Burton v. Federal Commissioner of Taxation.Judges:
Supreme Court of Western Australia
The present appeal is brought from a decision of Board of Review No. 2 handed down on 28 April 1978 by virtue of a section in the Income Tax Assessment Act (``the Act'') which allows such an appeal only where the decision ``involves a question of law''. If a question of law is involved ``then the whole matter is before the Court for determination as a matter of original not appellate jurisdiction'': per Windeyer J.
Buckland v. F.C. of T. (1960) 34 A.L.J.R. 60 at p. 62. If on the hearing of the appeal the parties elect not to call further evidence ``it is my duty to consider for myself the evidence given before the Board and the surrounding facts and to come to my own decision on that evidence and those facts'': per Zelling J.
Tilley v. F.C. of T. 77 ATC 4027 at 4031. It remains true, however, in circumstances where the only evidence before the Court is the evidence which has been given before the Board that the appellant has the ordinary duty cast on an appellant who contends on appeal that a decision below should be upset, he has to show that the impugned decision is wrong. (cf. Walsh J.
Krew v. F.C. of T. 71 ATC 4213 at p. 4216.)
The appellant had appealed to the Board of Review against an adjustment made to his taxable income by the respondent Commissioner in relation to the year of income ended 30 June 1976 by adding in certain car expenses claimed by the appellant as a deduction. The appellant is, and has been, since 1972 a Stipendiary Magistrate in this State. In his return the appellant sought to deduct cost of travelling by car between his home and his chambers at Beaufort Street Perth and return in addition to the cost of travelling by car between his chambers at Beaufort Street and other courts and return to Beaufort Street. Initially, the Commissioner allowed the claim to the extent of $180, being the amount of the travelling allowance received by the taxpayer. After objection a further deduction with respect to the cost of travel between the appellant's chambers and Beaufort Street and to and from any other court at which the appellant sat was allowed. The cost of travel between the appellant's home and his Beaufort Street chambers and return alone was in issue before the Board and by reason of the decision of the Board remains in issue before me. If the appeal succeeds it is agreed between the parties that the appropriate sum to be deducted from the taxpayer's assessable income for the year in question is $1,375.
Before the Board it was not the case of the appellant that the expenditure was incurred by him in order to travel from his home to work. Counsel for the appellant contended that the appellant's motor vehicle was ``something akin to a tool of trade'', the availability of which was essential to the proper performance of his duties as a sworn judicial officer. It was said by his counsel that there were ``three distinct ways'' in which the expenditure incurred by the appellant to ensure that the car was available at his Beaufort Street chambers was to be found in the activities of the appellant which were productive of the income in question. Firstly, it was said the appellant as a sworn judicial officer was obliged to dispense justice wherever he was needed, that he was required from time to time to make both scheduled and unscheduled appearances at other courts in the outer metropolitan area and although it was theoretically possible for him to travel from his chambers at Beaufort Street to these courts by public transport, the time factor rendered travel by such means impractical. Secondly, it was said that on occasions which it was not always possible for the appellant to predict in advance, it was necessary for him to carry books, notes of evidence and other materials associated with his work from Beaufort Street to his home and that he must have his car to transport this material to his home and back again when those occasions arose. The third reason which counsel contended rendered travel by public transport inappropriate, a reason which counsel conceded was ``less compelling but of weight and to be taken account of in combination with either or both of the first two grounds'' was that the appellant as a judicial officer considered it
ATC 4320``wrong for him to mix with the public as an ordinary member of the public to a greater extent than was necessary''.
The Board confirmed the Commissioner's assessment, the reasons of the Board being delivered by Mr. R.K. Todd, one of the two members of the Board. Notwithstanding a finding that ``there was a need for the taxpayer to have his car at Beaufort Street'', it was the conclusion of the Board that the evidence did not establish any real connection between the expenditure and the appellant's assessable income. Mr. Todd said at p. 6 of his reasons in relation to the expense incurred by the appellant in travelling between his home and Beaufort Street: ``the emphasis, in my opinion, in relation to the travel in question remains upon those aspects of the matter that involve his (the appellant) simply moving between his home and his place of employment.'' The grounds of appeal against that decision are as follows:
- (i) The Board found it was necessary for the taxpayer to have his own motor vehicle available near his principal place of work, namely the Court of Petty Sessions, Beaufort Street, Perth, in order that he might properly carry out his duties.
- (ii) The Board found that the appellant would have travelled from his place of residence to his principal place of employment by private motor vehicle in any event, in order to avoid potentially embarrassing contact with members of the public.
