HP Stevens SM
Administrative Appeals Tribunal
H.P. Stevens (Senior Member)
The question for decision in these applications is whether the applicant is entitled to deductions for travelling expenses of $1,192 and $1,014 in his assessments for the years of income ended 30 June 1983 and 1984 respectively in terms of sec. 51(1), 53 and 54 of the Income Tax Assessment Act.
2. In his returns of income for the years concerned the applicant gave his occupation as mine construction shift foreman and included under item 6(d) - ``Travelling allowance (including allowance received for use of motor vehicle), entertainment allowance'' - amounts of $1,192 and $1,014 respectively. Deductions were claimed under item 15 - ``Deductions relating to allowances included in items 6(d), 6(e) and 6(g)'' - for identical amounts with the notation, ``Travel allowance fully expended as per attached details''. The attached details were in each year the same viz.:
``ITEM 15 - DEDUCTIONS RELATING TO ALLOWANCES
The taxpayer is a Mine Construction Shift Foreman and is based at his employer's headquarters in Wollongong. His employers carry out mine construction, mine extensions, mine repair and underground safety projects for various customer Collieries. The taxpayer was involved in the Mine Construction/Extension work at the... Colliery for the whole of 1983 and the project is nearing completion. The Travelling allowance that he has received is paid to partially compensate him for extra travelling expenses necessarily incurred in travelling from his place of employment, Fairy Meadow near Wollongong, to the distant Mine Construction site at... Colliery. The allowance is not paid to compensate him for expenditure incurred in travelling to and from work, but from the work place at Fairy Meadow to construction site at the Colliery. The allowance is deductible under Section 51(1), 53 and 54 of the Act. The actual cost of using his own motor vehicle from work to construction site is considerably higher than the allowance received.''
3. Upon assessment each of the deductions claimed were disallowed and objections in identical terms (amounts only different) were lodged:
``The taxpayer hereby objects against the above assessment, and it is claimed that the assessment should be amended by the allowance of $1,192, or a part thereof, as deductions against the assessable income for the year. In reliance of the objection, the following grounds are furnished:
- 1. THAT the sum amounting to $1,192 or part thereof, were outgoings incurred by the taxpayer in the course of performing the income earning activities as Mine Construction Shift Foreman were necessary, incidental and relevant to those ends, that the occasion for the outgoings lay in the proper performance of the duties for the said year of income, and were peculiar to the occupation and employment. That the outgoings arose purely or predominantly due to work related demands and causes, served the taxpayer with an obvious employment function, and were not outgoings of capital or of capital, private or domestic nature as contemplated by the Income Tax Assessment Act, are properly allowable as deductions under Section 51(1) and/or Section 53 and Section 54 of the said Act.
- 2. THAT the schedule which accompanied the income tax return for the year should be considered in properly concluding that the outgoings are allowable as deductions under Sections 51(1), 53 and 54 of the Act. This has provided sufficient explanations and reasons why the allowance received is deductible under Sections referred to above. The nature of the employment and the employer's construction contracts compel the taxpayer to travel, on duty, to various far flung construction sites where various contracts are carried out by the employer company. The distance from the employer's office at Wollongong to the construction sites at the Mine is approximately 32 kms return making it 7520 kms excess duty travel for the 47 weeks year. This, at 25c per km using 2.5L Ford Station Wagon amounts to $1,880 for the 1983 year. However, only the allowance received is being claimed. This outgoing is NOT a private expenditure and is allowable for reasons already mentioned.''
4. The objections lodged were disallowed and requests for reference to a Board of Review were lodged with the applicant's agent's letter stating, inter alia:
``It appears that you do not comprehend the nature of the taxpayer's occupation as Mine Construction Shift Foreman. He has to travel to distant job/work sites where the various contracts are being carried on. The claim has been for excess duty travel expenses, being costs associated with the excess distance necessarily travelled from the employer's offices to the job sites on duty.''
5. A request has been made for written reasons and, since the applicant's representative was not able to point to an identical case (he felt there was an entitlement in principle) whilst the assertions made in the objection etc. are not only not factually correct but rather misleading, it might be appropriate to make these reasons fuller than they might otherwise have been.
