COMPASS GROUP (VIC) PTY LTD (AS TRUSTEE FOR WHITE ROCHE & ASSOCIATES HYBRID TRUST) v FC of T

Judges:
SA Forgie DP

Court:
Administrative Appeals Tribunal, Melbourne

MEDIA NEUTRAL CITATION: [2008] AATA 845

Judgment date: 22 September 2008

SA Forgie (Deputy President)

1. Acting as trustee for the White Roche & Associates Hybrid Unit Trust, the Compass Group (Vic) Pty Ltd (The Compass Group) sought review of an objection decision made by a delegate of the Commissioner of Taxation (Commissioner). The Commissioner disallowed the Compass Group's objection to its private ruling that an allowance it paid to one of its employees, Mr Adam Brown, was not a living-away-from-home allowance and so a benefit within the meaning of s 30 of the Fringe Benefits Tax Assessment Act 1986 (FBTA Act). On behalf of The Compass Group, Mr Brown submitted that the allowance had been paid to him as compensation for additional expenses he incurred by reason that he was required to live away from his usual place of residence in order to perform the duties of his employment with The Compass Group. He had been required to do that, he submitted, by virtue of the increase in the hours he was required to attend his place of work which was located some 60 kilometres from the place where he had lived while working fewer hours. I have decided that the Commissioner's objection decision is correct and that it would not be concluded that Mr Brown was required to live away from his usual place of residence in order to perform the duties of his employment with The Compass Group.

Factual background

The question ruled upon

2. The Commissioner ruled on the following question:

"Can a living away from home allowance be paid without changing the location of employment?"

The Commissioner answered the question in the negative.

Tribunal limited to the facts that constitute the arrangement as identified by the Commissioner in his ruling

3. Together with public rulings, private rulings were first introduced in the Taxation Administration Act 1953 (TA Act) on 30 June 1992.[1] Taxation Laws Amendment (Self Assessment) Act 1992 , s 4 Private rulings were the subject of Part IVAA but those provisions were repealed by the Tax Laws Amendment (Improvements to Self Assessment) Act (No. 2) 2005[2] Tax Laws Amendment (Improvements to Self Assessment) Act 2005 (No. 2), Schedule 2, Item 16 with effect from 19 December 2005. Provisions relating to private rulings now appear in Division 357 of Part 5.5 of Chapter 5 of Schedule 1 to the TA Act.

4. Under the current statutory scheme, the Commissioner may make a written ruling, called a private ruling, on the way in which he considers a relevant provision applies or would apply to a person in relation to a specified scheme.[3] TA Act, Schedule 1, s 359-5(1) Among the information that a private ruling must specify is the relevant scheme.[4] TA Act, Schedule 1, s 359-20(2) If the Commissioner considers that the correctness of a private ruling would depend on which assumptions were made about a future event or other matter, the Commissioner may either decline to make the ruling or make those assumptions he considers most appropriate.[5] TA Act, Schedule 1, s 357-110(1) The Commissioner must advise the applicant for the private ruling of any assumptions he proposes to make.[6] TA Act, Schedule 1, s 357-110(2)(a) The applicant may respond to the Commissioner and may provide further information then or otherwise.[7] TA Act, Schedule 1, ss 357-110(2)(b) and 357-115 The Commissioner may take that information into account as he may take account of information from third parties.[8] TA Act, Schedule 1, s 357-120 The person who applied for a private ruling may object against the private ruling in the manner set out in Part IVC of the TA Act but may not do so if the Commissioner has issued an assessment for the accounting period to which the ruling relates.[9] TA Act, Schedule 1, s 359-60 The Commissioner may consider new information on receiving an objection but may ask the person to apply for another private ruling if the additional information means that the scheme is materially different from that to which the ruling relates. If the Commissioner takes that view, the objection to the private ruling is taken not to have been made.[10] TA Act, Schedule 1, s 359-65 The fact that a person has applied for a private ruling does not affect the person's obligation to lodge a return or the Commissioner's power to make or amend an assessment.[11] TA Act, Schedule1, s 357-125

5. Schedule 1 of the TA Act establishes a scheme that appears to be the same in substance as that in Part IVAA. The basis of the latter scheme was described by Lockhart J in
Commissioner of Taxation v McMahon and Anor:[12] 97 ATC 4986 ; [1997] FCA 1087 , Lockhart, Beaumont and Emmett JJ

"The private ruling system rests on the premise that the taxpayer will not abuse the system and will genuinely seek to obtain rulings in relation to anticipated facts or facts which are in fact known, albeit that no relevant assessments have issued so that the taxpayer's affairs may be ordered accordingly. The important point to note, however, is that the Administration Act talks of the private ruling made about the 'arrangement', which means the set of facts that constitute the arrangement. The taxpayer specifies what the relevant facts are that constitute the arrangement. The Commissioner may request the applicant to give further information to the Commissioner in order to enable him to make a private ruling. But once the private ruling is made the Commissioner is bound by it, so is the taxpayer, in the sense that, leaving aside the question of appeal or review, the Commissioner when he issues an assessment must do so on the basis that the 'arrangement' as identified by the Commissioner in his ruling binds both the taxpayer and the Commissioner. It is important to note, however, that when the actual facts as ascertained by the Commissioner form the basis of an assessment by the Commissioner, it is those facts that will govern the assessment, not the facts as identified in the form of an arrangement by the Commissioner in his private ruling, unless the two correspond.

The private ruling regime is quite different from the process of assessment to tax under the Assessment Act. A private ruling is founded on the way in which, in the Commissioner's opinion, a tax law applies to the applicant in respect of a year of income. The arrangement is but a complex of assumed or identified facts. It may also involved assumptions which, if made by the Commissioner, must be stated in his identification of the relevant arrangement. ...

When making a private ruling the Commissioner does not make findings of fact. He simply identifies facts and then states his opinion about the way in which the relevant tax laws apply to the applicant in relation to those identified facts.

The assessment process continues notwithstanding the application for and making of private rulings, subject to the constraint that, if a private ruling has been made, the facts as identified by the Commissioner which constitute the relevant arrangements will govern the assessment that issues in due course. If the facts turn out to be different from those identified by the Commissioner, then the ordinary assessment process applies and in that sense the private ruling becomes academic.

If a taxpayer seems a review of the private ruling before the Tribunal, the subject matter of that review is that arrangement as identified by the Commissioner in his private ruling. That arrangement is constant throughout the process of the private ruling and any review of appellate process that ensues. The Tribunal may form its opinion as to how the tax law operated or would operate on the facts that constitute the arrangement; and it may disagree with the Commissioner and alter the objection decision. But the review is not a review in the usual sense that applies to the processes of administrative review when it is dealing with actual facts. These are hypothetical facts. They may turn out to be the real facts; but the whole notion of a private ruling is that the facts are not necessarily the facts that will underlie the making of any ultimate assessment. If the factual matrix as explained to the Commissioner in aid of a request for a private ruling. Once the ruling is made, it is made with respect to the facts that are identified for the purposes of the private ruling itself.

