Federal Commissioner of Taxation v. Wiener.

Smith J

Supreme Court of Western Australia

Judgment date: Judgment handed down 13 January 1978.

Smith J.: This is an appeal from the decision of Taxation Board No. 2 upholding the taxpayer's objection against the refusal of the appellant Commissioner to allow as a deduction certain travelling expenses incurred by the taxpayer in connection with the pursuit by her of her vocation as a school teacher. It was agreed that the evidence before the Board should be treated as evidence on the appeal. Apart from certain agreed facts, the only evidence before the Board was that of the taxpayer whom the Board accepted as a witness of truth.

The taxpayer had been since 1958 a teacher with the Education Department of Western Australia. For approximately nine years prior to the year 1970, the taxpayer had taught science at Perth Modern School, but in that year she was invited, in addition to her normal duties, to engage in a pilot scheme teaching foreign languages to primary students by a method known as the audio-lingual method. Initially this scheme was implemented by the taxpayer conducting Saturday morning classes held at the Mount Lawley Technical College for primary students drawn from twenty-seven different schools. During the year in question on this appeal, i.e. 1971-1972, the scheme for the teaching of foreign languages to primary students was expanded and instruction in foreign languages became part of the curriculum for primary students at certain schools. The taxpayer was allocated as part of her normal teaching duties, the task of instructing grade six and seven pupils at each of four primary schools and a special class at Mount Lawley Senior High School in foreign languages by the audio-lingual method. With the exception of the Mount Lawley High School, schools at which the taxpayer was required to teach foreign languages were situated broadly in the Scarborough district of the metropolitan area of Perth but were some miles apart, and as I understand the evidence before the Board, it was not practical to commute between these schools by means of public transport. Mount Lawley High School would be approximately seven miles from the Scarborough High School as the crow flies and commuting between the two schools by public transport again would be difficult.

During the first six months of the year in question, the taxpayer was attached to the Scarborough High School and during that period the taxpayer in addition to teaching foreign languages by the audio-lingual method, carried out some normal teaching duties during a morning time slot on each day at that school as well as a certain amount of relief teaching from time to time. During the latter six months of the income year under consideration, the taxpayer was formally attached to the Mount Lawley High School but it would seem that the whole of her time was devoted to the development of the pilot scheme for the teaching of foreign languages. The taxpayer's teaching timetable for the latter period was admitted into evidence by agreement between the parties and the Board of Review accepted that while the timetable for the second half of 1971 was not the same as it was in the first half of 1972, the two periods were not significantly different from each other. The timetable shows that on each week day except Friday at each of the primary schools, the taxpayer conducted two consecutive sessions of half an hour's duration at each primary school and that on each week day, with the exception of Wednesday, the taxpayer conducted one teaching session of forty minutes' duration at the Mount Lawley High School. The taxpayer's teaching programme on Friday was limited by reason of the sports commitments of the various schools and that day was kept by the taxpayer, as far as possible, for all other necessary work

ATC 4008

associated with the pilot scheme, such as photocopying, duplicating, attendance at the Government Printing Office, making and editing tapes and the distribution of mark sheets and text books to class teachers. Notwithstanding the free time available to the taxpayer on Friday of each week, the paper work involved in developing the teaching programme made it necessary for the taxpayer to maintain at her home a study set apart exclusively for her work as a teacher. Claims to deduct various expenses in relation to this study were allowed by the Commissioner.

The taxpayer's timetable was an exacting one and to carry out her teaching programme the taxpayer was necessarily on the move in her car throughout each week day except Friday. The timetable for the first half of 1972 shows that her teaching day commenced at 7.55am and concluded at 3.20pm, with the exception of Wednesday, on which day her last teaching session ended at 2.10 pm. On Monday, Tuesday and Thursday the taxpayer was required to attend at each of the five schools to which she was assigned and on Wednesday at four of them. On Friday she taught only at the Mount Lawley High School, but it would seem that on that day administrative work associated with the teaching programme necessitated the use of her motor car. Except for Friday of each week, the taxpayer's teaching day did not commence at the school to which she was attached and the last school at which she taught on any day was never the first school at which she was required to teach on the following day. The total mileage involved in travelling between schools in the course of her daily round was 3,445 miles and for the use of her own motor car for this purpose, the taxpayer received travelling allowances from her employer totalling $218, which sum she returned as part of her taxable income for the year in question.