6. At the outset it must be appreciated that claims fall to be determined having regard to what has actually occurred and not with respect to any alternative situation that might have taken place. Also that each case is to be determined on its own particular facts so that, whilst the principles applicable under the section concerned will be the same, the application of those principles to different fact situations may produce differing results. Such differing results may be said by those not entitled to a claim to be unequitable or anomalous but it has been long recognised that equity and taxation are strangers. Where the words of the legislation allow of only one construction that construction must be followed even if to some the result may be anomalous.
7. The above basic fundamental precepts are not always understood by those who pursue claims before the Tribunal. Thus it is commonly argued a claim should be allowed because another person had been allowed it (albeit in different factual circumstances) or because, if the applicant had taken another course, it would have been allowable and it is inequitable that the claim is not then allowable. It is also commonly argued that if it is not allowable then it should be allowable, however this avails little until such time as the law is amended by Parliament.
8. Turning now to the issue in the present case the main section involved is sec. 51(1) which provides:
``All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.''
And to succeed the applicant must bring himself within the first limb thereof and show the exclusory provisions do not apply.
9. Claims for travelling expenses by employees and others in terms of the section have been before the Courts on many occasions e.g.,
F.C. of T. v. Green (1950) 81 C.L.R. 313;
Lunney v. F.C. of T.; Hayley v. F.C. of T. (1957-1958) 100 C.L.R. 478;
F.C. of T. v. Finn (1961) 106 C.L.R. 60;
F.C. of T. v. Vogt 75 ATC 4073;
F.C. of T. v. Collings 76 ATC 4254;
F.C. of T. v. Kropp 76 ATC 4406;
F.C. of T. v. Ballesty 77 ATC 4181;
F.C. of T. v. Wiener 78 ATC 4006;
Burton v. F.C. of T. 79 ATC 4318; and
F.C. of T. v. Klan 85 ATC 4060 (reservations expressed by Ormiston J. re the decision in Kropp). Different types of travelling expenses were involved in varying situations and it is sufficient to refer only to Lunney and Hayley, Collings and Wiener which establish the principles to be applied in relation to claims by employees in relation to travel from their homes to the place at which they perform the duties for which they are paid.
10. In Lunney and Hayley - the principal decision applied in the other two cases - the Full High Court (McTiernan J. dissenting) held that the expenditure of Lunney (an employee) and Hayley (a self-employed dentist) in travelling day by day from their homes to their places of employment and business respectively and back again were not allowable in terms of sec. 51(1). The joint judgment of Williams, Kitto and Taylor JJ., inter alia, stated at pp. 498-499 and 501:
``The question whether the fares which were paid by the appellants are deductible under sec. 51 should not and, indeed, cannot be solved simply by a process of reasoning
ATC 1172which asserts that because expenditure on fares from a taxpayer's residence to his place of employment or place of business is necessary if assessable income is to be derived, such expenditure must be regarded as `incidental and relevant' to the derivation of such income. No doubt both of the propositions involved in this contention may, in a limited sense, be conceded but it by no means follows that, in the words of the section, such expenditure is `incurred in gaining or producing the assessable income' or `necessarily incurred in carrying on a business for the purpose of gaining or producing such income'. 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.''
``Expenditure of this character is not by any process of reasoning a business expense; indeed, it possesses no attribute whatever capable of giving it the colour of a business expense. Nor can it be said to be incurred in gaining or producing a taxpayer's assessable income or incurred in carrying on a business for the purpose of gaining or producing his income; at the most, it may be said to be a necessary consequence of living in one place and working in another. And even if it were possible - and we think it is not - to say that its essential purpose is to enable a taxpayer to derive his assessable income there would still be no warrant for saying, in the language of sec. 51, that it was `incurred in gaining or producing the assessable income' or `necessarily incurred in carrying on a business for the purpose of gaining or producing such income'. The questions in the cases stated should be answered in the negative.''
11. The issue in Collings' case concerned an employee whose employment required her to be on call 24 hours a day in relation to computer operations. She received calls (out of normal working hours) at home where she had been provided with a terminal by her employer and, if she could not deal with the problem raised at home, the employee was required to go to the office to rectify it. A deduction claimed in respect of this additional travel (over and above normal to and from work travel) was allowed. In his judgment Rath J. discussed all relevant decisions (including Lunney) and at pp. 4267-4268 said, inter alia:
``It seems to me that, under sec. 51(1), where the question is whether travelling expenses between home and work are deductible, and the case is not the simple one of the regular daily journey, it is necessary to pose the question inherent in the words of the provision, without the preconceived limitation that the element of choice in the place of the taxpayer's residence necessarily requires the answer that no deduction is to be made. In the general language used in
Ronpibon Tin N.L. v. F.C. of T. (78 C.L.R. at 57) it is proper to ask whether the expense is to be `found in whatever is productive of the assessable income'; or in the more specific words of the later English cases, whether the expense was incurred in travelling on the taxpayer's work as distinct from travelling to and from his work. In the language of the joint judgment in
Lunney v. F.C. of T. (100 C.L.R.at 501) the question is whether the expense was an expenditure incurred in, or, in the course of, earning assessable income.