- (iii) On the basis of the finding contained in para. (i) above, and had the finding contained in para. (ii) above not been made, the Board should have found that the travelling expenses were properly characterised as ``outgoings... incurred in gaining or producing... assessable income'' within the meaning of sec. 51(1) of the Income Tax Assessment Act.
- (iv) On the basis of the finding contained in para. (ii) above, and had the finding contained in para. (i) above not been made, the Board should not have found that the travelling expenses were properly characterised as ``outgoings... incurred in gaining or producing... assessable income'' within the meaning of sec. 51(1) of the Income Tax Assessment Act.
- (v) On the basis that one of the reasons for incurring travelling expenses was a sufficient reason to render such expenses outgoings of the sort mentioned, and the other was not, the Board should still have characterised such expenses as outgoings of the sort mentioned.
In the notice of appeal the question of law which is said to give rise to this Court's jurisdiction is expressed in the following terms:
``If a taxpayer incurrs travelling expenses for two distinct reasons, and:
- (i) one of those reasons if taken alone would render such expenses `outgoings... incurred in gaining or producing... assessable income' within the meaning of sec. 51(1) of the Income Tax Assessment Act, and the other would not:
- (ii) each of those reasons is a sufficient reason, standing alone, for such expenses to be incurred
then are such expenses properly characterised as outgoings of the sort mentioned, or are they not?''
On the hearing of the appeal counsel for the respondent queried whether this was the question of law which was involved in the decision. Mr. Williams did not dispute that a question of law did arise but submitted that the proper question was whether the expense of bringing the motor vehicle to and from the taxpayer's place of employment for the purpose of ensuring the availability of that vehicle for use by the appellant in his employment is an allowable deduction within the meaning of sec. 51(1) of the Act. Mr. Temby for the appellant did not seriously quarrel with that proposition but nevertheless he maintained that because the Board mistakenly, in his submission, considered that its task was to characterise the essential nature of the expenditure and because the Board sought to derogate from what Mr. Temby contended was its finding that it was necessary for the appellant to have his car available near his principal place of work in order that he might properly carry out his duties, by reference to the taxpayer's aversion to the use of public transport, a question of law was involved.
As the appellant's case was argued before me, Mr. Temby's substantive proposition was that the expense which was claimed to be an outgoing incurred in gaining or producing the appellant's assessable income, and which therefore was deductible pursuant to sec. 51(1) of the Act was the outlay involved in bringing the appellant's car rather than the appellant to work. There is, I think, contained in that proposition a question of law sufficient to give the Court jurisdiction that question being the application of the words ``incurred in gaining or producing the assessable income'' in sec. 51(1) of the Act to the facts of this case. Such a question, however, ``cannot, unfortunately, be determined by any very broad proposition of law. For the issue must be whether the expenditure was incurred in gaining or producing the assessable income and, although the meaning and application of this phrase has been elucidated judicially, and perhaps may be further so elucidated, in the end the decision often will depend upon the facts of the given case'': per Dixon C.J.
F.C. of T. v. Finn (1961) 106 C.L.R. 60 at p. 64.
At the outset of the hearing I was informed by counsel for the appellant that the parties were in agreement that it was convenient not to call further evidence and that I should decide the appeal on the evidence contained in the transcript, as if it had been led before me coming to my own decision on that evidence. That is the approach which, in any event, in the circumstances I think I am bound by the authorities to adopt. Before the Board evidence was given by the appellant and Mr. A.G. Smith, a former Chief Stipendiary Magistrate. Both parties were accepted by the Board as witnesses of truth and neither counsel has suggested that I should do otherwise. It is clear on the authorities, however, that I am not bound by the Board's findings either as to primary facts or as to the inferences to be drawn from those facts.
In developing the proposition that the appellant's case is and ``always had been a case of a getting of the car to and from work rather than a travel of the taxpayer to and from work'', counsel for the appellant summarised the appellant's case in this way. The appellant, he said, was a stipendiary Magistrate appointed pursuant to statute and he received a salary for carrying out those duties; in order to carry out his duties in a proper and adequate manner it was necessary for the appellant to have a motor vehicle available to him close to the court to which he was attached which, throughout the year in question was the Beaufort Street Court of Petty Sessions; that the appellant satisfied that requirement by taking his private car from his home to court each day and he parked the car in a bay in a public car park which bay was procured for him and paid for by the Government which also paid the appellant's salary. It followed therefore, he said, that the cost of getting the car to and from the chambers at Beaufort Street was an outgoing which was incurred in gaining or producing the appellant's assessable income and therefore was an allowable deduction. Counsel further contended that the expenditure so incurred remained deductible notwithstanding the fact, if it be the fact, that the appellant would have driven his car from his home to the Beaufort Street court for reasons which, although relevant to his work and relevant to the earning of his assessable income would not, if standing alone, have satisfied the requirements of sec. 51(1) of the Act.