In my opinion on a process of review the Tribunal cannot redefined the arrangement. The Tribunal is limited to the facts that constitute the arrangement as identified by the Commissioner in his own ruling. Nor can the Tribunal travel beyond those facts as identified in the ruling. What the Tribunal does is to 'go over again' the objection decision to consider what it thinks should be the proper answer to the question abut the way in which the relevant tax law operated on the identified facts constituting the arrangement:
Comptroller General of Customs v Akai Pty Limited (1994) 50 FCR 511 at 521 and the cases there cited."[13] Commissioner of Taxation v McMahon and Anor 97 ATC 4986 ; [1997] FCA 1087

6. It seems to me that his Honour's conclusions are directly apposite to the scheme of private rulings provided for in Schedule 1 of the TA Act. For the same reasons, I have concluded that I am equally bound to have regard only to the facts identified by the Commissioner as constituting the arrangement.

The arrangement

7. Between 7 May 2003 and the end of July 2006, Mr Brown worked for The Compass Group as an Accountant. He entered a written casual employment agreement with The Compass Group[14] T documents at 45-47 and worked on a casual basis for a minimum of 32 hours each week. Clause 5 of the agreement stated that the majority of the work is performed on the premises of the employer but that it might be necessary to work at a client's premises or at an agreed location.[15] T documents at 46 The Compass Group has its office in Lilydale in Victoria. Initially, Mr Brown commuted to Lilydale from his home at Boronia. He then moved to a farm that he purchased at Murrindindi, which is approximately 60 kilometres from Lilydale and continued to commute to his place of employment.

8. The Compass Group terminated Mr Brown's casual employment when he accepted a position as a Senior Accountant in the firm. In that position, Mr Brown was required to work an additional 5½ hours each week and was paid additional remuneration. There is no written contract of employment and the arrangement would continue until The Compass Group engaged a suitable person to fill the position. The additional 5½ hours enabled Mr Brown to conduct a greater number of client interviews. Mr Brown took up his additional duties with effect from 29 July 2006.

9. After July 2006, Mr Brown was required to be available for client interviews from 8.45am each weekday except Thursday when he was required from 7.00am. He was required to continue to be available until 6.00pm each Monday and Thursday, until 5.15pm each Wednesday and Friday and until 7.30pm each Tuesday. His hours of work increased from 22 hours each week during the period from January to June 2006 to 34 in July 2006 and then 42 in August 2006.

10. Mr Brown leased and furnished a property in Lilydale on 29 July 2006 for a period of 13 months and seven days ending on 4 September 2007. The rent was $200.00 each week but varied over the term of the lease. From 29 July 2006 to 28 August 2006, he paid $910.00 and from 29 August 2006 to 4 September 2006, he paid $209.30. For the balance of the term, Mr Brown paid $910.00 each calendar month subject to a six month rent review. The Compass Group did not require him to lease a property in Lilydale. Mr Brown intended to return to Murrindindi when the arrangements regarding his working extended hours came to an end. That is how events transpired.

11. Mr Brown made a declaration that during the period from 29 July 2006 to 28 July 2007, he was required to live away from his usual place of residence in order to perform the duties of his employment and that, during that period, his usual place of residence was at Murrindindi.[16] T documents at 48 Initially, the Compass Group did not pay Mr Brown a living away from home allowance (LAFHA) in this period. If the outcome of the ruling were favourable, The Compass Group might reimburse Mr Brown's expenses. Should it be unfavourable, there would be negotiations between The Compass Group and Mr Brown for reimbursement of all or some of the expenses he incurred for additional accommodation and food. Later, on 30 June 2008, The Compass Group paid the sum of $15,336.00 to Mr Brown. The Commissioner has accepted it as an allowance paid in respect of the additional expenses incurred by Mr Brown in renting the Lilydale property.

12. Further information that the Commissioner took into account was to the effect that The Compass Group was proposing to pay Mr Brown a weekly allowance of $292.00 comprising:

Rent allowance $200.00
Food allowance $134.00
Less Fringe Benefit Tax component ($42.00) $92.00
Total $292.00

13. Mr Brown visits his Murrindindi property at least once a week but often stays at Yea with his girlfriend. He has stayed on the Murrindindi property on several weekends and does so occasionally during the week. Most of his possessions remain at the Murrindindi property. Previously, Mr Brown was the only person living at that property but he now has a caretaker who works and lives there. He has not leased it. He uses The Compass Group's business address as his main postal address and the Murrindindi address is shown as his address on his driver's licence and on the Electoral Roll.

Legislative background

14. Section 5 of the Fringe Benefits Act 1986 (FB Act) provides that:

"Tax is imposed in respect of the fringe benefits taxable amount of an employer of a year of tax."

15. The "fringe benefits taxable amount" is payable by the employer. That is the effect of s 66(1) of the FBTA Act. Section 23L(1) of the Income Tax Assessment Act 1936 (ITA36) provides that income derived by a taxpayer by way of the provision of a fringe benefit is neither assessable income nor exempt income.

16. For tax years commencing on or after 1 April 2000, an employer's fringe benefits taxable amount is, subject to s 5B(1D),[17] Section 5B(1D) of the FBTA Act is concerned with benefits provided in respect of the employment of an employee employed by certain employers to whom s 57A relates. Mr Brown’s employer is not such an employer. the sum of the amounts calculated under ss 5B(1B) and (1C) of the FBTA Act.[18] FBTA Act, ss 136 and 5B(1A) and see also s 5C(2) Sections 5B(1B) and (1C) each sets out a formula specifying several amounts. Those amounts include, in the first, the "Type 1 aggregate fringe benefits amount" and, in the second, the "Type 2 aggregate fringe benefits amount". The first is worked out under s 5C(3)[19] FBTA Act, s 5B(3) and the second under s 5C(4).[20] FBTA Act, s 5B(3)

17. Before either can be worked out, the "aggregate fringe benefits amount" must be worked out according to the six steps set out in s 5C(1). The first of those steps requires the addition of each employee's individual fringe benefits amount for the year of tax in respect of the employment of that employee by the employer. The "individual fringe benefits amount" is the amount worked out under s 5E of the FBTA Act.[21] FBTA Act, s 136 It "... is the sum of the employee's share of the taxable value of each fringe benefit that relates to the year of tax and is provided in respect of the employment other than an excluded fringe benefit."[22] FBTA Act, s 5E(2)

18. A "fringe benefit" is defined in s 136 of the FTBA Act. In so far as it is relevant in this case, s 136(1) provides that:

" fringe benefit , in relation to an employee, in relation to the employer of the employee, in relation to a year of tax, means a benefit:

  • (a) provided at any time during the year of tax; or
  • (b) provided in respect of the year of tax;

    being a benefit provided to the employee or to an associate of the employee by:

  • (c) the employer; or

    ...

    in respect of the employment of the employee, but does not include;

    ...

  • (g) a benefit that is an exempt benefit in relation to the year of tax; or..."[23] FBTA Act, s 136

19. In so far as it is relevant, s 136(1) of the FBTA Act then goes on to specify that a:

" benefit includes any right (including a right in relation to, and an interest in, real or personal property), privilege, service or facility and, without limiting the generality of the foregoing, includes a right, benefit, privilege, service or facility that is, or is to be provided, under:

  • (a) an arrangement for or in relation to:
    • (i) the performance of work (including work of a professional nature), whether with or without the provision of property;
    • (ii) ...;
    • (iii) ...;
  • (b) ...
  • (c) ..."

