Australian Licenced Aircraft Engineers Association, The v Helicopters (Australia) Pty Ltd T/A HNZ Australia

Case •

[2013] FWC 8082

•

21 OCTOBER 2013

No judgment structure available for this case.

[2013] FWC 8082

FAIR WORK COMMISSION

DECISION


Fair Work Act 2009
s.739—Dispute resolution

Australian Licenced Aircraft Engineers Association, The
v
Helicopters (Australia) Pty Ltd T/A HNZ Australia
(C2013/3998)

Australian Federation of Air Pilots
v
Helicopters (Australia) Pty Ltd T/A HNZ Australia
(C2013/564)

Airline operations

DEPUTY PRESIDENT BOOTH

SYDNEY, 21 OCTOBER 2013

Dispute in relation to changes to the Daily Travel Allowance.

[1] In this matter the Fair Work Commission (the Commission) is asked to resolve a dispute between the Australian Federation of Air Pilots (AFAP) and The Australian Licenced Aircraft Engineers Association (ALAEA) on the one hand and Helicopters (Australia) Pty Ltd trading as HNZ Australia (HNZ) on the other. The dispute concerns the payment of Daily Travel Allowance to Touring Pilots and Touring Engineers respectively.

Background

[2] The AFAP and the ALAEA (the applicants) each made an application on 18 April 2013 for the Commission to deal with a dispute in accordance with a dispute settlement procedure pursuant to s.739 of the Fair Work Act2009 (the Act). At the applicants’ request the applications were dealt with together, initially by way of conciliation on 15 May 2013 and 19 June 2013 and then by way of arbitration on 28 August 2013 and 17 September 2013 before me.

[3] The AFAP was represented by Mr Andrew Molnar, Legal Counsel. The ALAEA was represented by Mr Lincoln Amos, Industrial Officer and HNZ was represented by Mr Jeff Uphill of the Chamber of Commerce and Industry of Western Australia (CCIWA). Witnesses were Mr Lawrence Cox, Manager of Industrial Relations, AFAP and Mr Noel Speers, National Industrial Officer, ALAEA for the applicants and Mr Paul Brown, Executive Director, Ernst & Young for HNZ.

[4] HNZ conducts its Australian operations from its headquarters in Perth. Its services include flying people to and from offshore sites out of Karratha, Western Australia.

[5] HNZ employs pilots and engineers to crew these services on the basis of a 13 days on and a 15 days off roster.

[6] The Touring Pilots and Touring Engineers are employed pursuant to the Helicopters (Australia) Pty Ltd (Helicopter Pilots – Australian Operations) Enterprise Agreement 2010 (the Pilots’ Agreement) and the Helicopters (Australia) Pty Ltd Helicopter Engineers Enterprise Agreement 2011 (the Engineers’ Agreement) respectively. I will refer to them collectively as the Agreements.

[7] A Touring Pilot is defined as a pilot employed by the Company permanently on rostered tours of duty away from their Home Base. A Touring Engineer is defined as an Engineer who is employed by the Company to work away from their Home Base and on a touring roster. Home Base is defined in the Pilots’ Agreement as the usual place of residence for on-site pilots or in the case of Touring Pilots, the nearest high capacity RPT (regular public transport) airport to the Pilot’s usual place of residence. Home Base is defined in the Engineers’ Agreement as the usual place of residence for on-site engineers or in the case of touring engineers, the nearest Australian population centre to the Engineer’s usual place of residence, serviced by direct regular public transport air-services to the respective capital city in the State where the operating base is located.

[8] Each of the Agreements contains s dispute settlement procedure that provides for the Commission to arbitrate to resolve a dispute.

[9] The Pilots’ Agreement provides, relevantly, as follows:

    “21.2 Dispute Resolution Process

    21.2.3 If a dispute in relation to a matter arising under the agreement is unable to be resolved at the workplace, and all agreed steps for resolving it have been taken, the dispute may be referred to FWA for resolution by mediation and/or conciliation and, where the matter in dispute remains unresolved, arbitration. If arbitration is necessary FWA may exercise the procedural powers in relation to hearings, witnesses, evidence and submissions which are necessary to make the arbitration effective.”

[10] The Engineers’ Agreement provides, relevantly, as follows:

    “11 Dispute resolution Process

    11.4 After conciliation where the matter in dispute remains unresolved, either party may refer the matter to Fair Work Australia for arbitration.”