Much of the decisive language used in Taylor v. Provan seems apt to the case of the present taxpayer, who had her regular hours of work, and who additionally had to remain on call for the balance of the day. There were two separate and distinguishable facets of her employment. On the one aspect she commuted regularly to her work; on the other she had a different set of functions, namely to be ready at call at all other times, night or day or on weekends to work at problems of malfunctioning of the computer, with the aid of such information as she could obtain on the telephone, and
ATC 1173with or without the aid of her portable terminal... Adapting the words of Lord Morris (p. 211), the journeys to and from home were made necessary by the very nature of the employment and of the taxpayer's duties. The taxpayer here, as much as in Taylor v. Provan, had a `very special' employment (cp. p. 212)... The taxpayer is not in this case choosing to do part of the work of her job in two separate places (cp. Lord Wilberforce in Taylor v. Provan, at p. 215). Unless she were to spend all her time in the office with the computer, she must have more than one place of work. Hers is not the freedom of choice of a barrister who does some of his work at home (
Newsom v. Robertson (1953) 1 Ch. 7). Her double work-location is not only not merely colourable, but the two places of work are a necessary obligation arising from the nature of her special duties (cp. Lord Simon, p. 222)... When called at her home, the taxpayer immediately had the responsibility of correcting the malfunction in the computer. She might there and then diagnose the trouble, and provide the remedy; or she might decide that she would have to make the journey to the office, and if she took this course she was during the journey on duty in regard to the particular problem that had arisen...
In my opinion in this case the taxpayer's expenses in respect of her travelling between her home and work, outside the normal daily journey, were in the special circumstances of this case outgoings incurred in gaining or producing her assessable income, and were not of a private or domestic nature, and were accordingly allowable deductions under sec. 51 of the Income Tax Assessment Act 1936 (as amended).''
12. Wiener's case involved a claim by a schoolteacher (who taught at five different schools spending about one hour a day at each school) for the cost of travel from home to the first school of each day and between the last school of each day and her home (travel between schools having been allowed). The claim was allowed by Smith J. who after considering various authorities (including Lunney and Collings) and the facts of the case said at p. 4010:
``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.''
13. From the above authorities the principles to be applied are clear. If, on the facts, the expenditure relates to normal travel to and from work then no deduction is allowable. Conversely a deduction is allowable if, on the facts, particular journeys over and above the normal travel are involved or if the employment concerned ``is of itself inherently an itinerant one''. Accordingly, since there is no dispute as to the principles involved, the real issue is one of the correct finding of fact to make having regard to the circumstances of the present case and it is necessary to turn to those details. In this regard the Tribunal had the assistance of evidence not only from the applicant but also his employer - such evidence did not conflict but rather was complementary.
14. The applicant's employer carries on business as a contractor in the mining industry and, depending on the contracts it obtains, employees of it perform their duties in the mines themselves. It has a depot at Fairy Meadow but none of its ``mine'' employees work there except, if one contract ends and another is coming up in the near future, they may then be deployed at the depot. If another contract is not in the offering the affected ``mine'' employees would be retrenched. Since these employees are engaged to work in the mines and not at the depot they are required to report direct to the mine concerned and are paid according to the shift times worked at that mine. A supervisor visits the various mines to pay the employees, pick up time sheets, advise them of the appropriate shifts to be worked etc. and the employees do not attend at the employer's depot in normal circumstances. Being employed to work in the mines it is the responsibility of the employee to arrange his own transport from his place of residence to the mine concerned and back home again. Employees are normally engaged at one mine only and when a contract ends at one mine and they are required for another contract elsewhere
ATC 1174the supervisor would inform them accordingly and thereafter they would report directly to the new mine.
