CASE 1/2014

Members:
G Ettinger SM

Tribunal:
Administrative Appeals Tribunal, Sydney

MEDIA NEUTRAL CITATION: [2014] AATA 9

Decision date: 10 January 2014

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G Ettinger (Senior Member)

10 January 2014

SUMMARY

1. The Applicant Taxpayer has appealed the decision of the Respondent, Commissioner of Taxation (the Commissioner), dated 17 January 2011, which was the result of three objections made by the Applicant in regard to her income tax returns for the years 2003, 2004 and 2005. She had declared $79,090 income from wages and salary as an industrial chemist for the year 2003; $83,012 for the 2004 year; and $73,322 for the 2005 year. She had declared nil taxable income for each of those years.

2. I noted that the Commissioner commenced an audit in 2005, with ensuing correspondence over the period of a year. The taxpayer expressed dissatisfaction about the process and her experiences.

3. The Applicant claimed in regard to each of the years audited that she was in the business of letting rental properties, and had been for some years previously. During the relevant period, she and her husband owned nine properties in various proportions. Her claims related, amongst others, to interest on borrowed funds, borrowing expenses, a trust, the managing of her tax affairs carried out by her husband, gardening work carried out by her husband, and the imposition by the Commissioner of an administrative penalty of 25 percent.

4. The Applicant works full time as an industrial chemist, and did so during the relevant period. The Commissioner characterised her as an investor, and did not accept that she was in the business of letting properties. The Commissioner also refused many of the Applicant's claims on the basis of insufficient or unsatisfactory substantiation, although at least three items related to borrowing expenses, capital works and depreciation in regard to a property built next door to the Applicant's residence, which the Applicant had not claimed, were identified as deductions during the audit. Certain portions of the claims made by the Applicant were allowed in part.

5. I was concerned that when giving her evidence, the Applicant appeared to have a selective memory of certain events, and that some of her evidence was contradicted by the written records. She did not seem to have an adequate explanation for those discrepancies, and sought to blame her husband, whom she told me had been managing her tax and business affairs.

6. Ultimately I was not satisfied that the Applicant had discharged her onus of proof in each of the items in dispute, although there were some where she did, as I have indicated below.

7. I was satisfied that the penalty which had been imposed by the Commissioner was the correct or preferable one, and was satisfied that there were no special circumstances in order to remit the penalty. I varied the decision of the Respondent to take into account those items in dispute where I was satisfied that the Applicant had discharged her onus. My reasons follow.

RELEVANT LEGISLATION

8. The relevant legislation in this matter is the Income Tax Assessment Act 1997, (the Act), in particular sections 8-1, 25-25, 40-25 and the Taxation Administration Act 1953 (Cth) (the TAA), in particular section 14ZZ. Sections 284-75, 284-90 and 298-20 of Schedule 1 to the TAA are also relevant.

ISSUES IN DISPUTE

9. The following are the issues in dispute in this matter.

Whether the Applicant was carrying on a business of letting rental properties in the 2003, 2004 and 2005 incomes years respectively;

Whether the Applicant is entitled to a deduction in the 2003, 2004, and 2005 income years, pursuant to section 8-1 of the Act, for all or part of the interest and dividend expenses claimed;

Whether the Applicant is entitled to a further deduction, pursuant to section 8-1 of the Act for all or part of the interest expense on the loan used to fund the construction of the rental property at unit 1, Forbes Place;

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Whether the Applicant is entitled to a further deduction pursuant to section 25-25 of the Act for borrowing expenses:

• A) on the loan used to fund the construction of the rental property at unit 1, Forbes Place;
• B) on the loan used to finance the purchase of the properties at Leviathan Drive and Southport Palms respectively;

Whether the Applicant is entitled to a further deduction, pursuant to section 40-25 of the Act, in each relevant income year for depreciating assets at unit 1, Forbes Place.

Whether the Applicant is entitled to a further deduction, pursuant to section 43-10 of the Act, in each relevant income year for capital works at unit 1, Forbes Place;

Whether the Applicant is entitled to the deductions of $33,597 and $54,737 claimed in the 2004 and 2005 income years respectively pursuant to section 8-1 of the Act in relation to trust income;

Whether the Applicant is entitled to a deduction for gardening and maintenance at unit 1, Forbes Place, and car, travel and other work related expenses;

Whether the Applicant failed to take reasonable care in filing her income tax return, such that the imposition of an administrative penalty, at the rate of 25 percent, pursuant to sections 284-75 and 284-90 of Schedule 1 to the TAA, is correct;

Whether any or all of the penalty imposed should be remitted in full or in part, pursuant to section 298-20 of Schedule 1 to the TAA?

Whether the Applicant was carrying on a business of letting rental properties in the 2003, 2004, and 2005 income years

10. The Applicant gave evidence regarding the nine properties she and her husband owned in various proportions during the relevant years. She said that they had owned rental properties since the 1990s. She told me that even though she works, (and in 2003 - 2005), worked full time as an industrial chemist, on shift work, and also spent time on travel to and from work and on home duties; she spent a lot of time in connection with the rental properties. In reply to questions put in cross-examination, the Applicant indicated that she inspected each property quarterly. That would take at least half an hour per property, and involved additional time, being travel time, depending on the location of the property, she said. The Applicant estimated that she spent nine hours every three months inspecting properties. She also said that she was also obliged to check accounts and carry out other tasks such as advertising for tenants in order to lease the properties.

11. The Applicant said that she engaged real estate agents to look after the properties, but that she had to follow up, advertise for new tenants, arrange repairs, and involve herself with other work in relation to the properties. She said that this was partly because the agents were inefficient, or did not do what she intended.

12. For the 2003, 2004 and 2005 years, the only ones relevant to this matter, the Applicant declared a net rent loss in each year. The losses which escalated over the three years, were as follows:

• • For the 2003 year, a net rent loss of $27,826 on gross rent of $72,855;
• • For the 2004 years, a net rent loss of $47,952 on gross rent of $85,065;
• • For the 2005 year, a net rent loss of $57,305 on gross rent of $90,733.

13. Mr Peadon of Counsel who appeared for the Respondent argued that the Applicant should not be found to have been carrying on a business of letting rental properties in the 2003, 2004, and 2005 years. He submitted, emphasising from the Applicant's evidence, that she worked full time as an industrial chemist, did not have a business plan, and that her evidence was that the rental activities had not returned a profit since commencement more than a decade previously. In that regard I noted that the Applicant's evidence was that she intended to make a profit, and that the method of doing so was to increase rents, and purchase further properties.