20. Section 30 is concerned in particular with living-away-from-home allowance benefits. In so far as it is relevant, it provides that:

  • "(1) Where:
    • (a) at a particular time, in respect of the employment of an employee of an employer, the employer pays an allowance to the employee; and
    • (b) it would be concluded that the whole or a part of the allowance is in the nature of compensation to the employee for:
      • (i) additional expenses (not being deductible expenses) incurred by the employee during a period; or
      • (ii) additional expenses (not being deductible expenses) incurred by the employee, and other additional disadvantages to which the employee is subject, during a period;

        by reason that the employee is required to live away from his or her usual place of residence in order to perform the duties of that employment;

      the payment of the whole, or of the part, as the case may be, of the allowance constitutes a benefit provided by the employer to the employee at that time.

  • (2) ..."

21. Section 136(1) of the FBTA Act provides that the expression "place of residence":

"... in relation to a person, means:

  • (a) a place at which the person resides; or
  • (b) a place at which the person has sleeping accommodation;

    whether on a permanent or temporary basis and whether or not on a shared basis."

The expression "deductible expenses" is also defined in s 136(1) to mean:

"... in relation to an allowance paid to an employee, means expenses incurred by the employee in respect of which a deduction is allowable to the employee under section 8-1 of the Income Tax Assessment Act 1997 (ignoring Divisions 28, 32 and 900 of that Act)."

In essence, s 8-1 of the Income Tax Assessment Act 1997 enables a taxpayer to deduct from assessable income any loss or outgoing incurred in gaining or producing assessable income or necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

22. Subject to Part III of the FBTA Act, the taxable value of a living-away-from-home allowance fringe benefit of the sort dealt with in s 30(1) is, in relation to a year of tax, the amount of recipient's allowance reduced by any exempt accommodation component and any exempt food component.[24] FBTA Act, s 31(a)

The submissions

23. On behalf of The Compass Group, Mr Brown submitted that his usual place of residence was his Murrindindi property. He distinguished authorities, to which Dr Jacques referred on behalf of the Commissioner and to which I will refer later in these reasons. The house in Lilydale was far less home and the property at Murrindindi far more home than those referred to in Miscellaneous Taxation Ruling MT 2030 (MT 2030): Case 88[25] Case 88 1 TBRD 353 and Case 106.[26] Case 106 12 CTBR (NS) 201 The Lilydale home was perhaps closer to what might be called a "usual place of residence" than the hotel accommodation discussed in Case B47,[27] (1951) 2 TBRD 201 to which reference was also made. The transitory living arrangements referred to in Case S27[28] (1985) 85 ATC 270 were quite different from his arrangements where he had owned and lived in one place for years leading up to the period for which the allowance was paid and then following that period.

24. On behalf of the Commissioner, Dr Jacques submitted that the amount of $15,336.00 could not constitute an LAFHA within the meaning of s 30(1) of the FBTA Act as it was not incurred as a result of Mr Brown's being required to live away from his usual place of residence. Referring to the judgment of Crockett J in
Federal Commissioner of Taxation v Charlton,[29] (1984) 84 ATC 4415 at 4419 Dr Jacques submitted that there was nothing in the nature of Mr Brown's employment that demanded that he stay in accommodation in Lilydale.

25. In any event, Mr Brown was not living away from his usual place of residence. The Commissioner accepted that both the Murrindindi and the Lilydale properties were Mr Brown's places of residence during the period under consideration but that the Lilydale property had become his usual place of residence. Relying on Case B47 and Case 76[30] (1987) 18 ATR 3547; Case U110 (1987) 87 ATC 663 and
Federal Commissioner of Taxation v Applegate,[31] 79 ATC 4307 ; (1979) 9 ATR 899 ; 27 ALR 114 Dr Jacques summarised five matters that indicated whether a place of residence is a person's usual place of residence.

Consideration

26. There is no question that The Compass Group has paid Mr Brown an allowance in respect of his employment. It is an allowance in the nature of compensation to Mr Brown for additional expenses he has incurred during the relevant period. The issue is whether he incurred those additional expenses "by reason that ... [he was] required to live away from his ... usual place of residence in order to perform the duties of that employment" within the meaning of s 30(1)(b) of the FBTA Act. The issue comprises two sub-issues. The first requires the identification of Mr Brown's "place of residence" and then his "usual place of residence". The second requires a decision as to whether he was "required" to live away from it "in order to perform the duties of that employment ...".

"It would be concluded" by whom?

27. Although not raised by the parties as an issue, I will pause for a moment to consider by whom "it would be concluded" or not concluded, as the case may be, that the allowance paid to an employee has the character described in s 30(1). This was considered by Lee J in
Atwood Oceanics Australia Pty Ltd v Federal Commissioner of Taxation[32] (1989) 89 ATC 4808 when he said that:

"... It was the requirement of the paragraph that the circumstances of payment of the allowance be such that a reasonable person would conclude, applying an objective view thereto, that the allowance bore the character described in the paragraph. ...

...

... The section did not require the allowance to be paid as compensation. It was sufficient that in the eyes of an objective observer the allowance was in the nature of compensation to the employee."[33] (1989) 89 ATC 4808 at 4,816 and see also Roads and Traffic Authority of New South Wales v Commissioner of Taxation 93 ATC 4508 ; (1993) 43 FCR 223 at 237 per Hill J.

What is meant by the expression "reside" in the general law?

28. Although the expression "place of residence" is defined in s 136(1) in terms of the place at which a person "resides" or has "sleeping accommodation", I will begin with the meaning given to that term under the general law. I will do so for the authorities have framed its meaning in terms of where a person "resides" and so in terms that are consistent with paragraph (a) of the definition in s 136(1).

29. The expression "place of residence" was considered in
Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation,[34] (1941) 64 CLR 241 in which Williams J said:

"The place of residence of an individual is determined, not by the situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on a yacht or some other place of abode ..."[35] (1941) 64 CLR 241 at 249

30. Wilcox J referred to this passage in
Hafza v Director-General of Social Security[36] (1985) 60 ALR 674 when considering Mrs Hafza's entitlement to child endowment under the Social Services Act 1947 (SS Act). Child endowment was not payable to a person if the person or the child for which he or she had custody, care and control, ceased to have his or her usual place of residence in Australia unless the absence of either the person or the child was temporary only. That was the effect of s 103(1) but s 104 qualified its operation. The effect of s 104 was that the person would continue to be entitled to child endowment if he or she had the custody, care and control of one or more children and was a person whose "usual place of residence is in Australia ... [but who] is temporarily absent from Australia".[37] SS Act, s 104(1)(e) In order to take advantage of this qualification, the person had to be a "resident of Australia" as defined by the ITA36.[38] SS Act, s 104(2) Wilcox J summarised the authorities relating to the meaning of "resident":

"Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home a particular place, even involuntarily (see
Inland Revenue Commissioners v Lysaght [1928] AC 234 at 248 and
Keil v Keil [1947] VLR 383) a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place (
Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and
Judd v Judd (1957) 75 WN (NSW) 147 at 149) together with an intention to return to that place and an attitude that that place remains 'home' (see
Norman v Norman (1969) 16 FLR 231 at 236). It is important to observe, firstly, that a person may simultaneously be a resident in more than one place - see the facts of Lysaght and the reference by Williams J to 'a home or homes' - and, secondly, that the application of the general concept of residence to any particular case must depend upon the wording, and underlying purposes, of the particular statute in relation to which the question arises. But, where the general concept is applicable, it is obvious that, as a residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as 'home', a change of intention may be decisive of the question whether residence in a particular place has been maintained."[39] (1985) 60 ALR 674 at 680-681

31. Wilcox J then considered whether a person's "usual place of residence" was synonymous with "resident" in ss 103 and 104 of the SS Act. He concluded it was not as Parliament had deliberately provided that a temporary absence would not disentitle the person from receiving child endowment. That provision would have been unnecessary had Parliament intended to use "resident" in the sense in which it is understood in the general law.