15. Being ``miners'' the employees are covered by the Coal Mining Industry (Miners) Award to which the employer is a respondent and are paid accordingly. In addition to the various rates of pay according to classification, leave provisions etc. the award also provides that ``to defray the costs of travelling to and from a colliery or establishment an allowance of $5.60 per attendance at work shall be paid to an employee by his employer''. The same rate of allowance is paid irrespective of the distance individual miners live away from a mine. Its purpose is to assist with the cost of travel from home to mine sites (the normal place of employment of people who work in mines and which are badly served by public transport (if any)). If there is any need for an employee to travel from one mine site to another in the course of a day's work e.g. to replace someone absent (not a common situation) he is compensated over and above the $5.60 for the cost of going from one site to the other site.
16. In so far as the applicant is concerned he started with his employer in 1975, left for a couple of years and returned in 1979 or thereabouts. Since his re-employment as a shift foreman machineman in charge of 3-4 others the applicant has worked exclusively (except for 3 different weekends) at the... Colliery with his shift commencement times being between 7 a.m., 1 p.m., 7 p.m. and 1 a.m. respectively (his pay being based therein). As indicated a supervisor comes to the colliery to pay the ``mine'' employees, etc. and the applicant only attends the depot if he was absent when the pay arrived or if the supervisor has not collected a shift report - such attendances being isolated occasions.
17. In a direct line the applicant's residence is 8 km north of the employer's depot at Fairy Meadow and 20 km south of the colliery. Put in another way his residence is 1 km from a road ``fork'' with the depot to the left and the colliery to the right at the ``fork''. The applicant using a Ford panel van purchased second hand for $5,000 during 1975 travels the 1 km and turns right thus travelling direct from his residence to the colliery and home again. The 32 km return ``excess duty travel'' set out in the objection was varied at the hearing to 24 km return based on the premise that the first and last 8 km i.e. 16 of the daily 40, represented travel to and from work and that the balance 24 represented travel on duty. The applicant's wife also had a car which she required for her work. During the 1984 year the applicant was on compensation for about 12 weeks and the number of weeks worked was said to be 36 as opposed to 46 for the 1983 year. Thus the allowable mileages claimed (on basis of 5 day working week) were 5,520 km for 1983 and 4,320 km for 1984. Total mileage i.e. 40 km per day plus private mileage was put as 11,500 km for 1983 and 9,000 km for 1984. Public transport is not available from the applicant's residence to the mine site.
18. Turning now to the proper ultimate finding of fact to make in the present application it is clear on the above evidence that the applicant was simply travelling from home to his one and only place of employment since he rejoined his employer and returning home again. The Tribunal so finds and it follows that the applicant is not entitled in principle to a deduction in terms of sec. 51(1). As stated previously the Act applies to situations as they are and not to alternatives that have not eventuated. The applicant might have, over the years concerned, been transferred regularly to different working places or might have been required to report first to the depot but in actual fact he was not and it is on that actual situation that the issue fell to be determined.
19. As the principle to be applied is well established it is unnecessary to look to previous decisions (other than the ones referred to) but in view of comments made by the applicant's representative reference might be made to Case M54,
80 ATC 361 and Case S29,
85 ATC 276. The first case was relied upon by the Commissioner's representative after the applicant's representative had said in his address he could not find an identical case. Case M54 concerned a plant operator employed by civil engineering contractors on various sites on the outer fringes of a capital city. Mostly he travelled directly to job sites but sometimes went first to the employer's depot for instructions or materials. It was held that a deduction was allowable only in respect of the actual travel between the depot and job sites - the rest of the travelling was simply ``travel to and from work - not travel in the course of the performance of the duties of employment -
ATC 1175and expenditure on the former class of travel is clearly not allowable as a deduction'' (per Mr Hogan and Dr Gerber at p. 364). Dr Beck in that case said at p. 365:
``Now, as has been seen, the taxpayer in this reference did not have a fixed place that he went to and returned from each day, although the employer did have such a fixed place, i.e. the depot. It was at the behest of his employer that he went directly each day to where his plant was to be operated, and not to the depot which presumably was the employer's administrative centre. I think if the principle in Lunney is to be applied to this case there are grounds for regarding the depot as the taxpayer's place of work.''
The applicant's representative sought in reply to rely on these remarks. However such reliance shows confusion as to the correct principles to be applied and as to the actual situation involved for factually the applicant (unlike the plant operator) did ``have a fixed place that he went to and returned from each day'' and, even if Dr Beck's views were to be preferred to those of the majority, the applicant would not be within the scope of his remarks.