14. By way of general guidance in regard to whether the Applicant was carrying on a business of letting rental properties in the relevant years, I am mindful of the frequently cited words from
Martin v Federal Commissioner of Taxation (1953) 90 CLR 470.

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The test is both subjective and objective: it is made by regarding the nature and extent of the activities under review, as well as the purpose of the individual engaging in them, and … the determination is eventually based on the large or general impression gained.

15. I am mindful also of Hill J's words in
FCT v Radnor Pty Ltd (1991) 102 ALR 187 where his Honour said:

There is no single factor that can be isolated as determinative of the question whether a taxpayer is carrying on a business. Rather as Jessel MR said in
Erichsen v Last (1881) 8 QBD 414 at 416: 'There are a multitude of things which together make up the carrying on of trade'.

The specific factors assist, however, in marking out activities as a business - repetition and the existence of a purpose of making a profit:
Hope v Bathurst City Council (1980) 144 CLR 1 at 8-9. The significance of these factors was pointed out in the joint judgment of Bowen CJ and Franki J in
Ferguson v FCT (1979) 26 ALR 307 where their Honours said:

There are many elements to be considered. The nature of the activities, particularly whether they have the purpose of profit-making, may be important. However, an immediate purpose of profit-making in a particular income year does not appear to be essential. Certainly it may be held a person is carrying on business notwithstanding his profit is small or even when he is making a loss. Repetition and regularity of the activities is also important. However, every business has to begin and even isolated activities may in the circumstances be held to be the commencement of carrying on business. Again, organisation of activities in a business-like manner, the keeping of books, records and the use of system may all serve to indicate that a business is being carried on.

…

ultimately, the question whether the respondent was carrying on a business of dealing in shares is a question of fact and degree, a question of impression.

16. The Tribunal suggested in
Shields v Deputy Federal Commissioner of Taxation (1999) 41 ATR 1042 and, more recently, in
Smith and Commissioner of Taxation (2010) 79 ATR 934, that relevant matters might include:

• (a) the nature of the activities and whether they have the purpose of profit-making;
• (b) the complexity and magnitude of the undertaking;
• (c) an intention to engage in trade regularly, routinely or systematically;
• (d) operating in a business-like manner and the degree of sophistication involved;
• (e) whether any profit/loss is regarded as arising from a discernible pattern of trading;
• (f) the volume of the taxpayer's operations and the amount of capital employed by him; (by 'her' in the present case).

17. In considering the above indicia, in particular Item (a), I noted the evidence that the Applicant made a loss in the relevant years, yet stated that she intended to make a profit, and that she would do so by increasing rents and buying further properties. There was however no evidence that the Applicant had acquired further properties. There appeared to be a small increase in rental income declared by the Applicant for the relevant years, which was however, offset by increases in what she characterised as her losses (see paragraph 12 above).

18. I also considered Item (f), the volume of the taxpayer's operations and the amount of capital employed by her; viz, the property, unit 1, Forbes Place was constructed with funds borrowed in 1991.

19. As to Item (b), I am satisfied that the supervision of agents the Applicant employed, and her oversight of, and part-management of the nine rental properties could be considered a substantial factor towards establishing that the Applicant was in the business of managing rental properties. When taken with Item (e), whether any profit/loss is regarded as arising from a discernible pattern of trading, I am satisfied that notwithstanding the losses declared, the Applicant operated a discernible

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pattern of trading in the management of the nine properties with her husband.

20. I have also considered Item (c), an intention to engage in trade regularly, routinely or systematically, and Item (d), operating in a business-like manner and the degree of sophistication involved. Item (c) above, the intention to engage in trade regularly, routinely or systematically is one emphasised by the Courts which have considered the indicia in regard to whether a person is running a business. I am satisfied that in managing rental properties over a period of years, from the 1990s (according to the Applicant), she exhibited an intention to engage in the business of renting properties regularly and routinely. However, I am not satisfied that she was necessarily operating in either a business-like manner, or in a sophisticated way. The Applicant's own evidence was that her modus operandi was not sophisticated, and that she had no written business plans in place. The Applicant's evidence was that she took over tasks such as advertising for tenants as the need arose, for example when her agents did not perform satisfactorily.

21. It is likely that the problems which were identified in the audit process, and which are before me mainly arise out of the Applicant's modus operandi, which resulted in a lack of substantiation for expenditure and deductions claimed by her. At least three items, that is, related to borrowing expenses, capital works and depreciation in regard to a property built next door to the Applicant's residence, which the Applicant had not claimed, were identified and accepted as deductions by the Commissioner.

22. In coming to a decision regarding whether the Applicant was carrying on a business of letting rental properties in the 2003, 2004, and 2005 income years, I am mindful that there is no single factor that can be isolated as determinative of the question. I have considered the indicia set out in
Shields v Deputy Federal Commissioner of Taxation and in Smith and Commissioner of Taxation.

23. In coming to a decision, I have taken into account the 'ATO - Guide for rental property owners' which assists decision makers and taxpayers. I have considered the role of estate agents in services provided to owners of real estate, and in particular to the Applicant in this case. I am satisfied that certain reliance on estate agents to manage real property does not preclude the Applicant from being characterised as carrying on a business of letting rental properties.

24. I am satisfied from the evidence that the Applicant had the intention of making a profit notwithstanding she did not make a profit in the relevant years, or indeed over a period of 10 years of investing, and that she did not acquire further properties in the relevant period. I am also satisfied from the evidence that, notwithstanding the paucity of documentation, there was a certain repetition and regularity in the activities she carried out in relation to the rental properties she owned with her husband. Having considered the indicia mentioned above, and taking into account the case law, I am satisfied that in the relevant years, the Applicant was carrying on a business of letting rental properties.

Whether the Applicant is entitled to a deduction in the 2003, 2004 and 2005 income years, pursuant to section 8-1 of the Act, for all or part of the 'interest and dividend' expenses claimed

25. Section 8-1 of the Act states as follows:

8-1 General deductions

• (1) You can deduct from your assessable income any loss or outgoing to the extent that:
  • (a) it is incurred in gaining or producing your assessable income; or
  • (b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.

  Note: Division 35 prevents losses from non-commercial business activities that may contribute to a tax loss being offset against other assessable income.

