Commissioner of Taxation (Cth) v Foxwood (Tolga) Pty Ltd [1981] HCA 24

High Court of Australia Gibbs C.J. Mason, Murphy, Aickin and Wilson JJ. Commissioner of Taxation (Cth) v Foxwood (Tolga) Pty Ltd [1981] HCA 24

ORDER Appeal dismissed with costs. Cross appeal dismissed with costs.

Cur. adv. vult.

The following written judgments were delivered:—

1981, June 2 Gibbs C.J.

The facts of this case, and the effect of the statutory provisions relevant to long service leave and holiday pay, are set out in the reasons for judgment prepared by my brother Mason which I have had the advantage of reading. Stated briefly, they are as follows. The respondent ("the taxpayer") was a company which, for a fee, made the services of its employees available to an associated company. On 29 June 1976 the respondent entered into a contract for the sale of its business to another associated company. By cl. 25 of the contract the purchaser agreed to take over all the taxpayer's employees employed in its business on 30 June 1976, and further agreed that on and from that date the purchaser should "be liable to make holiday, sick leave and long service leave payments accruing or owing before or after that date", provided that the taxpayer should pay to the purchaser an amount to be determined "as the employees' accrued entitlement for long service leave and holiday and sick pay". On 30 June 1976 the taxpayer paid the purchaser the amount determined in the manner provided by cl. 25. The total amount paid was $11,658, and the taxpayer claims that $8,897, the part of that amount which is said to represent the "accrued entitlement" of the employees for long service leave and holiday pay, should be allowed as a deduction from its assessable income for the year ended 30 June 1976. The effect of s. 17 of the Industrial Conciliation and Arbitration Act 1961 Q., as amended, was that none of the employees whose services were transferred by the taxpayer to the purchaser was entitled to be paid anything by the taxpayer in respect of long service leave; the period of service of each employee with the taxpayer would be taken into account in calculating the length of his service with his new employer (the purchaser) and would be deemed to be service with that employer (s. 17 (7) (b)). On the other hand, the effect of s. 15 of that statute, and of the relevant award, was that when the employment of each employee by the taxpayer was terminated, each employee became entitled to be paid the amount of his holiday pay, or a fraction of that amount, depending on the period of his service since he last became entitled to his annual holiday. In the present case it is a question, which is not resolved by any express finding of the learned trial judge, whether the services of the employees were terminated on 30 June 1976 or on 9 July 1976, when the employees were first told of the new arrangements, and I shall assume, without deciding, that their services were not terminated until 9 July. The amount of $8,897 claimed is made up of $5,984, the amount payable to the employees in respect of their holiday pay at the date when their services were terminated, and $2,913, the amount which would have been payable to certain employees in respect of long service leave if their services had been terminated and not transferred to a new employer.