[11] There was no objection to the exercise of the jurisdiction of the Commission.

[12] The applicants framed the question for the Commission to answer as follows:

    Pilots

    “Notwithstanding any change to taxation laws brought about by the Tax Laws Amendment (2012 Measures No. 4) Act 2012 (Cth), does clause 15.1 of the Agreement provide that touring pilots employed by the Respondent are entitled to a Daily Travel Allowance as set by the Taxation Determinations published by the Australian Taxation Office in relation to the reasonable travel and overtime meal allowance expense amounts (as amended from time to time)?”

    Engineers

    “Notwithstanding any change to taxation laws brought about by the Tax Laws Amendment (2012 Measures No. 4) Act 2012 (Cth), does clause 27.15 of the Agreement provide that touring engineers employed by the Respondent are entitled to a Daily Travel Allowance as set by the Taxation Determinations published by the Australian Taxation Office in relation to the reasonable travel and overtime meal allowance expense amounts (as amended from time to time)?”

[13] HNZ accepted these questions for the purpose of their submissions.

[14] In the course of the hearing of the matter I reframed the question in light of the applicants’ submissions as follows:

    “What is the amount that is required to be paid by the employer to the relevant employees?”

[15] The applicants confirmed that this was the “correct characterisation” 1 from their point of view and HNZ agreed.2

[16] Consequently I have addressed myself to both questions in the course of this decision.

[17] Immediately prior to 1 April 2013 HNZ paid Touring Pilots and Touring Engineers $142.05 per day in Daily Travel Allowance. This amount was equal to the addition of the Food and Drink component ($116.55) and the Incidentals component ($25.50) of Table 2 of Taxation Determination TD2012/17, the 2012-2013 income year equivalent to Taxation Determination TD 2010/19 referred to in the Agreements.

[18] Following the receipt of taxation advice from their tax advisors, Ernst & Young, HNZ changed the rate of the Daily Travel Allowance it paid to Touring Pilots and Touring Engineers to $233.00 per week and characterised it as a Living Away from Home Allowance (LAFHA). In addition and outside of the taxation advice received, they decided to pay an amount they described as “a taxable allowance inclusive of superannuation payment” of an amount equal to the difference between the daily rate of $142.05 and the weekly rate of $233 for the period that the Agreements are in force.

[19] The taxation advice received by HNZ included the following:

    “[....]

    3. For tax purposes, it is necessary to distinguish between a travelling allowance, which is taxable in the hands of the employee, and a living away from home allowance (“LAFHA”) which is a fringe benefit and taxable to the employer.

    [....]

    8. The main guidance regarding the distinction between travelling and living away from home is Miscellaneous Taxation Ruling MT 2030 (“MT 2030”). MT 2030 states that an employee will be living away from home where the employee has moved and taken up temporary residence away from his or her usual place of residence so as to be able to carry out employment duties for a time at the new workplace. The employee is required to change his or her job location and for a period of time there is an actual change of residence to a place at or near that location.

    9. A travelling allowance is paid where the employee travels in the course of performing their job. There is no change in usual location but for short periods of time, work is performed at another location or locations.

    [....]

    11. For the pilots, there is no change in job location. They are performing employment services at their usual place of work. This differs from business travel which involves short periods of working at locations other than the usual place of work. In our opinion, it is more appropriate to classify the pilots as living away from home rather than travelling while working and residing in Karratha.

    12. Accordingly, irrespective of how they are referred to in the Agreement, in our opinion the DTAs should be treated as LAHFAs for tax purposes and subject to the FBT law. Although this is our opinion it is not certain and there is scope for further clarity to be obtained as referred to below.

    13. From 1 October 2012, the FBT Act was amended to limit the value of LAHFAS that could be paid to employees in compensation for food expenditure without substantiation being required from employees. Prior to 1 October 2012, a LAHFA could be paid without substantiation and could be treated as exempt from FBT if it was reasonably based on the employee’s circumstances.” 3

[20] Prior to the hearing of this matter HNZ also received a decision from the Australian Taxation Office in response to a request for a Private Ruling which in effect confirmed this advice.

The relevant provisions of the Agreements

[21] The Agreements contain similar, but not identical, provisions in relation to the Daily Travel Allowance.