• (2) However, you cannot deduct a loss or outgoing under this section to the extent that:
  • (a) it is a loss or outgoing of capital, or of a capital nature; or
  • (b) it is a loss or outgoing of a private or domestic nature; or

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  • (c) it is incurred in relation to gaining or producing your ^[*] *non-assessable non-exempt income; or exempt income or your
  • (d) a provision of this Act prevents you from deducting it.
• ….

26. The Applicant claimed the amounts discussed below as deductions in relation to attendance at courses, audio packs and other educational materials. She had incorrectly included them in her returns as interest and dividend expenses.

27. The Applicant told me that the expenses were property related, and that the seminars she attended were in connection with borrowing strategies for purchasing properties, and related also to improving her knowledge regarding existing properties.

THE APPLICANT: Well that is - it's not really because, you know, they were teaching us how to, you know, get the best price when you sell the property, for example, how to negotiate with the sellers or buyers, how to renovate to get the most, you know, from the property, how to deal with tenants, how to do the, you know, joint venture partner with the tenants or buyers so there are a lot of connection with, you know, properties. And the ATO is saying that, you know, this is for the future. But that wasn't for the future, I already held the properties. So I tried to, you know, to get the knowledge so I can straight away - to do something about it, and you know, get more money by selling or by doing some deals or changing or renovating or sub-division or, you know, you know, or even building. So that was something what already I could implement after that course.

SENIOR MEMBER: All right, anything else?

THE APPLICANT: That's also about the security, you know, you know, that you should use (indistinct) for safety of the properties, so that's also including, you know, was something was already - the property existed. Some banking or - taught us on the banking. Well I'm thinking what to add because it's hard.

28. The Applicant claimed in oral evidence that the amount claimed for interest and dividend expenses in 2003 was $71,154, whilst on the annexure to the Respondent's Statement of Facts and Contentions, the amount shown as claimed for 2003, for interest and dividend expenses, was $74,154 (T17/568). The Commissioner accepted that the full amount of $55,000 had been paid for the courses, but disputed the deductions claimed. The full amount was disallowed by the Commissioner and remained in dispute before me.

29. The Applicant claimed $5,653 for interest and dividend expenses for 2004. The Commissioner disallowed the full amount, but noted that the amount already allowed was $190 for the general interest charge and $4 for bank charges. Mr Peadon explained that the $5,653 was largely comprised of the balance of a payment that was made in relation to one of the courses the Applicant attended which she attended in the previous year, and paid the balance in the following year.

30. The Applicant claimed $1,280 for interest and dividend expenses for 2005. The full amount remained in dispute at the hearing.

31. The Applicant gave evidence regarding the following courses for which she had claimed tax deductions.

32. Home Trader : She said that in 2003 she signed up and paid $1,090 for Home Trader, a course on share investment, and $1,050 for an Investment Support course, also concerning shares. Participation included attendance in person; books and CDs were also provided. In reply to questions in cross-examination, she told me that she did not own many shares in 2003, and may have bought shares perhaps five times. Accordingly, I affirm the decision of the Commissioner in regard to Home Trader, the cost of which cannot be a tax deduction to the Applicant.

33. IS Design Pty Ltd : The Applicant also gave evidence that she signed up for a course IS Design Pty Ltd, costing $1,295, which was to do with ceramic tiles and flooring for the interior design of buildings. When asked whether the course was to assist with locating suitable areas in which to purchase properties, the Applicant agreed. She also estimated that 20 percent of the course dealt with how to improve

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opportunities, and therefore one's income in regard to existing properties. There was no documentation provided to corroborate the Applicant's evidence in regard to the 20 percent estimate. I was not satisfied that the outlay had the nexus to gaining or producing the Applicant's assessable income from the business of letting rental properties in order to be deductible pursuant to section 8-1 of the Act.

34. Vision Pursuit : The Applicant did not provide material in regard to this course, and could not recall any details. The amount claimed was $1,500 for which I had no basis to allow any deduction.

35. Capital Holdings : The Applicant did not agree that the $3,300 paid was a joint venture to purchase properties. Her evidence was that it was to subdivide existing properties or land. I was not satisfied that the evidence demonstrated that the outlay had the nexus to gaining or producing the Applicant's assessable income from the business of letting rental properties in order to be deductible pursuant to section 8-1 of the Act.

36. McGrath Education : The Applicant said that she was no longer claiming this expense of $695 for McGrath Education, as her husband had made an error, and that this was a course booked for her son.

37. M2M Solutions : She had claimed $45.90, but did not know further details. Accordingly I could not be satisfied that a deduction should be allowed.

38. Nexus Business Solutions : The claim was for $178 which the Applicant said was for software on how to run a business. She did not provide further details. Accordingly I could not be satisfied that a deduction should be allowed.

39. National Investment Institute : (NII) Henry Kaye : The Applicant told me that the $55,000 paid for the 10 modules in the Platinum Partnership, Platinum Package gave the couple opportunities with regard to their real estate developments. Her claim for interest and dividend deductions for 2003 was originally $74,154 which included $19,154 in addition to the $55,000.

40. Mr Peadon submitted that Henry's Kaye's seminars were all Advanced Financing Strategies. The following extract from the transcript at pages 38/39 (17 September 2013), follows:

MR PEADON: In fact, all of Mr Henry Kaye's sessions were about Advanced Financing Strategies. You agree that all of the sessions that he is presenting in this seminar are entitled Advanced Financing Strategies, is that correct?

THE APPLICANT: Yes, that's right.

MR PEADON: Those Advanced Financing Strategies concerned the acquisition of properties, is that correct?

THE APPLICANT: No, that was also about owning already, if you have the property how you - you know, strategy - you make it, which one you're using. So it's not about buying, you always are saying about buying new ones, but it's not really only new, that would cover what you had and bought.

MR PEADON: Sorry, can I just clarify that? I think what you're saying it wasn't - the financing aspect weren't just about buying new properties, you're talking about it also concerned about refinancing existing properties?

THE APPLICANT: Yes, refinancing, yes. Yes, that's right.

MR PEADON: And using existing equity to purchase new properties?

THE APPLICANT: Well, you could do that, too; you could.

MR PEADON: That's what those sessions were about, is that correct?

THE APPLICANT: Not only.

SENIOR MEMBER: The answer is "Not only". They were also about existing properties and refinancing, is that right?

THE APPLICANT: That's right, and refinancing, yes. You can refinance the property that you have already. I don't know why do have to put it - you know, everything you are talking about 'new only', 'new and new'.