What is meant by the expression "place of residence" in the FBTA Act?

32. It is immediately apparent from the definition of the expression "place of residence" in s 136(1) that Parliament has given it a wider meaning than was intended under the general law. Under the general law, it is clear from the authorities to which I have referred that a place at which a person resides, and so is a place of residence, is a place with which a person has retained a continuity of association together with an intention to return to it and an attitude that the place remains home. A person may have but one such place or may have more than one. Paragraph (a) of the definition of "place of residence" in s 136(1) contemplates a residence of that sort even though it provides that it may be on a "permanent or temporary basis". It does so by providing that a "place of residence" means "a place at which a person resides". The word "reside" means "... to live or have one's home there, especially permanently ..."[40] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

33. Paragraph (b) of the definition, however, goes a long way beyond the general law when it provides that a "place of residence" also means "sleeping accommodation" "whether on a permanent or temporary basis" and whether or not on a shared basis. A place at which a person resides contemplates that it will also provide sleeping accommodation but sleeping accommodation does not necessarily contemplate that the person's attitude to it is that it is his or her home.

Mr Brown's place or places of residence

34. Whether Mr Brown's living arrangements are considered in light of (a) or (b) of the definition, he had a place of residence at Murrindindi before 29 July 2006. On and after 29 July 2006, he continued to have a place of residence at Murrindindi on the basis that he continued to have his home there and intended that it would remain so. He did not live there permanently but it continued to be a place to which he returned from time to time and a place with which he maintained a connection. In light of the fact that the definition of "place of residence" extends to a person's residing on a temporary basis as well as on a permanent basis, it remained a place at which he resides. The property at Murrindindi was also a place at which Mr Brown had sleeping accommodation and so it was his place of residence under paragraph (b) of the definition of "place of residence" as well as under paragraph (a).

35. The rented premises at Lilydale were also a place of residence in relation to Mr Brown as it was a place at which he had, at the very least, sleeping accommodation. The arrangement speaks of his having furnished it and that suggests that he had furnished it with more than was required for sleeping although how much more is not revealed. It was a place where he spends the majority of his five day working week and lives there during that time. The Lilydale premises were a "place of residence" under both paragraphs of the definition of that term in s 136(1).

What is meant by the expression "usual place of residence"?

36. The ordinary meanings of the word "usual" when used as an adjective include:

"... done, happening, etc most often; customary - took the usual route to work. ..."[41] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

37. It is a word that has been considered in Case C77,[42] (1971) 71 ATC 342 in which Mr Dempsey, Member, adopted the statement from
Brailey v Brailey[43] [1922] P 15 at 26 that "usual" means "usual in normal circumstances".[44] (1971) 71 ATC 342 at 344 per Mr Dempsey with whom Mr Dubout, Chairman, and Mr Thompson, Member, agreed Case C77 was concerned with a taxpayer's claim for a deduction of $232 as Living Away From Home Expenses. That amount had been paid to the taxpayer by his employer to cover the higher costs of his living in Canberra. In order to qualify as a deduction, the amount had to qualify as a living away from home allowance under s 51A of ITA36. At the time, s 51A provided that the amount of any living-away-from-home allowance was an allowable deduction from the assessable income of a taxpayer who was an employee. A living-away-from-home allowance was:

"... so much of any allowance or benefit paid or granted in money or otherwise as the Commissioner is satisfied is in the nature of compensation to the employee for the additional expenses (not being expenses which are allowable under ... [s 51 of ITA36[45] “51.(1) All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, …shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.” ] incurred by him, or which would be incurred by him if the allowance or benefit were not received, through having to live away from his usual place of abode in order to perform his duties as an employee."[46] ITA36, s 51(3)

The Commissioner had disallowed the taxpayer's claim in Case 77.

38. Mr Dempsey said:

"On the facts of this case the amount in question cannot be described as a living away from home allowance[.] [The] Taxpayer ... whilst being paid the allowance, had no other home other than the flat he was renting in Canberra and where he resided with his wife. The place must be regarded as his usual place of abode for the period that he lived there. Support for [t]his view is contained in ... the case of
R v Hammond (1852) 17 QB 772 p 781 where Lord Campbell CJ at p 781 said 'A man's residence where he lives with his family and sleeps at night is always his place of abode in the full sense of this expression.'"[47] (1971) 71 ATC 342 at 344

39. Dr Jacques drew my attention to several other cases concerned with s 51A of ITA36. In the first, Case No B47,[48] (1951) 2 TBRD 201 the majority of the Board of Review No. 2 decided that the taxpayer was entitled to a deduction to the extent that he incurred additional expense in providing hotel accommodation for himself during the week. That accommodation was in a town some 130 miles from Perth where his wife continued to live in the home in which they had both lived for some years. The taxpayer returned to the Perth home each weekend but was required to work in the town during the week. One of the majority, Mr Cotes, observed that the definition of "living-away-from-home allowance" "... itself places no limit upon the period during which the employee is required to live 'away from his usual place of abode' in order to perform his duties."[49] (1951) 2 TBRD 201 at 206 Mr Cotes observed that it might be that the taxpayer had two places of abode and he had to decide which would more correctly be described as his usual place of abode. Having regard to all of the facts including the maintenance of his Perth home, the presence of his wife in it and his returning to it each weekend, Mr Cotes decided that the Perth home was his usual place of residence. He went on to decide that it was essential for him to live away from it to carry out his duties as an employee and that the allowance had been paid to him as compensation for the additional expenses he incurred.

40. The other member of the majority, Mr Nimmo, looked more to the policy underpinning ss 51 and 51A and concluded that s 51A is intended to apply:

"where the Commissioner ... is satisfied that: (a) a taxpayer maintains a home or other place of abode, but because of the distance between it and his place of employment he cannot live in it; (b) the allowance the taxpayer receives by reason of these circumstances is in the nature of compensation to him for the additional expense he thereby incurs. The words 'additional expenditure' in the definition seem to me to imply that the taxpayer is already under some expense in connection with his usual place of abode. I think it is to meet the case where he incurs further expense by having to live away from that place of abode in order to perform his duties as an employee that the section was enacted. ..."[50] (1951) 2 TBRD 201 at 204

41. In Case 4,[51] (1952) 3 CTBR (NS) 21 the taxpayer had lived for some years in a rented house in Melbourne with his wife. In May 1945, he was transferred to Sydney as the New South Wales manager but his appointment did not become permanent until May 1946. In March 1947, his wife moved from Melbourne to Sydney and they obtained a house in Sydney. Until his wife arrived, the taxpayer lived in a guest house and received an allowance from his employer to meet the additional costs he incurred. Taxation Board of Review No 2 disallowed the taxpayer's claim that the allowance was deductible under s 51A. It took into account the nature of the taxpayer's employment and the permanency or otherwise of his appointment to the Sydney position in deciding that he was required to take up his abode in that city. The permanency or otherwise of the Sydney position was also relevant in deciding whether he had maintained an abode in Melbourne and so was the frequency of his visits to Melbourne. The Board considered that they were no more frequent than they would have been had his wife lived in Sydney at all relevant times. There was nothing to identify those visits as returns to his usual place of abode as distinct from official visits of a branch manager to head office.[52] (1952) 3 CTBR (NS) 21 at 24