By this approach, of course, counsel for the appellant sought to exclude the operation of the principle laid down in
Lunney and Hayley v. F.C. of T. (1958) 100 C.L.R. 478 that expenditure by a taxpayer on travelling between his place of residence and his place of work is prima facie a personal or living expense, whether the taxpayer is an employee or is self employed. There are exceptions to this principle but a perusal of the authorities since Lunney's case was decided shows that in respect of an employee the question invariably has been whether the evidence supported the conclusion that the outlay on travelling was incurred expressly or impliedly by reason of or in pursuance of the contract of employment. In F.C. of T. v. Finn (supra) Dixon C.J. concluded in relation to the facts in that case that the taxpayer ``was in fact complying with the desires, in so far as going to South America was concerned, with the actual request of the Government (his employer). His journey abroad and what he did while in Europe, as well as in South America... was therefore in a correct sense incidental to his employment and most relevant to it'' (at pp. 67-68). In that case
ATC 4322Kitto J. said of the taxpayer and his employment at p. 70: ``In my judgment the respondent, in making the investigations and studies which he pursued during his period of leave, was acting within the scope of his office, and therefore in the gaining of his salary.'' In
F.C. of T. v. Ballesty 77 ATC 4181 Waddell J. concluded at p. 4185: ``The taxpayer should be regarded as having embarked upon the activities by which he earned the assessable income when he left his home to travel either to a match or to training and as continuing in those activities on his journey home. In this sense his place of residence should be regarded as his base of operations.'' In
F.C. of T. v. Collings 76 ATC 4254 Rath J. after making a long and careful analysis of Lunney's case and the relationship of that case to the English authorities concluded that where the journeys begin as the result of the performance of the duties of employment at the taxpayer's home the outgoings incurred were not of a private or domestic nature. Similarly in
F.C. of T. v. Wiener 78 ATC 4006 it was my conclusion that because the taxpayer was engaged in employment of an itinerant nature which could not be performed without a motor vehicle being at her disposal, expenditure on travelling from the time of leaving home to the first of several places of work was deductible. In all these cases the decision turned not upon a question of principle but upon the proper inference to be drawn from the facts.
To my mind determination of this case turns not so much upon the need ``to characterise the expense incurred'' as Mr. Todd expressed it in his reasons but upon whether on the facts the proper conclusion is that the expense of conveying the appellant's car from his home to his principal place of work and return each day was an expense incurred expressly or impliedly by reason of or in pursuance of the contract of employment. The appellant is the holder of an office and the critical question therefore is whether the expenses incurred are expenses which each and every occupant of the particular office is necessarily obliged to incur in the performance of its duties. As Lord Blanesburg said in
Ricketts v. Colquhoun (1926) A.C. 1 in relation to provisions of the English Income Tax Acts at p. 7, ``... the terms employed are strictly and, I cannot doubt, purposely not personal but objective; the deductible expenses do not extend to those which the holder has to incur mainly and, maybe, only because of circumstances in relation to his office which are personal to himself or are the result of his own volition''. It is true that the legislative provisions which required consideration in that case and in subsequent cases in England in which the principle enunciated by Lord Blanesburg had been accepted are not identical with sec. 51 of the Act. In Lunney's case, however, Dixon C.J. after referring to the fact that both in Australia and England the view had always prevailed that expenses of travelling from home to work or business and back again are not deductible and to some early Australian cases said at p. 486:
``The relevant provisions of the English Income Tax Acts are not in the same terms as those of the Australian law, but the whole course of English authority involves a like conclusion. To escape from the course of reasoning on which the decisions proceed requires the taking of refined and rather insubstantial distinctions. I confess for myself, however, that if the matter were to be worked out all over again on bare reason, I should have misgivings about the conclusion. But this is just what I think the Court ought not to do. It is a question of how an undisputed principle applies. Its application was settled by old authority long accepted and always acted upon. If the whole subject is to be ripped up now it is for the legislature and not the Court to do it.''