The taxpayer claimed that she should be allowed deductions in respect of outgoings and depreciation in relation to her motor vehicle, totalling $408. The respondent Commissioner did not dispute her claim for expenses incurred in travelling between schools as an expense properly incurred by the taxpayer in earning her salary and allowed a deduction of $218, which equated the allowance received by the taxpayer from her employer. The additional amount which the taxpayer claimed was deductible represented the cost of travelling between her home to the first school of each day and between the last school on each day and her home, a total mileage of 3,910 miles in respect of which it was common ground between the parties that a proper allowance would be $190. What is in issue on this appeal, is whether the expense so claimed was ``incurred in gaining or producing assessable income'' within the meaning of sec. 51 of the Income Tax Assessment Act 1936.

The substance of the case for the Commissioner was that it has long been generally accepted that a man's expenses of travelling to his work are not deductible; only his expenses of travelling on his work are deductible, for those alone are incurred in the performance of the duties of his employment. Reliance was placed on
Lunney v. F.C. of T. (1958) 100 C.L.R. 478 and in particular on that passage in the joint judgment of Williams, Kitto and Taylor JJ. commencing at p. 498:

``It is, of course, beyond question that unless an employee attends at his place of employment he will not derive assessable income and, in one sense, he makes the journey to his place of employment in order that he may earn his income. But to say that expenditure on fares is a prerequisite to the earning of a taxpayer's income is not to say that such expenditure is incurred in or in the course of gaining or producing his income. Whether or not it should be so characterised depends upon considerations which are concerned more with the essential character of the expenditure itself than with the fact that unless it is incurred an employee or a person pursuing a professional practice will not even begin to engage in those activities from which their respective incomes are derived.''

Reference was also made to a number of English decisions in which it was said a like kind of distinction has been made:
Ricketts v. Colquhoun (1926) A.C. 1,
Owen v. Pook (1970) A.C. 244,
Taylor v. Provan (1975) A.C. 194 and
Newson v. Robertson (1955) 1 Ch. 7, to mention but some of the authorities cited. All these authorities and others were examined exhaustively by Rath J. in
F.C. of T. v. Collings 76 ATC 4254. In relation to the English cases he said at p. 4266:

``The English cases have been concerned with the construction and application of a rule providing that travelling expenses may

ATC 4009

be deducted from the emoluments of an office or employment if the holder of the office or the employment is `necessarily obliged' to incur the expenses `in the performance of the duties of the office or employment'. In some judgments stress is laid on the words `necessarily obliged'; in others on the words `in the performance of the duties of the office or employment'; but the consensus of opinion is that the expense of travelling between work and home has not the requisite connection with the employment to be deductible. Section 51(1) of the Income Tax Assessment Act 1936 does not in its leading words (with which I am concerned) use the word `necessarily'; and in the alternative case, where the word does occur, `probably it is intended to mean no more than `clearly appropriate or adapted for'' (
Ronpibon Tin N.L. v. F.C. of T., 78 C.L.R. 47 at 56). Notwithstanding the verbal differences, it is clearly established that the principle of the English decisions, at all events prior to
Owen v. Pook (1970) A.C. 244, is applicable to both the leading words and the alternative in sec. 51(1).''

With respect I agree with what he says.

It is important, I think, however, when considering the criteria formulated in these cases for the solution of the problem of whether or not a man's travelling expenses to and from his work are deductible to bear in mind the distinction between the case of a professional man and an employed person, to which Pennycuick V.-C. drew attention in
Taylor v. Provan at first instance (1971) W.L.R. 1459 at 1469, when he said:

``In the former case (the professional man), the individual concerned is free to work as and where he will, and it is therefore often necessary to find the true place of work by certain rather artificial considerations. In the latter case the employee (the individual) is bound by his contract of employment and one must in the first place look at the contract to see where the individual is, as the case may be, obliged or expected or free to work. One must of course also ascertain where he is working.''

