Case R99

Judges:
HP Stevens Ch
TJ McCarthy M
PM Roach M

Court:
No. 1 Board of Review

Judgment date: 27 September 1984.

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H.P. Stevens (Chairman)

The question for decision in this reference is whether the taxpayer is entitled to a deduction in terms of sec. 51A(1) of an amount of $4,788 in his assessment for the year ended 30 June 1982.

2. Born in 1953, the taxpayer was until November 1982 a bachelor. He had been ``going steady'' with a lady he had met in 1973 who said they needed a block of land on which to build a home. Although the taxpayer worked in Sydney and he and the lady lived in different suburbs of Sydney, a block of land was acquired at Avoca Beach and they started drawing up plans for a house to live therein in 1978. Building of the house commenced in August 1981 but the dates plans were finalised, submitted to Council for approval, approved, a builder located and a building contract entered into are unknown - however, the first in the sequence had to be well before August 1981. The house was completed in July 1982, the taxpayer thereupon moved into it and the couple were married in November 1982.

3. The taxpayer became an apprentice with a firm in 1971 and in due course qualified as an electrical mechanic. At all relevant times he remained in employment with this firm being covered by the Electricians, & c. (State) Award: Under this award where an employer is engaged on ``Distant Work'' defined as:

``(v) Distant Work is that in respect of which the distance or the travelling facilities to and from such place of work make it reasonably necessary that the employee should live and sleep at some place other than his usual place of residence at the time of commencing such work.''

he is entitled to, inter alia,

``(ii) Board and Lodging - Living Away Allowance - On distant work the employer shall, subject to the provisions of subclause (iv), Camps, of this clause, provide reasonable board and lodging or pay a living away allowance of $98.00 per week of 7 days but such allowance shall not be wages. In the case of broken parts of a week occurring at the beginning or end of a period of distant work the allowance shall be all living expenses actually and reasonably incurred but not exceeding $98.00.''

4. It will be noted that the receipt of this allowance is not conditional upon the incurring of any additional expense by the employee although this might well be the case with married employees. For a single person boarding in Sydney there may only be a substitution of one payment of board to another such payment. Additionally, it will be noted that ``his usual place of residence at the time of commencing such work'' is the criteria and the allowance continues to be paid irrespective of any subsequent change in place of residence. Thus the taxpayer, after he moved into the Avoca Beach house, was still paid this allowance.

5. Up until early June 1981 the taxpayer worked in the Sydney area and lived at home with his parents. He had a separate bedroom and paid his mother ``board'' - amounts unstated. Work was scarce and in June 1981 his employer, who was concerned with the electrification of the northern rail line, assigned him to this project. Initially it was to be for six weeks but it in fact extended to the latter half of 1982. The taxpayer, in order to meet this assignment, went to stay with friends at Avoca Beach - a couple of blocks from his area of land - and paid them for electricity, phone calls and meals. The amount paid was rather indefinite - he just helped them out - but it could have amounted to $60 per week. The project involved working six days per week with the taxpayer travelling back to Sydney most (but not all) Saturday afternoons and returning Monday morning. He came back to Sydney ``to see girlfriend mainly'' and for his mother to do his washing (gave her $20 for washing, etc.). He also dropped in time sheets to his employer's office when he came to Sydney. He estimated that with what he gave his friends and mother and petrol for travelling it would have cost him about $100 per week. He only took to Avoca Beach what he needed and the remainder of his belongings remained in the bedroom at his parents' home.

6. During the year the rate of allowance changed and he received 35 weeks at $98 and 12 weeks at $121 - a total of $4,891.60. The remaining period being holidays of which only 1 week was spent at his parents' home. The amount of $4,892 was returned (item 6(c)) as a ``Living-away-from-home allowance'' and an amount of $4,788 claimed (under item 14 as relating to item 6(c)) as a deduction - the return indicating an allowance of $94.07 per week had been received for 52 weeks. Upon disallowance an objection was lodged on the following grounds:

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``My permanent address was (Sydney). At this address I maintained all of my furniture, stereo equipment, coloured TV set, etc.

While working away from home I was located in only temporary accommodation not suited to accommodate my furniture and personal effects.

During this time I built a new home and moved in in July 1982. The address of my new home is (Avoca Beach).''