It was not the case of this appellant that it was an express term of his contract that his car be available for use in the performance of his duties but, nevertheless, the appellant's claim is to deduct the whole of his expenses during the year in question incurred in travelling from his residence to his Beaufort Street chambers and return. His claim is not limited to the expense entailed in having his car available for use on those days upon which either he was rostered to sit at a court other than the Beaufort Street court or when he was requested at short notice to sit at another court in the outer metropolitan area. No question of apportionment of the expense sought to be deducted therefore arose before the Board and I am not being asked to
ATC 4323apportion the outlay involved in travelling from the appellant's home to his Beaufort Street chambers and return each day.
The question then, in this case, is whether the proper inference from the primary facts is that a necessity in the objective sense existed for the appellant to have his car available for use in the performance of his duties at his Beaufort Street chambers at all times and hence that it was an implied term of the contract of employment that he incur the expense involved in bringing the car to work each day. It is clear from the authorities to which I have referred that the only necessity which is relevant is an objective necessity arising from the nature of the office itself. Necessity from the personal circumstances or the personal preferences of the taxpayer is not enough.
A facet of the performance of the appellant's duties upon which counsel for the appellant placed some reliance was the practise of the appellant to write urgent reserved decisions at his home at night and the need to use his car to carry work associated written materials and books from his Beaufort Street chambers to his home to perform this task. There can be no doubt on the evidence that the appellant from time to time did write reserved decisions at his home but it is also clear that his chambers were available for his use at all times for this purpose. It was a matter of his personal preference that he performed this work at his home. Being a circumstance which was personal to himself it cannot assist his claim to deduct the expense incurred in getting his car to work each day. The appellant's belief that it was desirable that persons holding judicial office should avoid, as far as possible, public places including public transport, was not pursued in argument before me a matter which could justify the expense incurred in travelling to work.
It was the necessity for the appellant to travel in the performance of his duties upon which the appellant primarily relied to establish that it was an objective necessity arising from the nature of his office that his car be available at his principal place of work for use on each working day. The appellant's evidence before the Board was that he ``practically always sat at the Beaufort Street court'' but that from time to time he sat at Midland, Fremantle, Armadale and Wundowie courts on occasions either when he was rostered, as one of the eleven Magistrates attached to the Beaufort Street court, to appear at those courts or when sitting at one or other of such courts to complete a case the hearing of which he had commenced when attending on roster. Apart from these regular appearances at courts in the metropolitan area other than Beaufort Street court, outstations as Mr. Todd in his reasons categorised them, the appellant was obliged, he said, to make visits at short notice to one or other of these outstations on other occasions in the event that the Magistrate who normally presided at the outstation became ill or was for some reason unavailable. In his evidence the appellant did not specify the number of occasions upon which he was obliged to make either scheduled or unscheduled visits to outstations. Roster duty at an outstation, he said, normally occurred on Saturday mornings. Requests to sit at an outstation at short notice were usually made shortly after the appellant had arrived at his Beaufort Street chambers to commence his normal duties at that court. The appellant said that, the Wundowie court apart, he had been requested to sit, at short notice, at each of the other outstations on a number of occasions. The time at which requests to attend at these outstations were made rendered the use of public transport impracticable, he said, and he used his own motor vehicle to travel to the outstation invariably returning from the outstation to his Beaufort Street chambers before travelling home. These requests to sit at short notice at an outstation occurred on the average, the appellant said, ``as much as once per fortnight'' and that he had been to three different outstations in a week.
In his reasons Mr. Todd accepted ``that as a matter of good sense and in the proper performance of the taxpayer's duties any notion that the taxpayer should have chosen to travel by public transport should be rejected'' and he went on to say, ``The frequency of the calls to outstations was undisputed although they are irregular. On an average such unscheduled sittings occurred once a fortnight but they have occurred as often as three times in a week''.
Before me there was no challenge to the finding as to the impracticality of the use of public transport for the proper performance of the appellant's duties on the occasions of unscheduled visits to outstations but the frequency of the appellant's sittings at outstations was the subject of dispute. Counsel for the respondent drew attention to the detailed information in relation to the appellant's visits to outstations supplied by the appellant to the respondent with his objection to the assessment issued for the year in question. In that list the appellant did not distinguish between scheduled and unscheduled visits but the list contains the dates and places of all visits with the exception of the dates of four visits to the court at Armadale. By reference to the dates of the visits to outstations it is possible to determine with reasonable accuracy the number of the visits to outstations which were unscheduled. The list shows that the total number of occasions upon which the appellant attended at outstations during the financial year in question was twenty. Nine of those visits were made on Saturdays and two were to the court at Wundowie, an outstation which the appellant said he visited only on roster. If it is assumed that the visits to the Armadale court were made neither on roster nor for the purpose of completing the hearing of part heard cases, the occasions on which the appellant was obliged during the year to make unscheduled visits to outstations would not exceed nine in number.
