Bazaad v Commissioner of Taxation
[2015] AATA 502Bobby Bazaad
v Commissioner of Taxation
Member:
P E Hack SC, Deputy President
Subject References:
Taxation
income tax
deductibility of items claimed
work-related expenses
whether incurred in gaining or producing assessable income
objection decision under review varied
Legislative References:
Administrative Appeals Tribunal Act 1975 (Cth) - s 2A(c)
Taxation Administration Act 1953 (Cth) - s 14ZZK(b)
Case References:
Ronpibon Tin NL v Federal Commissioner of Taxation - (1949 78 CLR 47
Decision date: 07 July 2015
Brisbane
Reasons for Decision
1. This is an application by Mr Bobby Bazaad to review the objection decision of the respondent, the Commissioner of Taxation made on 9 March 2015. By that decision the Commissioner disallowed a number of claims by Mr Bazaad for deductions from his assessable income in the year ended 30 June 2014.
2. It is necessary to give some background to the hearing to explain the way in which it was conducted. The application was lodged in the Tribunal on 14 April 2015. On the application of the Commissioner, and with Mr Bazaad's agreement, the time for the Commissioner to lodge the s 37 documents was extended to enable the parties to see whether the matter could be resolved by private discussion. That was not ultimately possible and the matter came back before me for a directions hearing on 26 June 2015. On that occasion Mr Bazaad indicated that he was planning to depart Australia on 10 July 2015 to work overseas. In those circumstances it became necessary to determine how best to manage the hearing process.
3. The matters that divide the parties go to the deductibility of expenses. They are not of any particular complexity or of any great value. Having regard to Mr Bazaad's impending departure and the objective of the Tribunal to, amongst other things, provide a mechanism for review that 'is proportionate to the importance and complexity of the matter',[1] I determined that the matter ought to be listed on the afternoon of 6 July 2015 to hear, in a fairly summary, way the matters in issue between the parties. The hearing was conducted in that way yesterday afternoon with the Commissioner helpfully preparing a schedule setting out the matters that were in issue between the parties and some detail as to the approach taken by the Commissioner.
4. Mr Bazaad gave evidence and was asked questions by me and by Mr Tse, for the Commissioner, explaining the basis upon which the matters which remain in issue were claimed to be deductible.
5. With that introduction I turn to the substance of the matter. It is trite to say that Mr Bazaad has the burden of showing that the assessment is excessive; that onus is placed on him by virtue of s 14ZZK(b) of the Taxation Administration Act 1953 (Cth). In the present context the various claims for deduction will be allowable if they were incurred by him in gaining or producing his assessable income. No greater dissertation on the jurisprudence relating to s 8-1 of the Income Tax Assessment Act 1997 (Cth) is warranted.
6. By reference to the schedule prepared by the Commissioner the first matter in issue was the amount of $23,738 claimed by way of interest deductions on rental property. The Commissioner has exercised his statutory powers and obtained information that verifies the total of those amounts and accepts that in respect of two properties Mr Bazaad is entitled to a deduction totalling $17,234. Mr Bazaad has not pressed the matter beyond that. That amount will be allowed.
7. The second item relates to a claimed deduction for work-related mobile phone/internet expenses. Mr Bazaad was able to produce nine accounts showing a monthly expenditure of $69.90 on nine months but was unable to produce documents evidencing the remaining three. Given that it is obvious that the amounts were paid monthly as part of a continuing plan I am satisfied, and I did not understand Mr Tse to argue to the contrary, that it ought be accepted that Mr Bazaad expended that amount in each of the months. The Commissioner accepts the deductibility of the sums so that, in the result, I am satisfied that the total of $838 for work-related mobile/internet plan expenses ought be allowed.
8. Next there are claims for depreciation on two items of technological equipment. As to the first, a laptop, the Commissioner concedes that an amount of $513 ought be allowed for depreciation on that item and concedes as well that an amount of $691 ought be allowed as depreciation on a mobile phone handset.
9. Next Mr Bazaad claimed $441 for another mobile phone but no longer presses that claim. I do not allow it.
10. The first of the matters about which there was a real contest related to a claim of $1,291.95 said to be in the acquisition of software. To understand the view I take on the matter it was necessary to have regard of the fact that according to documents provided by Mr Bazaad to the Commissioner he was, during the year in question, employed as the Information Technology Support Manager for a company called Thai Buddha Pty Ltd. That entity appears to be the managing entity of a number of Thai restaurants in New South Wales and Victoria. The software in question relates to a point of sale software. It is not immediately apparent to me, nor was Mr Bazaad able to explain, how the necessary nexus existed between his employment and the expenditure. If it had been the expenditure of his employer I could well have understood the connection but he was not able to satisfy me that the expenditure on the software was incurred in gaining or producing his assessable income. In the result, I do not allow the claim for the software.
11. The next series of items relate, in an overall sense, to a course that Mr Bazaad says that he undertook intermittently in India during the income year. He claims to have expended $18,550 in course fees as well as an amount $8,211 in various flights to attend the course on five occasions during the income year. There are some concerning aspects to the claim. It is pointed out that Mr Bazaad has produced what appear to be identical airline tickets, one of which has a destination in Moscow, the other has a destination in New Delhi, but where otherwise the tickets seem to be identical. Additionally, the dates of travel do not match up with the dates upon which the documents provided by Mr Bazaad indicate the course was to be held. When this was taken up with him in the course of cross-examination he explained that the course dates changed frequently and he was notified of the changes by email. Ultimately, I have come to the conclusion that the evidence does not satisfy me of the necessary connection between the incurring of the expenditure and the gaining or producing of his assessable income. Not all expenditure by an employee is deductible; what must be shown is that it is both productive of assessable income or expected to produce assessable income.[2] The evidence of Mr Bazaad does not satisfy me that either of those tests has been satisfied. The result is that I will not allow the claim for course fees or travel to attend the course.
12. The final matter relates to a claim for work-related car expenditure. The Commissioner is prepared to concede, by adopting one of the appropriate statutory tests, that Mr Bazaad is entitled to an amount greater than that to which he claimed, an amount of $3,850, calculated on the basis of the cents per kilometre method in relation to an estimate of 5,000 kilometres. In those circumstances I will allow that deduction of $3,850.
13. The result of that is that the respondent's objection decision of 9 March 2015 then will be varied to allow a deduction of $17,234 for rental property interest expenses, to allow a deduction of $838 for work-related mobile phone/internet expenses, to allow a deduction of $513 for the depreciation of a laptop, to allow a deduction of $691 for the depreciation of a mobile phone handset, to allow a deduction of $3,850 for work-related car expenses. The objection decision is otherwise affirmed. I will certify that the matter has been determined favourably to the applicant.