The objection did not refer to any section of the Act merely claiming that ``living away from home allowances should be allowed as a deduction''. I take this, having regard to the return claim, as a reference to sec. 51A.

7. Section 51A provides, inter alia,

``51A(1) Notwithstanding anything contained in section 51, where the assessable income of a taxpayer who is an employee includes the amount of any living-away-from-home allowance, an amount ascertained in accordance with this section shall be an allowable deduction.

(2) The amount of the deduction allowable under this section shall be -

• (a) where the allowance is paid in money under the terms of any law or of any award, order or determination of an industrial tribunal, or of an industrial agreement -
  • ...
  • (iii) for a period in respect of which the rate of the allowance exceeds $7 per week - an amount calculated in respect of that period at a rate per week that the Commissioner considers reasonable in the circumstances, which rate shall not exceed the excess of the weekly rate of the allowance over $2;

(3) For the purposes of this section -

...

`living-away-from-home allowance' means so much of any allowance or benefit paid or granted in money or otherwise as the Commissioner is satisfied is in the nature of compensation to the employee for the additional expenses (not being expenses which are allowable as a deduction under section 51) incurred by him, or which would be incurred by him if the allowance or benefit were not received, through having to live away from his usual place of abode in order to perform his duties as an employee.''

8. Although only one issue was argued by the Commissioner's representative the section raises a number of issues. The first is whether the amount of $4,892 represents a living-away-from-home allowance as defined and this raises two separate questions. Firstly, can one be satisfied the amount paid to the taxpayer ``is in the nature of compensation to'' him ``for the additional expenses... incurred by him... through having to live away from his usual place of abode...''? Secondly, was he on the facts whilst at Avoca Beach living ``away from his usual place of abode in order to perform his duties as an employee''? If both these questions are resolved in the taxpayer's favour the final issue is what amount is ``reasonable in the circumstances'' to be allowed? As indicated only one question, i.e. the taxpayer's ``usual place of abode'', was raised by the Commissioner and I propose to decide the reference on that basis. However, I will also comment on the other issues raised by the section.

9. Insofar as the first issue is concerned the difficulty is that the allowance is paid under the award regardless of whether any additional expenses are in the overall sense incurred by the recipient. The employer is not concerned about this. No doubt the concept behind the award is that normally additional expenses are incurred and the allowance is to compensate therefor, but whatever this general concept might be it does not represent the actual position of each recipient under an award and I think one must look at the position of each individual taxpayer (employee) in order to determine their taxation position. Accordingly, there can legitimately be different results for different employees. I can see no merit in allowing a deduction to one who has incurred no additional expense - otherwise he had received a ``tax free'' amount as compared to his fellow employee whose additional expense may exceed the allowance received. I think this is confirmed by the positive tone of the definition, for how can one be satisfied it is compensation ``for the additional expenses... incurred by him'' if no additional expenses have been incurred.

10. However, in answer to the above it could be said that properly interpreted, the definition

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is not speaking of additional expenses in the overall sense but is referring solely to those incurred in fact ``through having to live away from his usual place of abode in order to perform his duties as an employee''. Thus, if the employee is able to save on his ``normal'' expenses so that his overall expenses are not increased, this is a ``windfall'' to him and does not affect the fact that he has incurred expenditure that he would not otherwise have incurred (additional expenses) through having to work away.

11. Since this aspect was not the subject of argument before the Board it is unnecessary to express a concluded view and I am (despite reservations) proceeding on the basis that the first question can be answered in the taxpayer's favour. I would, however, point out that, even on this basis, receipts after moving into the house at Avoca Beach would not qualify and it illustrates the position that what is placed in awards does not necessarily determine the taxation result.

12. Turning now to the question of the taxpayer's usual place of abode, there is no doubt it was, in early June 1981, his parents' home in Sydney and, as from July 1982, his house at Avoca Beach but what was it during the period he ``boarded'' at Avoca Beach, having his house erected there and working away from Sydney? The evidence does not establish other than that it was a happy coincidence that his employer sent the taxpayer to work in an area where he intended to ultimately permanently reside - the situation might be different if he had actively sought a transfer to the area. Also it establishes the project was an indefinite one likely to have been terminated at any stage so far as the taxpayer was concerned, with him returning in that event to live at his parents' home in Sydney. Accordingly, I do not see this reference as being able to be placed in the category of cases where a single person has accepted a permanent position away from the parental home and town. I have no doubt he intended ultimately to abandon his parents' home as his usual place of abode but I do not think the evidence enables a finding that he had actually abandoned it during the year of income.