It is clear on these primary facts that the duties of the appellant were performed substantially in one place. The necessity to travel to outstations arose on twenty occasions only during the year in question and on slightly more than half of those occasions the appellant had notice of a need to travel in the course of the performance of his duties before leaving home for work. The necessity to make visits to outstations of which the appellant had prior notice on such a limited number of occasions, even assuming that no form of transport other than his own vehicle was available to enable the appellant to comply with this obligation, cannot support a claim to deduct the whole outlay incurred in getting the appellant's motor vehicle from his home to his Beaufort Street chambers and return each working day. I did not understand counsel for the appellant in the course of argument to disagree with that proposition. The additional circumstance which Mr. Temby contended rendered the total expense of getting the appellant's car to work to be deductible was the possible use of the appellant's motor vehicle to fulfil his potential obligation to sit at an outstation at short notice. The existence of this potentiality for the use of the appellant's motor vehicle on any day coupled with his obligation to visit outstations on roster, Mr. Temby contended, enabled the appellant to escape the net cast by Lunney's case in relation to the expense incurred by the appellant in respect of the journey made to his principal place of employment and in returning from it.
The success of this submission, I think, is dependent upon the primary facts establishing not only that requests to sit at outstations at short notice were made at frequent intervals but also that conformance with such requests was unavoidable and in the proper performance of the appellant's duties could not be achieved except by the use of his own motor vehicle. The evidence before the Board was, as I have said, that during the year in question the appellant made only nine visits to outstations at short notice. The appellant did not suggest that any similar requests had been made with which he did not comply and it follows therefore that requests of this type were made on the average once every five working weeks during the year. It would seem, also, that compliance with these requests was not insisted upon by the Chief Stipendiary Magistrate. When asked what would happen if his car was not available, the appellant said: ``Take one example at Fremantle. The Chief Stipendiary Magistrate had asked four people who did not have their cars there that particular day or were required somewhere else and I was the only man with a car to go.'' The former Chief Stipendiary Magistrate, Mr. A.G. Smith, while expressing the view that it was essential that Magistrates attached to the Beaufort Street court have their cars available for use in the case of emergencies said, that while he held office not all Magistrates brought their cars to work. As to the current situation the appellant said that of the eleven Magistrates
ATC 4325attached to the Beaufort Street court two of them, including the present Chief Stipendiary Magistrate, commuted to work regularly by the use of public transport. In relation to the use of his car the appellant said that he had never been requested or directed to make his car available to enable him to travel to outstations at short notice or otherwise. When asked whether it was a matter of personal choice that he used his own car, he said: ``Yes. I should add to that there was no other means of transport available except in some cases of getting a Government car to do it through the Crown Law Department.'' When questioned as to whether his fellow Magistrates had requested the use of a Government car, he agreed that they may not have and when asked what he thought would happen if he made such a request, he said: ``I may or may not get it''. He later said: ``There has been talk about going from one place to another in a taxi and we have suggested that we take our car.''
To my mind these primary facts do not give rise to an inference that the outlay involved in bringing the appellant's car to work each day is an expense ``which each and every occupant of the particular office is obliged to incur'' or an expense ``imposed upon each holder ex necessitate of his office'' per Lord Blanesburg in Ricketts v. Colquhoun (supra) at p. 7. If Mr. Todd's finding that ``there was a need for the taxpayer to have his car at Beaufort Street'' is to be interpreted as a finding that it was an objective necessity arising from a nature of his office that the appellant's car be available at his principal place of work in order that he may properly carry out the duties of his office then, in my opinion, the primary facts do not justify such a conclusion. The appellant's forays to outstations were not of sufficient frequency to lead one to conclude that his office is of itself inherently an itinerant one. In these circumstances and in the absence of evidence to exclude the possibility of the use by the appellant of transport such as a Government vehicle or a taxi to meet the requirement, when it arose, to travel in the performance of his duties, it cannot be said, in my view, that the proper inference is that it must have been a term of the appellant's employment, although tacit, that he have his motor vehicle available for use in the performance of his duties at his principal place of work each working day. Accordingly the appeal fails.