MR PEADON: So you're not able to explain how much of this session was spent on any of the modules you've referred to, is that correct?

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THE APPLICANT: No, I couldn't say. Also I can estimate that was in between 25 to 30 percent was, you know, on the existing properties; not only new.

MR PEADON: When you talk about the existing properties, you're talking about refinancing, is that correct?

THE APPLICANT: Well, there are other strategies, it could be joint-venture also, you can do it, you know, with other people.

41. At the hearing the Applicant stated that she was now only relying on deductions for three modules . I am mindful that those three, being module 5, 'Advanced Renovations for Established Properties', module 8, 'Advanced Rental System - Create long term positive gearing through maximised rental', and module 9, 'Equity Lease Rental System - Create long term positive gearing through maximised rental', dealt with the management of current properties. As I am satisfied that the Applicant was carrying on a business of letting rental properties in the relevant years, the cost of those modules can properly be deducted pursuant to section 8-1 of the Act. I remit the item for calculation by the Commissioner.

42. NII Affiliate Program : The Applicant claimed $5,692.24 in relation to this program at Hayman Island, including airfares and accommodation of $3,092.94 and refreshments of $364. She indicated that the program was for investors to learn how to look for good properties to buy and rent. I was satisfied that the focus of the investment was at a point too far into the future to be relevant to the Applicant's income earning activities (
FCT v Maddalena (1971) 2 ATR 541). Accordingly I was not satisfied that the outlay had the nexus to gaining or producing the Applicant's assessable income from the business of letting rental properties in order to be deductible pursuant to section 8-1 of the Act.

43. Vita Inc. Financial Education and VLFE audio packs : The Applicant had claimed $3,362 for two tickets, $1,580 being for a partner ticket which, at the hearing, she conceded she could not claim. The amount the Applicant claimed at the hearing for Vita Inc. was reduced to $512 for the two sections, tax (audio set 3), and asset protection (audio set 4). I noted that the titles of the topics were 'How to legally reduce your tax without losing money - How the rich make more money and pay less tax and you can do the same - using the loopholes the rich do' and 'The Fort Knox, safe as a bomb shelter, asset protection strategy'. I was not satisfied that the outlay for those audio sets had the nexus to gaining or producing the Applicant's assessable income from the business of letting rental properties in order to be deductible pursuant to section 8-1 of the Act.

44. Tribunal's considerations : In summary, the Applicant's evidence was that the courses she undertook instructed her on how to negotiate, renovate, how to deal with tenants, and how to buy and sell property. She told me that the couple's intention in attending was to learn how to earn more income, improve their knowledge, and improve their existing rental units.

45. The Applicant was asked to give evidence in regard to what proportion of the courses were relevant to her existing properties, and what part were in relation to future property purchases, which Mr Peadon submitted did not have the nexus to any existing property in order for the amounts to be claimed as deductions. The Applicant did not have any substantiating data, but estimated at first that 20 percent, and later on in her evidence, that 25 -30 percent, was in relation to her existing properties.

46. As I have held above that the Applicant was carrying on the business of letting rental properties in the relevant years, she can claim the modules of certain courses, viz, modules 5, 8 and 9 of the Platinum Package as tax deductions, as noted above.

Whether the Applicant is entitled to a further deduction, pursuant to section 8-1 of the Act for all or part of the interest expense on the loan used to fund the construction of the rental property at unit 1, Forbes Place

47. The Applicant and her husband owned Forbes Place in equal shares, and resided there. Evidence indicated that the loan used to acquire the property was discharged in 1988. In 1990 the local Municipal Council approved the construction of a detached residence and dual occupancy, being unit 1, which was built using funds jointly borrowed by the couple in 1991, and let for the purpose of gaining assessable income. Since that time, the couple's residence

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has been known as unit 2 even though both residences are on the one title and owned equally by the Applicant and her husband.

48. The Applicant could not recall from which bank or building society the funds for the building were borrowed, but recalled the amount being $60,000. The funds were secured by way of mortgage over the entire property. Evidence before me indicates the couple refinanced, and also entered into more than one line of credit. The audit was complicated by the fact that the Applicant did not provide credit card statements and details of goods and services purchased on credit. The correspondence in the files shows that more than once, the Applicant declined to provide credit card statements and other documents, and told the Respondent that certain transactions were private and confidential.

49. The Applicant gave evidence at the Tribunal that she and her husband did not transfer any money from the line of credit to their credit card accounts. This was however shown to be incorrect when she was taken to the relevant documents which had later been provided. The Applicant ultimately reluctantly agreed that such transfers had taken place.

50. The Commissioner has summarised the Applicant's claims, and his views as to deductibility expressed succinctly in paragraphs 35-39 of the 'Respondent's Consolidated Outline of Submissions' which are reproduced below (without footnotes).

• (35) In the 2003 income year, the applicant claimed interest expense on the borrowing said to be referable to unit 1's construction pursuant to s8-1 in the amount of $5,693, being 50% of interest expense on loan account no 58811347 ($11,386.29).
• (36) In the 2004 income year, the applicant claimed interest expense on the borrowing said to be referable to unit 1's construction pursuant to s8-1 in the amount of $5,751, being 50% of interest expense on loan account no 58811347 ($11,501.05).
• (37) In the 2005 income year, the applicant claimed interest expense on the borrowing said to be referable to unit 1's construction pursuant to s8-1 in the amount of $6,723, being 50% of interest expense on loan account no 58811347 ($4,695.98) and the Citibank account ($8,749.64).
• (38) The respondent accepts for the purpose of the proceeding that the credit facilities represent (in part) the refinanced borrowings used to fund the construction of 'unit 1', notwithstanding the absence of records to that effect. As discussed above, the credit facilities also represent (in part) substantial unexplained 'private and confidential' expenditure. The respondent has determined that for the 2003 and 2004 income years it is reasonable for a total of 50% of the interest on the credit facilities to be deducted. The respondent has also determined that the applicant, as the holder of a 50% interest in the property, is entitled to a deduction for 50% of the deductible interest (i.e. 25% of the total interest). In light of the subsequent significant additional unexplained 'private and confidential' expenditure, the respondent has determined that it is reasonable to allow a lesser percentage for the 2005 income year.
• (39) In light of the above, the respondent has determined that it is reasonable for the respondent to allow the applicant:

  Interest expense of $2,846 in the 2003 income year, being 25% of the total interest paid ($11,386.29);

  Interest expense of $2,875 in the 2004 in come year, being 25% of the total interest paid ($11,501.05);

  Interest expense of $2,246 in the 2005 income year, being in excess of 25% of the total interest paid on the Citibank account ($8,749.64) and approximately 16.5% of the total amount of interest paid on all relevant borrowings that income year ($13,445.62).