[22] The Pilots’ Agreement contains the following provision:

    “15. TRAVEL

    15.1 Daily Travel Allowance (DTA)

    15.1.1 DTA is paid to a Touring Pilot, a Resident Pilot, and a LOS Pilot for each night spent away from their Home Base. The DTA covers food, drink and incidentals. It is not paid when food and drink are provided.

    15.1.2 DTA shall be in accordance with the Australian Taxation Office guidelines. The current reference, at the time of this agreement taking place is TD2010/19 which encompasses the FY 2010-2011 as amended from time to time. DTA may be subject to tax dependent upon how the Pilots salary is structured.

    15.1.3 If the Pilot is on duty when they fall sick DTA will still be paid on the sick days during the rostered tour of duty.”

[23] The Engineers’ Agreement contains the following provision:

    “27. Allowances

    27.15 Daily Travel Allowance (DTA)

      27.15.1 The DTA payable for each night spent away from the home base will be paid in accordance with the Australian Taxation Office Taxation Determination (TD) guidelines as amended from time to time, and covers food, drink and incidentals. The current reference, at the time of this agreement taking place is TD2010/19 which encompasses the FY 2010-2011. It is not paid when food and drink are provided.

      27.15.2 Changes to the above rates during the term of this agreement will be in accordance with the ATO guidelines. Whilst this DTA is within the ATO range it may be subject to tax, dependent upon how the engineer’s salary is structured.

      27.15.3 If the engineer falls sick while on duty DTA will still be paid on the sick days during the rostered tour of duty.”

[24] In the Pilots’ Agreement Appendix 3 Allowances and additions to pay contains a table with 6 columns. There are many rows in the table but for the purpose of this matter the row commencing 15.1.2 is relevant as follows:

Agreement Clause Number

Agreement Item Description

Rate at the Commencement of the Agreement

Period Paid

Varied each year?

Variation based upon

15.1.2

Daily Travel Allowance (DTA)

As per ATO

Per event

Yes

As per ATO

[25] In the Engineers’ Agreement Schedule 2 Engineers Allowances contains a table with 6 columns. There are many rows in the table but for the purpose of this matter the row commencing 27.15 is relevant as follows:

Clause

Agreement Item Description

Rate at Lodgement

Period Paid

Varied each year?

Variation by

27.15

Daily Travel Allowance

As per ATO

Per event

Yes

CPI

Contentions

[26] The applicants submit, in effect, that even if the taxation law has the effect contended by HNZ, the Agreements are industrial instruments that give rise to obligations that cannot be negated by taxation laws. They contend that HNZ is required by the Agreements to maintain the real value of the Daily Travel Allowance by offsetting the effect of any changed taxation treatment of the entitlement, so that the net amount received by the relevant employee is the same as it was before the change. 4

[27] HNZ submits, in effect, that the Agreements require that they pay the Daily Travel Allowance in accordance with the taxation laws and as they have changed so has the obligation arising from the agreement.

Principles of interpretation

[28] In interpreting these Agreements I am to exercise arbitral, rather than judicial power, however the approach taken by courts to the task of interpretation of statutes, awards, agreements and contracts provides guidance.

[29] The words of the statute, award, agreement or contract must first be given their plain meaning and only when they are ambiguous does interpretation require the examination of surrounding circumstances.

[30] In the High Court judgement western Export Services Inc v Jireh International Pty Ltd Gummow, Heydon and Bell JJ upheld the decision of Macfarlane JA in the New South Wales Court of Appeal in which he said:

    “A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and business like operation if an interpretation different to that dictated by the language were adopted.” 5

[31] Their honours went on to say at paragraphs 3 and 4:

    “Acceptance of the applicant’s submission, clearly would require reconsideration by this Court of what was said in Codelfa Construction Pty Ltd v State Rail Authority of NSW by Mason J, with the concurrence of Stephen J and Wilson J, to be the ‘true rule’ as to the admission of evidence of surrounding circumstances. Until this Court embarks upon that exercise and disapproves or revises what was said in Codelfa, intermediate appellate courts are bound to follow that precedent. The same is true of primary judges, notwithstanding what may appear to have been said by intermediate appellate courts.

    The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council and it should not have been necessary to reiterate the point here.”

[32] In Codelfa Mason J said at paragraph 22:

    “The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning.” 6

[33] However the words in a section of an award and by extension an agreement must be considered in the context of the whole document.