13. In Case N31,
81 ATC 167 (a decision put forward as being similar) Board of Review No. 2 was considering the situation of a person who was employed in Perth and who, due to lack of projects there, was given the option by his employers of ``either being retrenched or being transferred temporarily to Sydney to work which the company had afoot in that city''. No firm commitment of a transfer back to Perth was given whilst the ``employee mentioned six months as the likely period that he would be required to work in Sydney'' - actually close to 17 months before ``he completed his assignment and returned to Perth''. At the time of his transfer he was renting a house in Perth ``on a shared basis with two other young men'' and on his transfer he ``left there in situ in the care of another lodger, a bed, a wardrobe and some other personal possessions'' - he made no contribution to the rent of this house whilst in Sydney. After examining the facts and previous cases ( Case H109 (
8 T.B.R.D. 499 );
F.C. of T. v. Applegate 79 ATC 4307 ;
F.C. of T. v. Miller (1946) 73 C.L.R. 93 ; Case K64 (
10 T.B.R.D. 330 ); Case H3,
76 ATC 9 and Case B47 (
2 T.B.R.D. 201 )) the Board concluded that they considered ``that the taxpayer's degree of connection with the Perth house was so tenuous as to involve stretching the English language to unpardonable limits to call it his abode at all''.

14. Here the taxpayer's degree of connection with (and resort to) his parents' home is far less tenuous and, like Mr. Cote's in Case B47 at p. 206, I ``have formed the opinion that the home at (Sydney) was the more permanent place of abode and should be regarded in all the circumstances as his `usual' place of abode''.

15. The final issue is what amount is ``reasonable in the circumstances'' to be allowed and on this aspect I would refer to my comments in para. 9 and 10 above. I would also refer to the comments of Mr. Nimmo (as he then was) in Case B47 at p. 204:

``The words `additional expenditure' in the definition seem to me to imply that the taxpayer is already under some expense in connection with his usual place of abode. I think it is to meet the case where he incurs further expense by having to live away from that place of abode in order to perform his duties as an employee that the section was enacted. In my opinion, the purpose of the enactment is to remove any taxation disadvantages which would otherwise arise from receipt by the taxpayer of the compensation which it is considered proper for him to receive in respect of that additional expenditure. The fact that the Legislature in subsec. (c) is careful to

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provide that a taxpayer is not to get a deduction for what it considers his food would cost him wherever he lives, also appears to me to support the view that the Legislature intended that he should have a deduction to the extent he is compensated for the additional expense he incurs by having to provide accommodation for himself at his place of employment and, at the same time, maintain a home or other place of abode elsewhere;''

and to the comment in CCH Australian Federal Tax Reporter /sp/26-750 that:

``The Treasurer explained that the principle on which sec. 51A is founded in that a living-away-from-home-allowance should be taxed only to the extent that it represents a saving in living expenses to the taxpayer in consequence of his absence from home.''

Relating these to what I have said in para. 9 and 10 supra I do not think it ``reasonable'' to allow a deduction in respect of the ``windfall'' that a single person, who merely changes the party to whom he pays board, obtains. If, for example, he pays $50 per week for board and lodgings at A and thereafter pays only $20 he has saved $30 per week and it would be unreasonable to give a deduction to the extent of this $30 per week. Although the taxpayer would regard this as ``discriminatory'' I do not think it is and it merely recognises that not all persons (single or otherwise) have the same ongoing commitments at place A whilst working at place B.

16. Applying these views to the present case there would be a difficulty in that whilst we know the taxpayer only paid his mother $20 for washing (presumably only for those weekends he went to Sydney) there is no evidence of what he previously was paying for full board and lodgings with his parents. He certainly was saved some considerable amount overall - only one lot of meals paid for - and it would be unreasonable to allow a deduction in respect of this amount. However, as the matter was not argued it is unnecessary to proceed further.

17. In para. 14 I have found that the taxpayer's usual place of abode remained his parents' home in Sydney and accordingly I would reverse the Commissioner's decision upon the taxpayer's objection and amend his assessment for the year ended 30 June 1982 so as to reduce the taxpayer's taxable income by $4,788.