51. I am satisfied that the Applicant and her husband have not provided further explanation or given any evidence which convinces me that I should not accept the reasoning of the Commissioner in regard to the deductibility of expenses for unit 1, Forbes Place. Accordingly I have accepted the reasoning of the Commissioner in regard to deductibility of expenses on the loan used to fund the construction of the rental property at unit 1,

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Forbes Place, and affirm that part of his decision.

Whether the Applicant is entitled to a further deduction pursuant to section 25-25 of the Act for borrowing expenses:

• A) on the loan used to fund the construction of the rental property at unit 1, Forbes Place;
• B) on the loan used to finance the purchase of the properties at Leviathan Drive and Southport Palms respectively.

52. Section 25-25 of the Act provides as follows:

25-25 Borrowing expenses

• (1) You can deduct expenditure you incur for *borrowing money, to the extent that you use the money for the *purpose of producing assessable income. In most cases the deduction is spread over the *period of the loan.

  For the cases where the deduction is not spread, see subsection (6).

  Note: Your deductions under this section may be reduced if any of your commercial debts have been forgiven in the income year: see Subdivision 245-E.

  Income year when money used solely for the purpose of producing assessable income

• (2) You can deduct for an income year the maximum amount worked out under subsection (4) if you use the *borrowed money during that income year solely for the *purpose of producing assessable income.

  Example:

  Example: In 1997-98 you borrow $100,000 and incur expenditure of $1,500 for the borrowing. You use the money to buy a house. Throughout 1998-99 you rent the house to a tenant. You can deduct for the expenditure for 1998-99 the maximum amount worked out under subsection (4).

  Income year when borrowed money used partly for that purpose

• (3) If you use the money only partly for that purpose during that income year, you can deduct the proportion of that maximum amount that is appropriate having regard to the extent that you used the *borrowed money for that purpose.

  Note: You cannot deduct anything for that income year if you do not use the money for that purpose at all during that income year.

53. As to further deductions to fund the construction of unit 1, Forbes Place; the Respondent has submitted that the Applicant and her husband refinanced the borrowings said to relate to the construction of unit 1 in July 2002, and incurred borrowing costs of $3,733.05. The Applicant claimed borrowing expenses pursuant to section 25-25 in the 2003 income year in the amount of $394 of which, $362 was allowed by the Commissioner.

54. The couple again refinanced those borrowings in September 2004, and incurred borrowing costs of $2,686.20. The Applicant claimed deductions for borrowing expenses pursuant to section 25-25 in the amount of $394 in each of the 2003 and 2004 income years, and $480 in the 2005 income year.

55. The Respondent allowed borrowing expenses pursuant to section 25-25 in the amounts of $362 and $373 (rather than the $394 claimed) for the 2003 and 2004 income years respectively, and $1,203 which I noted was more than the $480 claimed in the 2005 income year. I have noted that in assessing the amount of the borrowing costs allowed, the Respondent apportioned 50 percent of the total borrowing costs to the Applicant to reflect her 50 percent interest in unit 1.

56. The Applicant's evidence in relation to this issue, follows:

SENIOR MEMBER: What do you want to say about those 2003 and 2004 years?

THE APPLICANT: Well, I think we should get the full amount because like ATO said that they were not sure about - because we had the line of credit so they were not sure how much really we paid, you know, to the bank. But because the interest rate was the same roughly during those years there was no variation much, so we should be deducted at the same, you know, amount as what they gave us in 2005 and they should base that on all three years, because they are the same amount what we paid to the bank roughly.

57.

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I was not satisfied from the evidence that the Applicant was entitled to a further deduction pursuant to section 25-25 for those borrowing expenses, and affirmed the Commissioner's decision on that point.

58. Re borrowing expenses in relation to Leviathan Drive and Southport Palms; it is undisputed that the Applicant owns 90 percent of the legal interest of the property at Leviathan Drive, and 50 percent of the legal interest of the property at Southport Palms. The Applicant confirmed in her evidence that she has claimed borrowing expenses in the amount of $865 pursuant to section 25-25 of the Act every year since 1988. Borrowings over the two properties were refinanced by the Applicant and her husband in 2003 (incurring borrowing expenses of $1,342), and 2005 (incurring borrowing expenses of $3,402.34).

59. I noted the Respondent's explanation regarding the basis on which the Commissioner calculated borrowing expenses at T21, including apportioning the expenses having regard to the Applicant's ownership interests. The Respondent accordingly allowed borrowing expenses to the Applicant in relation to Leviathan Drive in the amount of nil for the 2003 year (the claim having been $865), $84 for the 2004 year (the claim having been $1,106), and $561 for the 2005 year (the claim having been $1,279 for Leviathan Drive).

60. I noted a further exchange between Mr Peadon and the Applicant in regard to the Leviathan Drive property:

MR PEADON You have been claiming $865 every year since 1998 as deduction for borrowing relating to your property at …. (Leviathan Drive).

Can I deal with it like this. Firstly, you had a 90 per cent legal and beneficial interest in the property at … (Leviathan Drive); is that correct?

THE APPLICANT: Yes.

MR PEADON: Okay. Do you agree that you have been claiming borrowing expenses in the amount of $865 for each year since at least 1998, leading up to this audit?

The Applicant: Must be.

MR PEADON: I take that as a yes. Do you have any basis or are there any documents that you have seen that indicate that the Commissioner's calculation of borrowing expenses in relation to these properties is incorrect? I don't mean by the application of the law, I mean the actual expenses that were incurred from time to time and they are referred to in the second paragraph on that page.

…

THE APPLICANT: I don't have any extra documents. I knew it was sent to ATO, that's all.

SENIOR MEMBER: You don't have any extra calculations that you want to present; is that right?

THE APPLICANT: That's right. I don't have any extra.

61. Mr Peadon questioned the Applicant further:

MR PEADON: I suppose the question, Ms …, can you provide a document that demonstrates your entitlement to the $865, but I think we have already heard that the answer is no, and that's the Commissioner's position.