[34] In City of Wanneroo v Holmes a decision of the Federal Court Industrial Division, French J says at paragraph 43:

    “The interpretation of an award begins with a consideration of the natural and ordinary meaning of its words - The Clothing Trades Award (1950) 68 CAR 597 (Aust. Indus. Ct. F.C.). The words are to be read as a whole and in context - Australian Timber Workers Union v W. Angliss & Co. Pty Ltd (1924) 19 CAR 172. Ambiguity if any, may be resolved by a consideration, inter alia, of the history and subject matter of the award - Pickard v John Heine & Son Ltd [1924] HCA 38; (1924) 35 CLR 1. Resort to such matters as prefatory statements and negotiations is of dubious assistance if admissible at all - Seymour v Stawell Timber Industries Pty Ltd [1985] FCA 236; (1985) 9 FCR 241, 244 (Northrop J.), 254 (Keely J.) cf. 265 (Gray J.). The logs of claim and arbitrator’s reasons for decision may be referred to to determine the ambit of the dispute which led to the making of the award so that where there are two possible interpretations, one within the ambit and one without, the former may be preferred. Evidence of the conduct of the parties subsequent to the making of the award however, cannot be relied upon to construe it. - Seamen’s Union of Australia v Adelaide Steamship Co. Limited (1976) 46 FLR 444, 446, disapproving Merchant Seamen’s Guild of Australia v Sydney Steam Collier Owners and Coal Stevedores Association (1958) 1 FLR 248.” 7

[35] A decision of Lawler VP in the Australian Industrial Relations Commission, the predecessor tribunal to this Commission provides a contemporary summary of the principles of interpretation. In Watson v ACT Department of Disability Housing and Community Services he says at paragraph 15:

    “In summary, the general principles governing the construction of contracts laid down by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales apply to the construction of industrial agreements. However, consistent with the approach in Kucks and Short v FW Hercus Pty Ltd, an industrial agreement must always be construed in context: the context of particular provisions within the agreement as a whole and the context in which the agreement was made including any relevant statutory or historical context. Extrinsic evidence as to the context in which the agreement was made, including the statutory and historical context, will be admissible to demonstrate the existence of ambiguity and or to resolve ambiguity.” 8

Consideration

[36] The relevant provisions of the Pilots’ Agreement refer to “Australian Taxation Office Guidelines” and this is qualified by the words “the current reference is TD2010/19 which encompasses FY2010-2011 as amended form time to time”. The relevant provisions of the Engineers’ Agreement refer to “Australian Taxation Office Taxation determination (TD) guidelines as amended form time to time”. In both cases I conclude that this is an explicit and unambiguous reference to the series of documents called “Taxation Determination Income tax: what are the reasonable travel and overtime meal allowance expense amounts for the (relevant year – relevant year) income year” which are updated for each financial year by the Australian Taxation Office.

[37] The schedules to the Agreements contains the word “rate”. This word has its ordinary meaning as the speed at which something happens over a particular period of time or the number of times something happens or is done during a particular period of time or an amount that is paid or a price or amount to be paid that is set according to a scale or standard. 9 I consider that the Agreements intend there to be a specific amount set for the Daily Travel Allowance not, as HNZ contends, no particular amount. I think the clauses intend to refer to the amount derived from the tables in the Taxation Determination that pertain to the financial year in which the Daily Travel Allowance is paid. Mr Spears gave evidence in relation to the working document of the negotiations that gave rise to the Engineers’ Agreement. That document, marked as Exhibit A3, uses the term “rates” and I regard this as confirmation that the clauses provide a specific amount that is required to be paid.

[38] The Taxation Determinations do not set amounts for payment. Rather they set “amounts the Commissioner considers are reasonable...for the substantiation exception...” (my emphasis). TD 2013/16 states at paragraph 2:

    “It is important to remember that in setting the reasonable amount...the Commissioner does not determine the amount of allowance an employee should receive or an employer should pay their employees. The amount of an allowance is a matter to be determined between the payer and the payee.” (my emphasis)

[39] I believe the words of the relevant clause of the Agreements read along with the references in Appendix 3 and Schedule 2 of the Pilots and Engineers Agreements respectively make it clear that the parties have chosen to determine the amount or rate by reference to the reasonable amount. It would appear that they have done so in order that the amount is increased from time to time and remain within the bounds of what is considered “reasonable” by the Australian Taxation Commissioner. However it is the Agreements and not the Taxation Determination that gives rise to the entitlement to the amount or rate of the Daily Travel Allowance.