42. Mr Cotes expressed the reasoning in this way:

"... [It] is obvious that, to qualify for deduction under this section, the taxpayer must live at a place other than what should be regarded as his usual place of abode, and it therefore follows that the taxpayer's actual place of living for purposes of his employment cannot be taken as final and conclusive proof that this therefore becomes his usual place of abode. But, despite all this, it is not easy to see how a taxpayer can be held to live away from his usual place of abode if the employment which keeps him away from what is claimed to be such is of a permanent and not temporary nature and if the position is such that, not only can there be no intention on the part of the taxpayer to return permanently to dwell there but the distance is such that his periods of sojourn there are of brief duration and at infrequent intervals. If in these circumstances a taxpayer continues to maintain a home away from the locality of his employment, even if his wife and family continue to reside there, I find difficulty in regarding that home as the taxpayer's usual place of abode. ..."[53] (1952) 3 CTBR (NS) 21 at 27

43. Case 50[54] (1971) 17 CTBR 322 concerned a taxpayer employed at a mining town, R, and living with his family in a house rented from his employer. In 1965, he decided to move the family home to another town, B, where there were better educational facilities for his children. He continued to live in the same rented house in the mining town for 12 days out of each 14 and visited his family on the remaining two days. From 1 July 1966, his employer paid him a living-away-from-home allowance. He returned the whole of the amount as income but claimed a deduction amounting to $8 per week for the whole of the year under s 51A. The Commissioner disallowed the taxpayer's claim but the Taxation Board of Review No 2 decided to allow it in part. The Board decided that:

"On the rather special facts in the case before us, we have concluded that this is a case wherein the taxpayer in the year of income maintained a home which should be regarded as his 'usual place of abode', but in which, because of the distance between it and his place of employment, he could live continuously or for long."[55] (1971) 17 CTBR 322 at 328

44. In view of what it described as "special facts", the Board had actually considered them and tested them on a basis different from those that they found had actually occurred. They said:

"... [W]e are of the opinion that undue weight should not be given to the fact that the taxpayer was living at R in the accommodation described prior to his family's move to B. The matter should be tested on the basis that the situation were as if the taxpayer had lived with his family at B and had then gone to R and taken up the employment and accommodation which we have described, and had returned to B only for the stated periods. The circumstances of the taxpayer so far as his accommodation and his relationship with his family were concerned were so different prior to their move to B that we think it would not be correct to stress the fact that he lived in the same house or even in the same town before and after the move."[56] (1971) 17 CTBR 322 at 325-326

45. This revised formulation of the facts must be kept in mind in reading the passage in which the Board distinguished the facts of Case 4 from those before it. The Board said:

"... In the case before us it was plain that the taxpayer wished and intended to return to his home as soon as and as often as should prove possible, whereas in ... Case 4 the intention of the taxpayer was to abandon his former place of abode as soon as possible, thus rendering more natural a conclusion that he had so abandoned it at a relatively early point of time."[57] (1971) 17 CTBR 322 at 328

46. The final case to which Dr Jacques referred regarding a claim for deduction under s 51A was Case 76. The taxpayer had declared as income a weekly living allowance and claimed a deduction for the same amount under s 51A. He had, at his employer's request taken up a temporary assignment to manage its troublesome projects in Sydney for a period of what was thought to be six to nine months. The employer provided a house for the taxpayer in Sydney and the taxpayer rented his Adelaide house in an unfurnished state. He moved some of his furniture and his young daughter to Sydney but maintained his contact with his friends in Adelaide and, on one occasion, visited there. During the last six months of his assignment, his Adelaide house was vacant and he did not move his furniture back into it. Ultimately, he took another job in Sydney and did not return to Adelaide.

47. The taxpayer argued that his Adelaide house was his usual place of abode and not the rented Sydney premises. Senior Member McMahon said:

"It seems to me as a matter of fact that the Adelaide home could not, during the year, be said to be the applicant's place of abode. For six of the twelve months it was occupied by another family with their furniture. At no time during that period could the applicant have knocked on the door and demanded that he be allowed to sleep there with his family. He had granted the right of exclusive possession to others. More importantly, he did not, as a matter of fact, sleep there. Fort the remainder of the period it was empty of both tenants and furniture. Without fanciful hardships, it would not have been possible to stay there during this time - the remainder of the financial year. More importantly, again, the applicant did not in fact do so. A place of abode is more than a place one merely owns. It is a place where one lives. Since 1576, the Shorter Oxford English Dictionary says, abode has meant habitual residence. In that sense, the word 'usual' in the statutory phrase is probably unnecessary. After the applicant left the Adelaide house, it ceased to be either his usual or any other adjectival place of abode. An applicant must first establish that place of abode existed in fact before he begins to prove that it is his usual place of abode.

The purpose of the legislation, it has been said, is to compensate a person for being obliged to keep up two homes because of his employment. Here the applicant simply turned his former home into a revenue earning asset, against which he claimed and was allowed deductions. He was not put to the expense of a dual establishment."[58] (1987) 18 ATR 3547; Case U110 (1987) 87 ATC 663 at 3551; 666

48. Section 51A was repealed with effect from 1 July 1986 when the FBT Act and the FBTA Act came into operation. It was considered by Hill J in
Roads and Traffic Authority of New South Wales v Commissioner of Taxation.[59] 93 ATC 4508 ; (1993) 43 FCR 223 ; 116 ALR 482 His Honour considered whether camping allowances should be classified as living away from home fringe benefits under s 30 of the FTBA Act. Allowances were paid to employees who were labourers, gangers, field-hands, plant operators or foremen. They were usually hired at a works office of which there were 38 or so scattered throughout the towns and cities of New South Wales. At the time that they were hired, they were usually told that they would be required to camp if the work site was located at a place where reasonable transport facilities were not available to enable them to travel to and from their homes to the work site each day. The duration of work at a particular site varied from a few days to several months with a maximum of 12 months. Employees were accommodated at camp sites in either huts or caravans which were generally located on the side of the road but, occasionally, were located at caravan parks. On the evidence before him, Hill J found that the employees:

"... are required, as an incident of their employment, by their employer and for the purposes of the employer to live close by their work site for relatively short periods of time. No question arises of their choosing to live in these places. Each of the persons has a permanent house in which he lives when not in camp. None of the employees spend inordinate periods of time in the camps so that the camp becomes their home. Their house is retained and the employees in question travel home at weekends. They do not remain in the camps. The costs in question here are an incident of the employment. ..."[60] 93 ATC 4508 ; (1993) 43 FCR 223 ; 116 ALR 482 at 240; 500

49. Dr Jacques referred to the earlier case of
Atwood Oceanics Australia Pty Ltd v Federal Commissioner of Taxation[61] (1989) 89 ATC 4808 as a case in which Lee J had come to the same conclusion. That was a case that concerned various benefits and allowances provided or paid to employees required to work on an off-shore drilling rig. It was assumed that the employees were separated from their usual homes for some days but the case did not turn on a finding as to what amounted to their usual places of residence. It turned instead on the requirement of s 30(1)(b) to find a "... causal connection between the likelihood of additional expenses and disadvantages and the requirement to live away from home for a period."[62] (1989) 89 ATC 4808 at 4,816 Lee J concluded on the facts he had found that:

"The proper conclusion must be that the legislature intended that an allowance be paid by an employer to compensate an employee for intangible disadvantages of employment required to be performed away from the usual place of residence of the employee and to make such employment more attractive to the employee would not be a fringe benefit assessable under the Act unless such compensation was a composite payment which included compensation for additional expenditure likely to result from the requirement that the employee live away from home for any period.

