High income threshold

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Introduction

Contains issues that may form the basis of a jurisdictional issue

See Fair Work Act s.382

The high income threshold operates as a limit to an employee’s eligibility to be protected from unfair dismissal under the terms of the Fair Work Act.

If an employee is not covered by a modern award, or if an enterprise agreement does not apply to them, they must have an annual rate of earnings of less than the high income threshold.

The high income threshold is currently $158,500.^[1] This figure is adjusted annually on 1 July.^[2]

For a dismissal which took effect on or before 30 June 2021 the high income threshold was $153,600.^[3]

What are earnings?

See Fair Work Act s.332

Earnings include:

wages
such other amounts (if any) worked out in accordance with the Regulations
amounts dealt with on the employee’s behalf or as the employee directs, and
the agreed money value of non-monetary benefits.

Non-monetary benefits are benefits other than an entitlement to a payment of money:

to which the employee is entitled in return for working, and
for which a reasonable money value has been agreed by the employee and the employer.

The Fair Work Commission has a discretion to include a benefit that is not a payment of money and that is not a 'non-monetary benefit' (within the meaning of s.332(3) of the Fair Work Act). It may do so where it is satisfied that it is appropriate to take it into account, and it can attribute a ‘real or notional’ value to the benefit, in default of any agreement between the parties.^[4]

Earnings do not include:

payments the amount of which cannot be determined in advance such as:
- commissions
- incentive-based payments and bonuses, or
- overtime (except guaranteed overtime);^[5]
reimbursements (such as per diem payments),^[6] and
compulsory contributions to a superannuation fund (superannuation guarantee).

Per diem means 'by the day' – a sum of money paid to an employee every day, such as a meal allowance or accommodation allowance.

Superannuation

Compulsory superannuation contributions are not included in the calculation of an employee’s earnings.^[7] Any superannuation paid in excess of compulsory contributions may be included in the calculations of the employee’s earnings.

Vehicles

Where an employer provides an employee with a fully maintained vehicle the value of the private use of the vehicle can be included in the annual rate of earnings.^[8] Use for business purposes is excluded and only the proportion of private usage can be counted as remuneration.^[9]

Where there is no agreed monetary value of the benefit of the private use of a motor vehicle, the Commission will generally apply the following formula:^[10]

Determine the annual distance travelled by the vehicle in question.
Determine the percentage of that distance that was for private use.
Multiply the above two figures to obtain the annual distance travelled for private purposes.
Estimate the cost per kilometre for a vehicle of that type (may be obtained from RACV, NRMA or other similar motoring association).
Multiply the annual distance travelled for private purpose (obtained at step 3) by the estimated cost per kilometre.

The figure obtained is the value of the vehicle to the employee and is added to remuneration.^[11]

Where an employer provides an employee with a car allowance, the allowance should be treated in the following way for the purpose of calculating an employee’s ‘annual rate of earnings’:

If a car allowance is paid to an employee in circumstances in which there is no requirement or expectation that the employee will have to use his or her car for work purposes, then the whole of the car allowance is, in reality, part of the employee’s wages and is therefore included in their ‘earnings’.
If a car allowance is paid to an employee at the time of their dismissal in circumstances in which there is a requirement or expectation that the employee will have to use his or her car for work purposes, then it will be necessary to determine and calculate the private benefit, if any, derived by the employee from the car allowance.^[12]

Fringe benefit tax

Fringe benefit tax is a tax that is imposed on an employer when they provide a benefit to an employee,^[13] such as personal use of a company owned vehicle.

Fringe benefit tax may or may not be counted as earnings depending on whether the amount is found to be an amount dealt with as the employee directs.

Where the employer is ‘free to choose whether to provide a particular benefit to an employee’ it cannot be said to be an amount dealt with on the employee’s behalf.^[14]
Fringe benefit tax may be an amount dealt with at the employee’s direction, in a genuine salary sacrifice situation when an employee has forgone wages in return for a benefit.^[15] In this situation fringe benefit tax will be included in the employee’s earnings.^[16]

Case examples

Earnings

Tax-deductible work-related expenses

Read v Universal Store Pty Ltd T/A Universal Store [2010] FWA 5772 (McKenna C, 23 August 2010).

The employee claimed that tax-deductible work-related expenses should be deducted from his wages for the purpose of calculating whether the high income threshold had been exceeded. This submission was not accepted.

Pre-determined overtime

Foster v CBI Constructors Pty Ltd [2014] FWCFB 1976 (Catanzariti VP, Lawler VP, Lewin C, 24 March 2014).

The employee was required to attend 30 minute pre-start meeting every work day which was paid as overtime. It was found the overtime payments could be determined in advance so the 2.5 hours of overtime per week could be included in the calculation of his earnings.

Guaranteed overtime

Cross v Bechtel Construction (Australia) Pty Ltd [2015] FWC 3639 (Catanzariti VP, 29 June 2015).

The employee was contractually obliged to work a 58 hour Extended Work Week (EWW) which was comprised of 40 hours ordinary work and 18 hours overtime.

The Commission found that the overtime was guaranteed as the required 58 hour EWW could clearly be determined in advance and therefore should be used as the basis for calculating the annual rate of earnings.

Vehicle

Zappia v Universal Music Australia Pty Ltd T/A Universal Music Australia [2012] FWA 3208 (Hamberger SDP, 18 April 2012).

The employee argued that the provision of a company car was a tool of the trade and should not be considered part of his earnings. It was found that the vehicle was primarily used for private purposes and was a significant part of the employee’s remuneration package.

