWC upheld the appeal, quashed the FWC first instance decision and remitted the matter to another Commissioner to rehear the jurisdictional objection.

The Lessons

Consider the legal risks before terminating an employee’s employment. One consideration is whether the employee has access to the unfair dismissal jurisdiction. If the employee’s employment is not covered by a modern award or enterprise agreement, then their income will need to be below the high-income threshold to make a claim. The high-income threshold increased on 1 July 2018 to $145,400.

If the employee is paid a motor vehicle allowance, you can include the private percentage component of the motor vehicle allowance in the high-income threshold calculation.

Please note: Case law is reported as correct and current at time of publishing. Be aware that cases in lower courts may be appealed and decisions subsequently overturned.

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