Case N35

KP Brady Ch

LC Voumard M
JE Stewart M

No. 2 Board of Review

Judgment date: 20 May 1981.

K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members)

At all relevant times the taxpayer, a qualified accountant, was a full-time salaried employee. His employer's office was located in a capital city, and the taxpayer attended there during normal business hours each working day. His work involved mainly the rendering of taxation services to clients of his employer. The taxpayer also conducted a small public accountancy practice on his own account at and from his suburban residence or, to be more precise, from the garage at his suburban residence, the garage having been converted to an office. On each working day throughout the two years ended 30 June 1978, the taxpayer travelled by train from the station nearest his residence to that nearest his city employment in the morning and back again in the evening, and in his returns of income for those years he claimed the train fares as a deduction under sec. 51(1) of the Income Tax Assessment Act 1936 (1977 - $174; 1978 - $189). The Commissioner disallowed each claim, and also the objections that followed, and the taxpayer accordingly requested these references. As the point in issue was identical in each case, the two references were heard together.

2. The only question for decision was as to the deductibility of the fares paid; in the event that they should be determined to be deductible, the Commissioner's representative conceded that the amounts claimed had been incurred as stated.

3. The case for the taxpayer was presented by the taxpayer himself. From his evidence it appeared that the two income producing activities in which he engaged were discrete; there was no suggestion that his work at home in the evening was merely a continuation of his city work during the day, or that it involved the same clients. Moreover, we accept that the conduct of the taxpayer's private practice did constitute the carrying on of a business, which the taxpayer conducted independently of his salaried employment.

4. The taxpayer's submission was, in essence, that outgoings incurred in travelling between two places of income production fall within one or other of the positive limbs of sec. 51(1); that is, that they are properly categorised as incurred in or in the course of gaining the taxpayer's assessable income, or necessarily incurred in carrying on a business for that purpose. Moreover, they were not of

ATC 187

a private or domestic nature. For authority supporting the deductibility of such expenses the taxpayer relied on the Board decision reported as Case B9,
70 ATC 42. The taxpayer in that reference carried on a business at his home, and in addition worked for wages as an employee at a manufacturing concern on five nights per week. He claimed a deduction for the cost of travel between the two places, and the issue there was, as it is in the present case, whether the travelling was to be treated as travelling between the taxpayer's residence and his place of employment (and so not deductible under sec. 51(1):
Lunney v. F.C. of T.; Hayley v. F.C. of T. (1957-58) 100 C.L.R. 478) or as travelling between his place of business and his place of employment and so deductible (
F.C. of T. v. Green (1950) 81 C.L.R. 313). In Case B9, supra, it was held that in the circumstances the deduction should be allowed. It was the fact, although no special significance seems to have been attached to it, that on occasion he might leave home a little early, and on his way to work inspect a job of his own to quote on it; he might on other occasions take finished work with him from his home workshop to his place of employment, and deliver it to the appropriate work site on his way home. The absence of these factors in the case now before us might operate as distinguishing features; in any case, we do not regard ourselves as bound to apply the decision in Case B9 to these references.

5. It is, of course, highly desirable that there be consistency in Board decisions, but it does not follow from this that we are obliged to follow an earlier decision if on consideration we reach a different conclusion. This was the position in which this Board, as then constituted, found itself when deciding Case F43,
74 ATC 245, and it declined to follow Case B9, supra. We, too, find ourselves unable to treat that case as concluding the present issue in favour of the taxpayer, although in taking a different view from that then expressed we derive some comfort from the observation of Wilson J. in
F.C. of T. v. Forsyth 81 ATC 4157 at p. 4161, that the application of sec. 51 ``in the circumstances of each case remains very much a matter of fact and degree''.

6. The submission advanced by the taxpayer (refer para. 4 of these reasons) is, in our opinion, stated too broadly. In order that a deduction might be had under sec. 51(1), the travelling between the two places of income production must be seen to be travelling in the course of the taxpayer's income producing activities. But when one looks at the essential character of the outgoings incurred by the present taxpayer, it seems to us impossible to describe them with any degree of accuracy as outgoings incurred in gaining or producing his income or necessarily incurred in carrying on a business for that purpose. Rather do they possess the character of expenditure incurred to transport him from his residence to his city employment in the morning, and back to his residence at the end of the normal working day. In the light of the decision in Lunney and Hayley, such outgoings are not deductible. To use the description given by Dixon C.J. in that case (100 C.L.R. at p. 485), the costs incurred ``by ordinary people to enable them to go day by day to their regular place of employment or business and back to their homes'' are a personal or living expense, and excluded from deduction under sec. 51 as being outgoings of a private or domestic nature. Whether this be considered anomalous, as it was by Menzies J. in
F.C. of T. v. Maddalena 71 ATC 4161 at p. 4162, is a matter which does not affect us, as it is not for a Board to seek to vary the law as established by the High Court.

7. We have not referred to all of the Board decisions that were cited to us in the course of the hearing. We consider it unnecessary to burden this narrative with what are really decisions on their own facts.

8. The Commissioner's decisions on the objections should be upheld, and the assessments before us confirmed.

Claims disallowed

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