Earlier in his reasons for judgment Pennycuick V.-C. referred to the decision in Ricketts v. Colquhoun and said:

``Since that decision it must be regarded as well established that expenses are only allowable in so far as viewed objectively, they are necessary for the performance of the duties of the office. It is not sufficient that they are necessary for the convenient performance of those duties by the particular holder of the office.''

When Taylor v. Provan ultimately came before the House of Lords in all the speeches the authority of Ricketts v. Colquhoun was accepted and all the learned law Lords applied Lord Cave's test in that case, namely that in order that travelling expenses should be deductible they must be expenses which the taxpayer as holder of an office was obliged to incur by the very fact that he held the office and had to perform its duties. Differences between the majority and minority judgments in Taylor v. Provan turned not upon principle, but upon the proper inference to be drawn from the facts. In his speech Lord Simon of Glaisdale speaking of Lord Cave's test said at p. 221:

``Applying the rule in Ricketts v. Colquhoun (1926) A.C. 1 - i.e. that the obligation to incur the expenses of travelling in question must arise out of the nature of the office or employment itself, and not out of the circumstances of the particular person appointed to the office or employed under the contract of employment - two different classes of travelling expenses readily come to mind. The first is where the office or employment is of itself inherently an itinerant one. Examples are various sorts of inspectorate (say of weights and measures or to check stock) or commercial travel or supervision of duties carried out by local subordinates. In such cases the taxpayer may well be travelling in the performance of the duties of the office or employment from the moment of his leaving home to the moment of his return there - a visit to any head office might well be purely incidental or fortuitous. The second class of case is where the taxpayer has two places of work and is required by the nature of his office or employment to travel from one to the other. The classic example (until the situation was governed by allowances) was the Member of the House of Commons: he was necessarily obliged to perform part of the duties of his office at Westminster and

ATC 4010

part in his constituency; so that travel between the two was an obligation arising by the nature of the office itself, and not by the circumstances of the particular Member - even though it may be assumed that, in all the eyes of his electorate, he was the best person to be elected to the office. Another example might be a managing clerk of a solicitor who has offices in adjacent towns: the cost of travel from home to either would not be a deductible expense, since it would be an obligation arising out of his personal circumstances, having chosen to live where he has; but the travelling between the two offices would be an obligation arising by the very nature of the employment itself.''

Turning now to the facts of the present case, it seems to me that the conclusion reached by those members of the Board of Review who formed the majority, that travel was a fundamental part of the taxpayer's work, is not open to challenge. Viewed objectively, it does not seem to me to be open to question that the taxpayer would not have been able to perform her duties without the use of her motor vehicle. On four of the five working days the taxpayer's contract of employment required her to teach at not less than four different schools and to comply with an exacting timetable which kept her on the move throughout each of those days. The nature of the job itself made travel in the performance of its duties essential, and it was a necessary element of the employment that on those working days transport be available at whichever school the taxpayer commenced her teaching duties and that transport remained at her disposal throughout each of those days. It was not said by the taxpayer in evidence that it was an express term of her employment that she provide her own means of transport, but it appears to have been tacitly understood that she would do so, as she was paid an allowance by her employer for the use of her motor vehicle in travelling between schools. The evidence as to the necessary use of a motor vehicle is not as strong in relation to the single working day on which the taxpayer was not required to attend at more than one school, but it would seem that performance of administrative tasks on that day was facilitated by the use of the motor vehicle. In any event no separate issue was raised as to the expense of travelling between home and school on that day. In all the circumstances, it seems to me, that the travelling expenses claimed by the taxpayer fall into the first of the two categories described by Lord Simon of Glaisdale in Taylor v. Provan i.e. where the office or employment is of itself inherently an itinerant one, and that the taxpayer may be said to be travelling in the performance of her duties from the moment of leaving home to the moment of return there.

For the foregoing reasons, it is my opinion that the expenditure here in question was deductible and accordingly the appeal is dismissed.

This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.