The nature of the allowance paid under the 1984 award was that of compensation to an employee for the particular disadvantages of living in a remote location and for the social disruption occasioned by the employment as a result of requiring the employee to live away from home.

It was not an allowance in the nature of compensation for additional expenses and, therefore, it was not an allowance to which sec. 30 of the Act applied. ..."[63] (1989) 89 ATC 4808 at 4,818

50. Three cases decided by the Tribunal were also drawn to my attention: Case X41,[64] (1990) 90 ATC 347 Case Y40[65] (1991) 91 ATC 393 and Case Y51.[66] (1991) 91 ATC 453 Dr Jacques submitted that each had found that the employee's usual place of residence had changed to Karratha when they moved there with their families. To my mind, the reasoning in each of these cases cannot be categorised in quite this way. Taking Case X41 first, Deputy President McDonald found that the employee and his wife lived wherever the work was but, for their holidays, returned to Perth where they generally stayed with members of their family. He owned a home unit in Perth but had never lived in it and expected that, if he returned to Perth, he would live in it. The employee continued to regard Perth as his place of residence. During his employment in Karratha he, like most other employees and regardless of their usual place of residence, was paid a location allowance.

51. Deputy President McDonald applied the reasoning in Atwood Oceanics Pty Ltd v Federal Commissioner of Taxation to conclude that:

"... it is a payment not so much in the nature of a compensation payment but rather a payment made to attract employees to live in or continue to live in a remote area where the conditions may not be as favourable as they may be in a less remote area. ... In my view the allowance is paid for 'other additional disadvantages' alone and therefore cannot be categorised as an allowance under sec. 30(1)(b)(i) or (ii)...."[67] (1990) 90 ATC 347 at 350-351

52. Should he be incorrect in that conclusion, Deputy President McDonald went on to decide that the employee's usual place of residence was Karratha and could not be said to be Perth:

"... There is a distinction to be drawn between a person's 'point of origin' as identified in his letter of assignment and a place where a person has his 'usual place of residence'. Probably Perth may be the place to which the applicant habitually returns for his holidays and for purposes of seeing his children, relations and friends. That however does not necessarily make Perth his 'usual place of residence'. Nor does the fact that he regards Perth as his 'usual place of residence' make it so. That also must be judged objectively in accordance with the well-known principles set out by Lord Campbell CJ in
R v Hammond ..."[68] (1990) 90 ATC 347 at 351

53. Case Y40 was concerned with a taxpayer who had rented out his home in Perth when he was temporarily transferred to Karratha. The taxpayer received an amount that his employer described as a living-away-from-home allowance and, on the basis of s 23L of ITA36, claimed that it was not liable to tax as it was a fringe benefit. Section 23L would only apply if the allowance was a fringe benefit within the meaning of the FBTA Act.

Deputy President Gerber concluded:

"On the whole of the evidence, I am satisfied that any finding other than that T was living in Karratha from August 1985 to April 1989 would be perverse. He was thus not 'living-away-from-home' as the Act requires - he had no other home than in Karratha; the Perth home being leased. T's submission that he continued to pay the rates and interest on his mortgage on the Perth home are fiscally irrelevant (save that they are tax deductible since rent from the property is income ...). In the circumstances, I see no need to have recourse to dictionary definitions of terms such as 'usual' and 'residence' .... I am satisfied that the statutory relief provided for by sec 23L of the Income Tax Act is designed to deal with the situation where a man is compelled to live away from his home for purposes of his work and thus compelled to maintain his home whilst living in another. "A man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression" ...".[69] (1991) 91 ATC 393 at 396

54. The taxpayer in Case Y51 also rented out his Perth home and relocated himself and his family to Karratha when he was required to work there. He continued to regard his Perth home as his normal home in the sense that it was the place to which he returned after undertaking employment assignments. During the period in question, however, Deputy President Johnston decided that the taxpayer lived in Karratha and maintained his home there. It was his usual place of residence.

55. There are several principles that can be gleaned from these cases. The first is that the fact that s 30 and, before it, s 51A, are concerned with what is described as a living-away-from-home allowance. That allowance is paid by an employer to an employee in respect of the employee's employment. It is a payment in the nature of compensation. The compensation is to meet additional expenses the employee incurs during a particular period and for other additional disadvantages he or she faces in that period but only if the expenses are incurred because he or she is required to live away from his or her usual place of residence in order to perform the duties of employment. As Mr Cotes alluded to in CaseB47, it necessarily assumes that the taxpayer has two places that could be described as his or her place of residence before one or the other needs to be identified as the "usual place of residence".

56. Putting to one side the case of Case 50, all cases looked to the taxpayer's place of residence before he or she acquired another place of residence. Each looked to the taxpayer's continuing connection with the first place of residence including matters such as whether his or her family continued to live there, the frequency of the taxpayer's visits there and whether or not that was a place to which the taxpayer could return at will if he or she so wished. Also relevant was the nature of the employment and whether the move to another place was a temporary or permanent move. Case 50 stands alone and does not fit neatly into the pattern created by the other authorities. I have not attempted to fit it into the pattern as the restatement of the facts by Board of Review No 2 clearly located it on the fringe rather than in the central pattern created by the other authorities. Given that, if for no other reasons, I must consider the matter in light of the arrangement identified by the Commissioner, I am unable to engage in a restatement of the facts in this case.

57. In undertaking this exercise, it could easily be concluded that the place at which a person is required to live in order to perform the duties of employment has become the person's usual place of residence. That comes about because of the extended meaning given to the expression "place of residence" in s 136(1) of the FBTA Act. It includes not only the place at which the person resides as it does in the general law but extends to a place at which the "person has sleeping accommodation". In both instances, it includes them whether on a "permanent or temporary basis". Under this definition, a person who is required to travel to a place of work and to stay in dormitory accommodation, for example, for extended and regular periods of time would have a place of residence in light of the definition. If the periods away from the place of work were short even if regular, the dormitory accommodation would be a place of residence that could also be said to be the person's "usual" place of residence. It would be "usual" in the sense that it would be customary and regular and would have that characterisation even when the person maintained another place of residence that could also be described as usual.

58. On my reading of s 30 in light of the authorities dealing with it and with s 51A of ITA36, any dilemma of this sort that arises on the facts of a case is solved when the next question is asked. That is, having identified the usual place or, if there be more than one, places of residence, is the employee required to live away from that place, or one of them, in order to perform the duties of the employment? Any place that becomes the usual place of residence by virtue of performing the duties of the employment necessarily falls outside the scope of the question.