[40] Therefore I conclude that the Agreements provide that the Daily Travel Allowance be paid to Touring Pilots and Touring Engineers, is a rate set by reference to the contemporary income year equivalent to Taxation Determination TD 2010/19 referred to in the Agreements, in accordance with the criteria set in the relevant clause. The criteria are “each night spent away from their/the home base”; “it is not paid when food and drink are provided” and “if the pilot/engineer falls sick while on duty...(it)...will still be paid on the sick days during the rostered tour of duty”. At the time of this decision the rate is an amount of $145.20 and this is payable for each night spent away from the home base of the Touring Pilot or Touring Engineer. A night has the ordinary meaning of the time of darkness between one day and the next; the part of the day when no light from the sun can be seen and most people and animals sleep. 10

[41] I do not agree with the contention of the applicants that, in effect, HNZ is required by the Agreements to maintain the real value of the Daily Travel Allowance by offsetting the effect of any changed taxation treatment of the entitlement, so that the net amount received by the relevant employee is the same as it was before the change. I consider that the amount that is intended to be paid by HNZ is a gross amount.

[42] An applicable analogy is the rate of pay for a particular classification in an enterprise agreement. Typically it is expressed as a dollar amount per hour, week or year and although the word “gross’ or “net” does not appear it is well understood that the amount is a gross amount and the employer deducts Pay As You Go taxation from the amount before it is paid to the employee. If the Australian Government changes the tax scales and the amount of taxation to be deducted increases the employer is obliged to deduct the new amount and no obligation arises to top up the gross amount to offset the effect of the change in tax scale.

[43] Therefore I do not agree with the contention of the applicants in regard to the maintenance of the real value of the Daily Travel Allowance.

[44] Both the employees and HNZ must abide by the taxation laws and any tax payable by either HNZ or the employee is a separate matter to the obligations arising under the relevant agreement. Indeed the Agreements recognise this.

[45] The Pilots’ Agreement has a provision as follows:

    “DTA may be subject to tax dependent upon how the Pilots salary is structured.”

[46] The Engineers’ Agreement has a provision as follows:

    “Whilst this DTA is within the ATO range it may be subject to tax, dependent upon how the engineer’s salary is structured.”

[47] Neither do I agree with HNZ that, in effect, the Agreements require that they pay the Daily Travel Allowance in accordance with the taxation law and as it has changed so has the obligation arising from the agreement.

Conclusion

[48] The effect of my reasoning is that I answer the questions referred to above as follows:

Q: Notwithstanding any change to taxation laws brought about by the Tax Laws Amendment (2012 Measures No. 4) Act 2012 (Cth), does clause 15.1 (Pilots) and clause 27.15 (Engineers) of the Agreement provide that touring pilots and engineers employed by the Respondent are entitled to a Daily Travel Allowance as set by the Taxation Determinations published by the Australian Taxation Office in relation to the reasonable travel and overtime meal allowance expense amounts (as amended from time to time)?

A: Yes

Q: What is the amount that is required to be paid by the employer to the relevant employees?

A: For the 2013-14 Financial Year the amount payable is $145.20 per day gross, with the amount subject to tax payable as appropriate by HNZ and/or the individual employee according to their circumstances in light of the applicable taxation law.

[49] The impact of this conclusion on employees and HNZ should be taken into account in forthcoming enterprise bargaining.

DEPUTY PRESIDENT

Appearances:

A Molnar, Australian Federation of Air Pilots

L Amos, The Australian Licenced Aircraft Engineers Association

J Uphill, Chamber of Commerce and Industry of Western Australia (CCIWA), for Helicopters (Australia) Pty Ltd trading as HNZ Australia

Hearing details:

2013.

Melbourne:

28 August.

2013.

Perth:

17 September.

 1   Transcript PN69

 2   Transcript PN594

 3   Exhibit H1 - Letter from Tanya Ross Jones to Wayne Archibald, 8 August 2013

 4   Transcript PN 812, 814

 5 [2011] HCA 45

 6   Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

 7 [1989] FCA 369

 8   [2008] AIRC 291

 9   Free Merriam Webster Dictionary found at   Free Merriam Webster Dictionary found at by authority of the Commonwealth Government Printer

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