SENIOR MEMBER: Well, I think Ms … answer was - and don't let me put words in your mouth - that you don't have any other calculations or documents; is that right?

The Applicant: That's right. I don't have any.

SENIOR MEMBER: So however you worked out the $865, you have already given the ATO all the documents for that.

THE APPLICANT: Yes.

SENIOR MEMBER: Is that right?

THE APPLICANT: That's correct.

62. The Applicant claimed $361 in relation to the Southport Palms property in 2005, the Respondent allowed borrowing expenses of $312, with the amount in dispute being $49. In reply to a question from me regarding whether there was only claim for the Southport Palms property in 2005, Mr Peadon, stated, Yes, Senior Member. I think the refinancing in 2005 resulted in the borrowing in both properties.

63. As the Applicant was not able to further provide substantiation of her claim, I am

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satisfied on the basis of the documents and evidence before me, that the Commissioner's decision on this item should be affirmed.

• A) Whether the Applicant is entitled to a further deduction, pursuant to section 40-25 of the Act, in each relevant income year for depreciating assets at unit 1, Forbes Place.
• B) Whether the Applicant is entitled to a further deduction, pursuant to section 43-10 of the Act, in each relevant income year for capital works at unit 1, Forbes Place

64. Sections 40-25 and 43-10 follow as relevant:

40-25 Disposal, loss, destruction or termination of use: balancing adjustment

• (1) Many of the *capital allowances require you to make a balancing adjustment if:
  • • you dispose of the property on which you incurred the expenditure that qualified you for the deduction; or
  • • the property is lost or destroyed.
• (2) The purpose of a balancing adjustment is to ensure that the total amount you have written off corresponds to your actual loss over the same period.
• (3) Some *capital allowances also require you to make a balancing adjustment if you stop using the property in the way that qualified you for the deduction: for example, for producing assessable income.
• (4) You make the balancing adjustment by comparing:
  • • the property's *termination value for the purpose of the particular *capital allowance;

    with:

  • • the property's *written down value for the purpose of the particular *capital allowance.
• (5) If the *termination value exceeds the *written down value, the amount of the excess is included in your assessable income. However, the amount included cannot exceed the sum of any amounts you have deducted or can deduct.

  If the *termination value is less than the *written down value, you deduct the difference.

  Either way, the write off period immediately ends.

  Example: To continue the example in section 40-20, after 7 years of writing off the site preparation costs, you sell the mining right for $12,000. This is the termination value. The written down value is $10,000 - $7,000 (deductions so far claimed) = $3,000. The termination value exceeds the written down value by $9,000. As this is more than any deductions you have so far claimed, you include $7,000 in your assessable income for that income year. You may no longer write off any remaining expenditure.

  Note: If you dispose of the property there may also be capital gains tax implications arising from the disposal.

• (6) The termination value is the value of the property when the event happened that gave rise to the balancing adjustment.

  The written down value is your original expenditure in respect of the property less any amounts you can deduct or have deducted.

  Note: The rules for different capital allowances include different methods of measuring the termination value and the written down value.

43-10 Deductions for capital works

• (1) You can deduct an amount for capital works for an income year.
• (2) You can only deduct the amount if:
  • (a) the capital works have a *construction expenditure area; and
  • (b) there is a *pool of construction expenditure for that area; and
  • (c) you use *your area in the income year in the way set out in Table 43-140 (Current year use).

    Note 1: The deduction is limited to capital works to which this Division applies, see section 43-20.

    Note 2: Amongst other things, the definition of your area ensures that only owners and certain lessees of capital

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    ATC 681

    works, and certain holders of quasi-ownership rights over land on which capital works are constructed, can deduct an amount under this Division

65. Re (A) above, depreciation in regard to unit 1 Forbes Place; that is the rental property next door to the Applicant's residence, (unit 2). It is not in dispute that the property is owned in equal shares by the Applicant and her husband.

66. I have noted that the Applicant's depreciation schedule for unit 1, 13 Forbes Place recorded opening values for the 2003 income year of $1,081 for the plant and equipment pool, and $1,471 for the low value pool.

67. The Respondent submitted that an earlier prepared depreciation schedule recorded that a diminishing value rate of 18.75 percent had been applied to the low value pool the previous year, and that consequently the rate to be applied in subsequent years was 37.5 percent. The Respondent corrected calculated that the deduction should be apportioned 50 percent to the applicant and 50 percent to her spouse in accordance with their respective ownership interests.

68. The Applicant claimed deductions pursuant to section 40-25 of the Act of $246 for the 2003 year, $311 for the 2004 year and $209 in the 2005 income year. The Respondent allowed a deduction of $384 in the 2003 income year, which was in excess of the $246 claimed by the Applicant. She claimed $311 in the 2004 year, and the Respondent allowed $259 which left $52 outstanding. For the 2005 income year, the Applicant claimed $209; $177 was allowed, leaving $32.

69. The Applicant did not have any explanation in support of her statement that she did not agree with the calculation made by the Respondent except to say that her accountant had calculated the depreciation schedule correctly.

70. As she had no substantiation for what she asserted, I accepted the Respondent's submission on the basis of the documents before me, and was satisfied that the Applicant had not demonstrated an entitlement to any further deductions pursuant to section 40-25 of the Act. I was not satisfied that further deductions should be allowed, and affirmed the decision of the Respondent on that item in dispute.

71. As to (B) above, I had to decide whether the Applicant is entitled to a further deduction, pursuant to section 43-10 of the Act, in each relevant income year for capital works at unit 1, Forbes Place. In that regard, I noted that originally the Applicant had not made a claim for a deduction for capital works for unit 1, the construction of which cost $62,022 (the figure was not in dispute). Her eligibility to claim a deduction for capital works had been drawn to the Applicant's attention by the auditor.

72. The Respondent submitted that the rate to be used in determining any deduction should be 2.5 percent, and that the amount calculated using that rate ($62,022 × 2.5% = $1,552) should be apportioned as to 50 percent to each of the Applicant and her spouse in accordance with their respective legal interests.

73. Of the $1,552, the Respondent thus allowed a deduction of $985 (comprised of $776 and $209) for the 2003 year, leaving an amount of $567.

74. For the 2004 year the calculation was again $1,552, with an allowed deduction of $1,086 (comprised of $776 plus $310), leaving an amount of $466.

75. For the 2005 year, $1,552 was claimed, and the Respondent allowed a deduction of $1,022 (comprised of $776 and $246) leaving an amount of $530.