20. This same confusion was evident in the representative's concession that the applicant's home could not be described as his base of operations and his subsequent submission that the applicant should be treated in the same manner as are shearers. However shearers are so classed - as Case S29 shows - because they are ``itinerant'' workers whose homes are regarded as their base of operations. Here of course the applicant's employment was not factually ``inherently an itinerant one''.
21. Although the applicant's representative placed no reliance upon the absence of public transport aspect, reference should perhaps be made to Case R22,
84 ATC 212. In that case a tanker driver employed by an oil company used his own car to travel to his work site (public transport was not available early in the morning and a ``transport location allowance'' was received) and claimed a deduction of an amount equal to the allowance. The claim was disallowed the Tribunal stating at p. 214:
``8. The fact that an allowance of a particular kind is paid to a taxpayer does not of itself impress an outgoing, ostensibly related to that allowance, with any greater degree of deductibility than that which it would have in the event that no such allowance was paid in fact. It is the character or nature of the allowance which determines whether it is properly to be included as assessable income; likewise, it is the nature of the outgoing itself, without regard to the nature of any allowance that might be received, that determines whether it is an outgoing or expenditure that properly falls for deduction under the provisions of the first limb of sec. 51(1) of the Assessment Act. As the taxpayer was an employee at the relevant time, his claims do not fall for consideration under the second limb of that section.
9. On the evidence, the taxpayer was not on duty while he was travelling to and from work and his remuneration was not calculated with reference to that time. He was paid only with reference to the time during which he carried out his official duties, and to the nature of the duties performed, between the hours of 4 a.m. and 3.32 p.m. In the circumstances, the expenditure in issue does not satisfy the requirement to be deductible, that it was incurred `in the course of gaining or producing' assessable income (see
Ronpibon Tin N.L. and Tongkah Compound N.L. v. F.C. of T. (1949) 8 A.T.D. 431; (1949) 78 C.L.R. 47). Although the expenditure was an essential prerequisite to the derivation of assessable income, its character as travelling expenses between home and place of work was neither relevant nor incidental to the tanker driver activities by which the taxpayer gained or produced his assessable income (see
Hayley v. F.C. of T.; Lunney v. F.C. of T. (1958) 11 A.T.D. 404; (1958) 100 C.L.R. 478;
Lodge v. F.C. of T. 72 ATC 4174). The expenditure is therefore not deductible under the first limb of sec. 51(1). Furthermore, having regard to the observations of Williams, Kitto and Taylor JJ. in their joint judgment in the Lunney case, it would seem that they regarded expenses in travelling between home and place of work as being of a private nature. In the present case, the like expenditure appears to be essentially of a private nature and therefore precluded from being an allowable deduction under the excluding provisions of sec. 51(1).''
As will be seen the clear general principle set out earlier was applied. To the case of Lodge v. F.C. of T. (supra) referred to might be added the Full Federal Court decision in
Martin v. F.C. of T. 84 ATC 4513.
22. Being of the above view it is unnecessary to consider the alternative argument raised on behalf of the Commissioner that the onus of proof imposed by sec. 190(b) had not been discharged in relation to the quantum of the deductions claimed. However brief reference should be made to the evidence relating thereto.
23. Whilst the evidence relating to the mileages set out earlier was reasonably clear that concerning the costs of running the vehicle was not so specific. The mileage rate referred to in the objections of 25c per km was abandoned at the hearing and attempts were made to arrive at actual figures. However this resulted in estimates - no records available - for a number of items. Thus it was estimated $1,800 had been spent on repairs over the two years and as it could not be established when individual items had been incurred, it was claimed $900 should be allocated to each year. Again petrol was estimated and calculated for 50 and 40 weeks respectively although the mileages were based on 46 and 36 weeks work in the respective years. The only precise figures in the resultant total respective running costs of $2,360 and $2,260 were the depreciation amounts of $190 and $150. These figures were apportioned on the basis of the mileage figures to yield deductible proportions of $1,132 and $1,085 which were increased by 10% for harsh usage to $1,245 and $1,193.
24. For the above reasons the Tribunal affirms the decisions of the Commissioner upon the applicant's objections to his assessments for the years ended 30 June 1983 and 1984.