59. It is a question that must be asked at the commencement of the time at which the person begins to reside at the place at which it is said his or her employment requires that he or she live but must also be asked during the period. That this is so follows from the fact that a person may be required to live away from his or her usual place of residence in order to perform the duties of his or her employment at the outset but circumstances may change. The person may, for example, decide to lease the place that is his or her usual place of residence so that, even if initially required to work away from it, that place can no longer be regarded as his or her usual place of residence for it is no longer a place to which he or she has access let alone able to reside in.

Mr Brown's usual place or places of residence

60. Before 29 July 2006, I am satisfied that Mr Brown's usual place of residence was at his property at Murrindindi. It was a place where he kept his belongings and where he lived. He might spend nights or weekends away but it was the place to which he returned and which he regarded as his home. It was his usual place of residence.

61. After 29 July 2006, Lilydale became Mr Brown's usual place of residence in the sense that it was the place in which he resided or had sleeping accommodation during the working week. He went away occasionally to stay at Murrindindi or at Yea during the week and always went to one or other of those places at the weekend.

62. After 29 July 2006, Mr Brown maintained his association with his Murrindindi property. It was the property that he regarded as his home and the property at which he kept most of his belongings. He returned to it from time to time; perhaps for a night during the week and for a weekend. It seems implicit in the facts identified in the arrangement that, had Mr Brown not had to visit his girlfriend in Yea, he would have spent the time that he spent in Yea at Murrindindi. Mr Brown has engaged a caretaker to care for and live at the property at Murrindindi but he has not leased it. He has no family living at Murrindindi but it remains the place to which Mr Brown is attached and to which he wishes to return after The Compass Group finds a suitable person to fill the role of Senior Accountant. The facts in the arrangement and Mr Brown's are concerned with the period from 29 July 2006 to 28 July 2007. During that period, I am satisfied that Mr Brown's property at Murrindindi was his "usual place of residence".

Was Mr Brown required to live away from his usual place of residence in order to perform the duties of his employment?

63. The question posed by s 30(1)(b) and summarised in the heading is framed in the passive voice and so does not expressly identify the agent requiring the employee to live away from his or her usual place of residence. Reading the whole of s 30(1) and particularly s 30(1)(b), it would seem that the agent requiring the employee to live away from his or her usual place of residence must be the employer, the inherent nature of the employment or a mixture of the two. It would seem that regard must be had to both in order to answer whether the employee is so required.

64. I will begin, though, with what is meant by "required". The ordinary meanings of the word "require" include:

"... 1a to need something; b to wish to have something. 2 to demand, exact or command by authority. 3 to have as a necessary or essential condition for success, fulfilment etc ..."[70] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers

65. The word "require" does not contemplate choice. The distinction is apparent from the passage from Hill J's judgment in Roads and Traffic Authority of New South Wales v Commissioner of Taxation when he said:

"... For the reasons already given, an employee who is required as part of his employment to reside at the work site for periods of time and to bear the cost of his own accommodation, in the circumstances where he has his own private house, will be entitled to a deduction for the cost of that expenditure. ...

... An employee who had no private home and was employed indefinitely to work at a particular site and did in fact work for the whole of his employment at that site, might be said to have chosen to live at the site so that the cost of his accommodation would be private. ..."[71] 93 ATC 4508 ; (1993) 43 FCR 223 ; 116 ALR 482 at 242; 501-502

66. The element of choice was a relevant consideration for Crockett J in
Federal Commissioner of Taxation v Charlton.[72] (1984) 15 ATR 711 ; 84 ATC 4415 The facts are summarised in the head note, which reads in part:

"The taxpayer was a pathologist employed by a government department in charge of a laboratory in Bendigo. Whilst employed with the government department he also acted as the pathologist assisting the local coroner in the performance of autopsies, for which he was paid statutory fees. He ceased working at the laboratory in December 1977 preparatory to retiring in May 1978. Whilst employed by the government department in Bendigo the taxpayer rented a flat in that town, while his wife and children resided at the permanent family home in Melbourne, located approximately 150 kilometres away. Upon ceasing to work at the laboratory in Bendigo the taxpayer moved back to the matrimonial home, but retained the tenancy of the flat for the months of January to May 1978 inclusive, to ensure the availability of accommodation on those occasions when he returned to Bendigo for the purpose of carrying out autopsies. During April and May 1978 he also worked as a pathologist at the base hospital in Wangaratta. Throughout January to May 1978 he made repeated trips from both Melbourne and Wangaratta to Bendigo to carry out pathology work as required by the coroner there. These trips were mostly made late at night or in the early hours of the morning. There was evidence that there would have been difficulty in finding motel accommodation in Bendigo, and the taxpayer was reluctant to make the round trip from either Melbourne or Wangaratta to Bendigo and back without rest.

The taxpayer claimed that the rental for the period January to May 1978 was incurred in the production of assessable income as represented by professional fees. ..."[73] (1984) 15 ATR 711 ; 84 ATC 4415 at 711; 4415

67. Crockett J considered whether the rental, or any part of it, was an outgoing incurred in gaining or producing Dr Charlton's assessable income. His Honour said:

"... [T]he question in contest ... [was] whether there was a sufficient nexus between the expenditure and the derivation of income. The solution to the question turns on an objective view of the relevant facts and not, of course, upon what the taxpayer may have thought as to the existence of such a nexus ... So far as the present case is concerned, it is a question of whether the work demanded that the taxpayer reside from time to time in his Bendigo flat. The question is not whether he required or desired so to reside. There must be something in the nature of the work that demanded that the taxpayer stay in the flat.

... The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he, not only needs to incur expense in travelling to that place but, also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.

...

It appears to me that in seeking the answer to the question whether an outgoing has been incurred in gaining or producing income it is necessary first to determine the essential character of the expenditure so that it will appear that it has either been dictated by the income-producing activity or, on the other hand, has been incurred for private purposes. That is to say, what has to be examined is the relationship between the expenditure and the production of income. But the test cannot be whether the expenditure was proper or reasonable:
FCT v Green (1950) 4 AITR 471 at 478; 81 CLR 3131 at 317.

The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations. There was an exception to this in the month of May. He was then required by his employment to work in both Wangaratta and Bendigo. The nature and circumstance of that work made the taking of rest at Bendigo necessary. The keeping of a flat during that month was dictated by his income-producing activity and was incidental to his work. ..."[74] (1984) 15 ATR 711 ; 84 ATC 4415 at 717-718

68. In
Federal Commissioner of Taxation v Toms,[75] 89 ATC 4373 ; (1989) 20 ATR 466 Burchett J found there to be nothing to distinguish Mr Toms' situation from that of Dr Charlton. Mr Toms was a logging contractor whose home was 108 kilometres from the forest base where he worked. He moved a caravan to the forest and camped in it during the week. He would leave the base each morning at about 6.30 am and travel to a logging area within a 20 kilometre radius of the caravan. He ceased work at about 4.30 or 5.00 pm.[76] 89 ATC 4373 ; (1989) 20 ATR 466 at 470

69. The earlier case of
Lunney v Federal Commissioner of Taxation;
Hayley v Federal Commissioner of Taxation (Lunney),[77] (1958) 100 CLR 478 Dixon CJ, Williams, Kitto and Taylor JJ; McTiernan J dissenting the majority of the High Court decided that fares paid by taxpayers to travel each day to and from their homes to the places of employment or business were not deductible expenses under s 51(1) of the Income Tax and Social Services Contribution Assessment Act 1936. Three of the majority, Williams, Kitto and Taylor JJ said that employees:

"... have, within limits, the right to choose where their homes shall be so that a taxpayer's daily journeys between his home and place of work are rendered necessary as much by his choice of a locality for his residence as by his choice of employment or occupation. And indeed the purpose of such journeys is, at least, as much to enable him to reside at his home as to attend his place of work or business. In the course of seeking to ascertain the 'purpose' of such daily journeys, Denning LJ in Newsome's Case ...[78] [1953] 1 Ch 7 made some obvious, but nevertheless interesting, observations on this point. He said: '... A distinction must be drawn between living expenses and business expenses. In order to decide into which category to put the cost of travelling, you must look to see what is the base from which the trade, profession, or occupation is carried on. In the case of a tradesman, the base of his trading operation is his shop. In the case of a barrister, it is his chambers. Once he goes to his chambers the cost of travelling to the various courts is incurred wholly and exclusively for the purposes of his profession. But it is different with the cost of travelling from his home to his chambers and back. That is incurred because he lives at a distance from his base. It is incurred for the purposes of his living there and not for the purposes of his profession, or at any rate not wholly or exclusively; and this is so, whether he has a choice in the matter or not. It is a living expense as distinct from a business expense'...[79] [1953] 1 Ch 7 at 15-16 ."

70. Although Lunney was concerned with travelling expenses, the principles are consistent with those established in relation to accommodation expenses. When I consider Mr Brown's situation in light of those principles, I come to the conclusion that a reasonable person would conclude that he was not required to rent premises and to live in Lilydale during the week but chose to. Beyond the fact of the payment of the sum of $15,336.00 itself to Mr Brown, there is no evidence that suggests that his employer required or even requested that he do so in order that he could perform his duties. The payment itself does not take the matter any further. The work itself does not seem to have demanded or required it. Certainly, Mr Brown was required to have greater client contact and so to work longer hours but the hours were not so extended and the commuting distance to Murrindindi not so great that it could be thought that the work itself required it so that he could perform the duties of his employment. Like Dr Charlton, a reasonable person would conclude that Mr Brown chose to reside in accommodation that was closer to his place of work during the week but that he was not required to do so in order to perform the duties of his employment with The Compass Group.

71. The consequence of my conclusion is that the sum of $15,336.00 does not constitute a benefit provided by The Compass Group to Mr Brown within the meaning of s 30(1) of the FBTA Act. Therefore, I affirm the objection decision of the respondent dated 5 April 2007.


Footnotes

[1] Taxation Laws Amendment (Self Assessment) Act 1992 , s 4
[2] Tax Laws Amendment (Improvements to Self Assessment) Act 2005 (No. 2), Schedule 2, Item 16
[3] TA Act, Schedule 1, s 359-5(1)
[4] TA Act, Schedule 1, s 359-20(2)
[5] TA Act, Schedule 1, s 357-110(1)
[6] TA Act, Schedule 1, s 357-110(2)(a)
[7] TA Act, Schedule 1, ss 357-110(2)(b) and 357-115
[8] TA Act, Schedule 1, s 357-120
[9] TA Act, Schedule 1, s 359-60
[10] TA Act, Schedule 1, s 359-65
[11] TA Act, Schedule1, s 357-125
[12] 97 ATC 4986 ; [1997] FCA 1087 , Lockhart, Beaumont and Emmett JJ
[13] Commissioner of Taxation v McMahon and Anor 97 ATC 4986 ; [1997] FCA 1087
[14] T documents at 45-47
[15] T documents at 46
[16] T documents at 48
[17] Section 5B(1D) of the FBTA Act is concerned with benefits provided in respect of the employment of an employee employed by certain employers to whom s 57A relates. Mr Brown’s employer is not such an employer.
[18] FBTA Act, ss 136 and 5B(1A) and see also s 5C(2)
[19] FBTA Act, s 5B(3)
[20] FBTA Act, s 5B(3)
[21] FBTA Act, s 136
[22] FBTA Act, s 5E(2)
[23] FBTA Act, s 136
[24] FBTA Act, s 31(a)
[25] Case 88 1 TBRD 353
[26] Case 106 12 CTBR (NS) 201
[27] (1951) 2 TBRD 201
[28] (1985) 85 ATC 270
[29] (1984) 84 ATC 4415 at 4419
[30] (1987) 18 ATR 3547; Case U110 (1987) 87 ATC 663
[31] 79 ATC 4307 ; (1979) 9 ATR 899 ; 27 ALR 114
[32] (1989) 89 ATC 4808
[33] (1989) 89 ATC 4808 at 4,816 and see also Roads and Traffic Authority of New South Wales v Commissioner of Taxation 93 ATC 4508 ; (1993) 43 FCR 223 at 237 per Hill J.
[34] (1941) 64 CLR 241
[35] (1941) 64 CLR 241 at 249
[36] (1985) 60 ALR 674
[37] SS Act, s 104(1)(e)
[38] SS Act, s 104(2)
[39] (1985) 60 ALR 674 at 680-681
[40] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[41] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[42] (1971) 71 ATC 342
[43] [1922] P 15 at 26
[44] (1971) 71 ATC 342 at 344 per Mr Dempsey with whom Mr Dubout, Chairman, and Mr Thompson, Member, agreed
[45] “51.(1) All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, …shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.”
[46] ITA36, s 51(3)
[47] (1971) 71 ATC 342 at 344
[48] (1951) 2 TBRD 201
[49] (1951) 2 TBRD 201 at 206
[50] (1951) 2 TBRD 201 at 204
[51] (1952) 3 CTBR (NS) 21
[52] (1952) 3 CTBR (NS) 21 at 24
[53] (1952) 3 CTBR (NS) 21 at 27
[54] (1971) 17 CTBR 322
[55] (1971) 17 CTBR 322 at 328
[56] (1971) 17 CTBR 322 at 325-326
[57] (1971) 17 CTBR 322 at 328
[58] (1987) 18 ATR 3547; Case U110 (1987) 87 ATC 663 at 3551; 666
[59] 93 ATC 4508 ; (1993) 43 FCR 223 ; 116 ALR 482
[60] 93 ATC 4508 ; (1993) 43 FCR 223 ; 116 ALR 482 at 240; 500
[61] (1989) 89 ATC 4808
[62] (1989) 89 ATC 4808 at 4,816
[63] (1989) 89 ATC 4808 at 4,818
[64] (1990) 90 ATC 347
[65] (1991) 91 ATC 393
[66] (1991) 91 ATC 453
[67] (1990) 90 ATC 347 at 350-351
[68] (1990) 90 ATC 347 at 351
[69] (1991) 91 ATC 393 at 396
[70] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[71] 93 ATC 4508 ; (1993) 43 FCR 223 ; 116 ALR 482 at 242; 501-502
[72] (1984) 15 ATR 711 ; 84 ATC 4415
[73] (1984) 15 ATR 711 ; 84 ATC 4415 at 711; 4415
[74] (1984) 15 ATR 711 ; 84 ATC 4415 at 717-718
[75] 89 ATC 4373 ; (1989) 20 ATR 466
[76] 89 ATC 4373 ; (1989) 20 ATR 466 at 470
[77] (1958) 100 CLR 478 Dixon CJ, Williams, Kitto and Taylor JJ; McTiernan J dissenting
[78] [1953] 1 Ch 7
[79] [1953] 1 Ch 7 at 15-16

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