76. I am satisfied that the disallowances reflect the proportion of the ownership of the property between the couple, being 50 percent each of the legal title.

77. Notwithstanding, while the Applicant concedes that she holds only a 50 percent interest in the property, she asserts an entitlement to 100 percent of the deduction, ($1,552).

78. The following excerpt of the transcript of the hearing at page 105 indicates the Applicant's view of how the deductions should be made.

THE APPLICANT: If that - I just have a question about that. Is this capital works? This is calculated last 2.5 per cent for over 40 years. That one? Or no? Or that's not that one?

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ATC 682

MR PEADON: Yes.

THE APPLICANT: Yes. So because we did not claim for many years so it means we can claim for the next years, because it's over 40 years. The building is - - -

MR PEADON: Sorry, this is not a forum for us to give advice.

SENIOR MEMBER: We are talking only about those three years.

79. I accept the Respondent's submission on the basis of calculations provided in the documents, and the evidence before me, that no further deductions pursuant to section 43-10 of the Act should be allowed. I affirm the Commissioner's decision on that item.

Whether the Applicant is entitled to the deductions of $33,597 and $54,737 claimed in the 2004 and 2005 income years respectively pursuant to section 8-1 of the Act in relation to trust income

80. The Applicant's evidence was that in the relevant years (and since the 1990s), she, her husband and her son owned rental units. In 2003 she owned shares and became a director of P - Pty Ltd (the Trustee), which was the corporate trustee of a discretionary trust, the P - Property Trust, (the Trust), which she said was set up by her accountant.

81. The Applicant indicated that the Trustee borrowed $276,000 and $436,000 from a financial institution using the services of a broker to acquire rental properties at Riverstone and Waitara.

82. Two loan agreements were set up by a lawyer between the Trustee and the Applicant, in which the Trustee was the lender and the Applicant the borrower, indicating that in connection with the amounts borrowed, being $276,000 and $436,000:

The Borrower has itself borrowed the principal amount to be able to provide the Loan facility to the Borrower. It is the intention of the Lender and the Borrower that the Lender is effectively a conduit who is on-lending the Advance to the Borrower and the Borrower is responsible for all repayments relating to the borrowing by the Lender.

83. The Applicant's evidence was that she did not receive any moneys from the Trust. It appeared to be simply an accounting transaction set up to provide for tax deductions.

84. Even though the Applicant's evidence and apparent understanding of what occurred in regard to the funds after they were borrowed indicates she did not fully comprehend the advice she had been given, loan agreements in the T-documents indicate that in 2003, two written loan agreements provided for the Trustee to on-lend to the Applicant the same loan that the Trustee had obtained from a financial institution. The agreements also provided that the Applicant would be responsible for all repayments.

85. The Respondent did not allow a deduction as claimed, because he held that there was an insufficient nexus between the incurred interest expenses on the loan, and the receipt of income. He emphasised that the Applicant had not received any distribution from the Trust.

86. The Applicant was unable to show to my satisfaction that she should be able to claim a deduction pursuant to section 8-1 of the Act in respect of trust income, being $33,597 for the 2004 year and $54,737 for the 2005 year. Accordingly I affirmed the Commissioner's decision on this item, disallowing any deduction.

Whether the Applicant is entitled to a deduction for gardening and maintenance at Forbes Place, and car, travel and other work related expenses

87. Gardening Expenses - The amounts claimed by the Applicant for gardening expenses at Forbes Place were $240 for 2003, $240 for 2004 and $190 for 2005. All the claims were rejected by the Commissioner on the basis that the invoices issued by the Applicant's husband were dated 2006, which is outside the years in dispute, and that there was no evidence they were paid.

88. I emphasise that the Applicant and her husband are equal legal owners of the rental property at Forbes Place. I found the evidence of the couple inconsistent in regard to gardening. The Applicant said that she had not agreed to pay her husband, and that there had been no agreement between them about payment for gardening. By way of contrast, she had written to the Commissioner as follows:

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ATC 683

I have employed my husband to look after the garden on the rental property. I have not paid him yet.

89. The husband told me however, that he undertook the work on behalf of the tenant, not his wife. In any case, I am satisfied that the invoices he issued were outside the relevant period, and that there was no evidence they were paid. For the above reasons, and those on the basis of which the Commissioner rejected the claims, they must be disallowed.

90. Repairs and maintenance - for Forbes Place were claimed for the 2003 year as follows:

• • 2003 - $411 claimed, $105 allowed, $306 in dispute

91. I affirmed the decision of the Commissioner in regard to repairs and maintenance for Forbes Place on the basis that the Applicant could not further substantiate her claim at the hearing.

92. Motor Vehicle Expenses - The Applicant made a claim using what she said was the log book method. However, she agreed in oral evidence after having been taken through several entries, that the log book was inaccurate. For example, she attempted to re-characterise various entries, such as a trip to visit friends as a visit to a broker. I was satisfied from the evidence that the Applicant's motor vehicle was used at least partly for her private use. She was unable to explain the amount of private use, and told me that the couple had two cars, and that she did not always drive the same car, further complicating the issue for her in regard to substantiation.

93. The Commissioner used the 'cents per kilometre' method to calculate the Applicant's entitlements. Given the inaccuracies in the log book, I am satisfied that this was a preferable method of calculating motor vehicle expenses.

94. The Applicant claimed:

• • $6,103 in the 2003 year. The Commissioner allowed $543 leaving $5,560 in dispute.
• • $6,748 in the 2004 year. The Commissioner allowed $2,510 leaving $4,238 in dispute.
• • $7,473 in the 2005 year. The Commissioner allowed $2,600 leaving $4,873 in dispute.

95. The Applicant's evidence did not satisfy me that she should be allowed a further tax deduction for motor vehicle expenses than had already been allowed. I affirmed the decision of the Commissioner in regard to motor vehicle expenses.

96. Travel Expenses - The only claim made for travel expenses in the relevant years was $80 for the 2003 year. This was disallowed in full by the Commissioner. I had no evidence before me to satisfy me that the Applicant should be allowed a tax deduction for travel expenses for the 2003 year. I affirmed the decision of the Commissioner in regard to travel expenses.

97. Website - In the 2004 year, the Applicant claimed $1,116 for a decline in the value of her website which was disallowed in full by the Commissioner. In the 2005 year, she claimed $788 for the same item. Evidence the Applicant gave at the hearing established that she does not own a website, but that she accessed a website to advertise for tenants. The Applicant said that she did not understand what the decline in the website actually signified. I was satisfied that the Applicant was unable to substantiate the claims for the website, and affirmed the decision of the Commissioner in that regard.