Private use of company provided iPhone and iPad

Dart v Trade Coast Investments Pty Ltd [2015] FWC 4355 (Sams DP, 29 June 2015).

The employee was provided with an iPhone and iPad at the commencement of his employment with permission for personal use ‘within reason’.

The employee accepted that he had used the phone for personal calls, but, as with the vehicle, he argued that this was ‘incidental’ to the phone’s primary business purpose. The phone records disclosed that of 659 national direct calls, it appeared that 412 were direct personal calls (62.5%). When the phone and iPad were returned on termination, there were 610 personal photos on the iPad, and eight videos, as distinct from 21 work related entries.

The calculated benefit from the employee’s private use of the phone and iPad resulted in his earnings exceeding the salary cap threshold.

Life insurance policy

Savannah Nickel Mines Pty Ltd v Crowley [2016] FWCFB 2630 (Hamberger SDP, Hamilton DP, Saunders C, 27 April 2016).

The cost of the premium for a life insurance policy, which was paid for by the employer, was found to be an amount applied or dealt with on the employee’s behalf and was included in calculating the employee’s income.

NOT earnings

Travel allowance

Davidson v Adecco Australia Pty Ltd T/A Adecco [2012] FWA 8393 (Booth C, 4 October 2012).

The employee was in receipt of an annual travel allowance of $16,000 for the use of his own vehicle for work travel. It was held that the business use component of the allowance was to be excluded from the 'earnings'. Only the personal use could be included in ‘earnings’.

Bonuses

Jenny Craig Weight Loss Centres v Margolina [2011] FWAFB 9137 (Giudice J, Hamilton DP, Robert C, 23 December 2011).

In the previous financial year the employee had received a base salary of $60,000, a 5 year bonus of $100,000 and an annual performance bonus of $42,000. It was found that the 5 year bonus could not be ‘determined in advance’ because the employer reserved the right to alter or discontinue the bonus plan, and it was likely that the same applied to the annual performance bonus. The employee therefore earned less than the high income threshold.

Fringe benefit tax

Rofin Australia Pty Ltd v Newton, Print P6855 (AIRCFB, Williams SDP, Acton DP, Eames C, 21 November 1997), [(1997) 78 IR 78].

Fringe benefit tax on the provision of a motor vehicle was found not to be part of the employee’s earnings as it was the employer’s taxation liability. This was distinguished from a genuine salary sacrifice situation where it can be said that fringe benefit tax is an amount paid at the direction of and by arrangement with the employee which would otherwise be part of the employee’s salary package.

Mobile broadband – personal use

Maturu v Leica Geosystems Pty Ltd [2014] FWCFB 6735 (Catanzariti VP, Asbury DP, Spencer C, 29 September 2014).

The personal use of a mobile broadband service, on a laptop computer supplied for work purposes, was found not to be a ‘non-monetary benefit’. This was because the mobile broadband service was provided as a piece of equipment that was essential to the performance of the job and there was no evidence of any agreement in relation to the private use of the mobile broadband service.

References

^[1] This figure applies from 1 July 2021.

^[2] For more information on the high income threshold please see Fair Work Act s.333; Fair Work Regulations reg 2.13.

^[3] High income threshold for period 1 July 2020‒30 June 2021.

^[4] Fair Work Regulations reg 3.05(6).

^[5] See note in Fair Work Act s.332; incentive bonuses discussed in Jenny Craig Weight Loss Centres Pty Ltd v Margolina [2011] FWAFB 9137 (Giudice J, Hamilton DP, Roberts C, 23 December 2011) at para. 19.

^[6] See for e.g. Schreuders v Freelancer International Pty Ltd [2015] FWC 3286 (Booth DP, 15 May 2015).

^[7] Fair Work Act s.332(2)(c); discussed in Ablett v Gemco Rail Pty Ltd [2010] FWA 8124 (Williams C, 22 October 2010) at paras 31‒32.

^[8] Rofin Australia Pty Ltd v Newton Print P6855 (AIRCFB, Williams SDP, Acton DP, Eames C, 21 November 1997), [(1997) 78 IR 78 at p. 82]; citing Condon v G James Extrusion Company Print N9963 (AIRC, Watson DP, 4 April 1997), [(1997) 74 IR 283 at p. 288]; cited in Slavin v Horizon Holdings Pty Ltd [2012] FWA 2424 (Bissett C, 23 March 2012) at para. 11.

^[9] ibid.

^[10] Kunbarllanjnja Community Government Council v Fewings Print Q0675 (AIRCFB, Ross VP, Watson SDP, Bacon C, 7 May 1998); cited in Chang v Ntscorp Ltd [2010] FWA 1952 (Hamberger SDP, 9 March 2010); see McIlwraith v Toowong Mitsubishi Pty Ltd [2012] FWA 3614 (Cribb C, 30 April 2012) at para. 34.

^[11] Kunbarllanjnja Community Government Council v Fewings Print Q0675 (AIRCFB, Ross VP, Watson SDP, Bacon C, 7 May 1998).

^[12] Sam Technology Engineers Pty Ltd v Bernadou [2018] FWCFB 1767 (Gostencnik DP, Clancy DP, Saunders C, 27 March 2018) at para. 72.

^[13] Rofin Australia Pty Ltd v Newton Print P6855 (AIRCFB, Williams SDP, Acton DP, Eames C, 21 November 1997), [(1997) 78 IR 78 at p. 82].

^[14] ibid.

^[15] Chang v Ntscorp Ltd [2010] FWA 1952 (Hamberger SDP, 9 March 2010) at para. 21.

^[16] ibid.

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Last updated

01 July 2021

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