98. Other Work Related Expenses - This claim included mobile phones, the internet, computer expenses, bank charges and stationery.

99. In the 2003 year, the Applicant claimed $28 for stationery, telephone and postage. This was disallowed in full by the Commissioner. Sundry expenses of $3,875 were allowed in full. The Applicant claimed $2,684 for Other Expenses which included the telephone, and computer. The Commissioner allowed only $342, leaving $2,342 in dispute. Also in the 2003 year, the Applicant claimed $264 for mobile phone expenses which was refused on the basis the claim was duplicated. She claimed $530 for computer expenses which was also found by the Commissioner to have been duplicated.

100.

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In the 2004 year the Applicant claimed $1,209 for Other Expenses of which $365 was allowed, leaving $844. Also in 2004, the Applicant claimed $844 for mobile phone expenses which was refused on the basis the claim was duplicated.

101. In the 2005 year, the Applicant claimed $4,998 for Other Expenses of which $376 was allowed, leaving $4,622. Also in 2005, the Applicant claimed $324 for mobile phone expenses which was refused in full as it was found by the Commissioner to have been duplicated. The Applicant claimed $53 for stationery, telephone and postage of which the Commissioner allowed $45. $8 remains in dispute.

102. The following exchange took place at the hearing:

MR PEADON: You'll see again, there is, in the first paragraph it says, 'work related calls identified by an itemised telephone account will be a reasonable basis for estimating the claim'. Do you see that?

THE APPLICANT: Yes.

MR PEADON: In the second-last paragraph in that page you have not provided details of the calls made nor have you provided the calculations of how you determine that 90 per cent of the mobile phone's usage related to your rental properties. Can you point to any of the materials that you have provided to the Commissioner of Taxation that provide that information?

THE APPLICANT: Ask my husband and I don't know, did you send it, that information.

Applicant's husband: Yes, accountant say you can claim 90 per cent of the mobile phone. That's the advice.

103. The Applicant gave evidence that the items mentioned above were used to run her existing business of letting rental properties, and not future properties, whilst Mr Peadon argued that the nexus between the expenses and earning of assessable income as an industrial chemist could not be made.

104. As I have found that that the Applicant was in the business of letting rental properties, I am satisfied that she is entitled to claim a part of her telephone, computer use and other work related expenses as deductible expenses. I have noted above that the Commissioner has found that certain portions of the claims the Applicant made have been duplicated. The Commissioner is in a better position than I to unravel the specifics of that. I am satisfied that any duplications have to be accounted for, but that the Applicant should be allowed half her claims for the abovenamed items. I remit this item for calculation to the Commissioner.

105. Cost of Managing Tax Affairs - For the 2005 year, the Applicant claimed the full amount of $4,481 paid to a tax agent in connection with the management of her tax affairs, which included the affairs of her son, the family trust and the P trust. The Commissioner allowed $2,800 which left $1,681 in dispute. I am satisfied that the Commissioner's decision is correct in that the Applicant cannot claim for the family trust and her son.

106. The Commissioner disallowed the invoices dated 2006 made by the Applicant's husband for his role in managing her tax affairs. I accept that is the correct decision as the Applicant's husband is not a recognised tax advisor, the invoices are dated outside the periods under review, and the evidence was that they have not been paid. Accordingly I have affirmed the decision of the Commissioner in regard to the cost of managing the Applicant's tax affairs.

Whether the Applicant failed to take reasonable care in filing her income tax return, such that the imposition of an administrative penalty, at the rate of 25 percent, pursuant to sections 284-75 and 284-90 of Schedule 1 to the TAA, is correct.

Whether any or all of the penalty imposed should be remitted in full or in part, pursuant to section 298-20 of Schedule 1 to the TAA?

107. Pursuant to sections 284-75 and 284-90 of Schedule 1 to the TAA penalties can be imposed on taxpayers. The 25 percent penalty was imposed by the Commissioner because he found that the Applicant had failed to take reasonable care in filing her income tax return. I am satisfied that she had over the relevant years not claimed deductions for legitimate items as mentioned above, for example, the capital works at Forbes Place. In addition, she has

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claimed for items for which there is either no substantiation, or for which substantiation has been created subsequent to the event such as gardening claims, and advice in managing the Applicant's tax affairs. In both those case the invoices were created in 2006, outside the relevant period, and not paid. The gardening was done by the Applicant's husband who holds a half share of the legal title in the properties, and who, in any case, was not paid for his gardening work.

108. The Applicant told me that she did everything in regard to the Commissioner's queries to the best of her ability, but that her husband did most of the work, supplying documentation and information. She sought to blame him for any errors which had occurred. The Applicant said that if errors occurred inadvertently, then they should have been picked up by the accountant. In that regard, I note specifically that in reply to a query from the Applicant's husband regarding the tax deductibility of the $55,000 paid for courses to NII (following its liquidation), Pizzinga & Associates, Accountants and Tax Agents replied to the couple as follows to the couple on 9 December 2003:

The $55,000 paid by … (the Applicant), in relation to the Platinum Partnership with National Investment Institute cannot be claimed at this stage. However we submit that …(the Applicant), may be able to claim this loss against future capital gains investments. We believe the Australian Taxation Office would regard the amount paid as a capital loss similar to loss on the sale of shares.

109. As noted above, we were occupied at the hearing with the Applicant's claim for the $55,000, (later reduced) notwithstanding her accountant's advice.

110. As to recall of matters about which she was asked, the Applicant said that she remembered certain things well, but that it was hard to recall everything which occurred over the years.

111. On the basis of the evidence before me, I accept the Commissioner's decision that the Applicant had failed to take reasonable care in filing her income tax return.

112. I did not have any evidence before me to convince me that the penalty imposed should be remitted in full or in part pursuant to section 298-20 of Schedule 1 to the TAA. I affirm that part of the Commissioner's decision.

CONCLUSION

113. As noted above, I have found that the Applicant was carrying on the business of letting rental properties in the income years 2003, 2004 and 2005, and that accordingly certain of the claims can be allowed. I have indicated that in each of the sections above by either affirming or varying the decision of the Commissioner in each.

DECISION

114. The decision of the Commissioner is varied as indicated in the Reasons for Decision above.