Case U228

PM Roach SM

Administrative Appeals Tribunal

Decision date: 11 December 1987

P.M. Roach (Senior Member)

The applicant in these two references is a logger who for many years has felled timber in the forests of New South Wales. During the years of income ended 30 June 1983 and 1984 he worked in a particular forest carrying out the selected felling of trees nominated by officers of the Forestry Commission. He worked in that forest for about four years and did so in association with a truck driver. Both men had worked for a company (SAW-CO) which had contracted for the supply of sawlog and veneer logs to millers. Prior to the period under review the two men had purchased the shareholding in SAW-CO with the result that they came to control the company which remunerated them for their services. Later the applicant and his colleague, together with their respective wives, are said to have formed a partnership. The terms of their agreement were not documented and were not detailed at all in evidence. To what extent the formation of the partnership affected the assessable income of the applicant is anything but clear. However, there was no

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contention for the Commissioner challenging the efficacy of that partnership for tax purposes.

2. However, as to expenses, in the year of income ended 30 June 1984 - the only year in which the applicant derived income both directly from SAW-CO and from the partnership - expenses relating to both sources of income were claimed without distinction as to source. In both years the expenses claimed ranged over depreciation and investment allowance on chain-saws; costs of operating and maintaining the saws; accountancy fees; and claims in relation to protective clothing. In addition, there were claims for "motor vehicle expenses - forest transport - 48 weeks" at $32 per week and $35 per week respectively ($1,536 and $1,680) and "camping costs - forest - 48 weeks" at $60 per week and $65 per week respectively ($2,880 and $3,120). In addition, in the latter year, there was a claim to depreciate a sedan motor vehicle after allowing 25% for private use.

3. The claims to travelling expenses were allowed but those for camping costs were disallowed. Upon objection, the disallowance was confirmed and the matter now comes before the Tribunal for determination. Both claims arise out of the circumstance that the distance between the private residence of the applicant and his worksite in the forest was substantial. As a result, the practice of the applicant was to travel each Monday morning by four-wheel-drive vehicle 108 kilometres from his home to a forest campsite where he occupied a caravan. He camped there until the following Friday afternoon when he returned home. He shared the van with another man employed by SAW-CO. They shared the forest site with as many as 15 others who worked in the forest, either as loggers or as officers of the Forestry Commission. While in the forest, on each working day he would travel by the same four-wheel-drive vehicle to the site in the forest at which he was to carry out felling operations that day. The distance between the campsite and the logging site was commonly 20 kilometres.

4. When objection was made to the 1983 assessment, it was claimed that the expenses constituted deductions allowable pursuant to sec. 51(1) of the Income Tax Assessment Act 1936. The amounts claimed, acknowledged to have been "estimated", were said to have been as follows:

      Depreciation - (the taxpayer
      owns a caravan valued at $6,000,
      and generator valued at $500)

        Depreciation at 20% prime
        cost would equal $23/week                             25

      Petrol and kerosene costs for
      heating and lighting estimated at                       15

      Gas costs for refrigeration
      estimated at                                             5

      Food - additional costs incurred
      on food over and above the
      costs which would be incurred
      at home                                                 20

      Maintenance on caravan, generator                        5
                              Total weekly cost              $70

The objection went on to say that the claim for $60 per week was a conservative one "and if the taxpayer were to travel from his home to the site each day, the costs... would exceed $100 per week before repairs and maintenance expenses". In the following year the claim was repeated in the same terms, save only for the increase from $60 to $65 per week.

5. At the hearing it was very clear that the claims were "estimated". I am quite satisfied that they were not the estimates of the applicant. (It is appropriate to say that I accept him as a completely honest witness.) As to the quantum of the claim, I am of the view that it is the responsibility of the Tribunal to make the best judgment it can upon the evidence available. Claims to deductions are not to be defeated merely because they cannot be quantified precisely by reference to documentary or other evidence. Bearing it in mind that the "value" of the caravan and of the generator is of no relevance and, in particular, the evidence that the caravan had only cost $2,400 originally; and that his estimate was that the total food costs would have run at the rate of $10 a day, I have concluded that the overall claims are not "conservative". However, I am persuaded that it would be reasonable to allow amounts of $30 per week and $33 per week

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respectively should anything be allowable at all.

6. Arising out of the facts so found, the questions for determination are whether costs incurred by the applicant in providing for his meals and sustenance while working in the bush, and his costs in providing for his own shelter while residing in the bush close to his place of work, are allowable as income tax deductions. Neither class of expenditure will qualify for deductibility if it falls within the category of being of a "... private or domestic nature..." within the meaning of those words as they appear in sec. 51(1) of the Income Tax Assessment Act 1936. Further, the claims must be established as relating to expenses incurred "in the course of" gaining his assessable income
[Amalgamated Zinc (De Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295].

7. The applicant contends that the expenses because they were expenses incurred by reason because of the nature of his income-earning activities as a logger and the consequent circumstance that, in order reasonably to carry out those income-earning activities, it was "necessary" - in a practical sense - that he reside throughout the working week in the forest in reasonable proximity to the worksites at which he was engaged and to forgo the economy, comfort and convenience of residing in his own home. In that regard it is important to observe that his income-earning activities were conducted as a logger employed by SAW-CO, and later as a member of a partnership contracting with SAW-CO for the provision of services. He argues that he has to suffer the living conditions of a bush camp when, but for his income-earning activities, he might have been enjoying the comfort and facilities of his own home. He also points to the circumstance that, but for the demands of his work, his expenses would have been less than they in fact were. But neither consideration necessarily alters the nature of the case. The expenses claimed are those of providing for, in the one instance, his shelter and, in the other, his sustenance. As Viscount Cave said in
Ricketts v. Colquhoun ((1926) A.C. 1):

"A man must eat and sleep somewhere, whether he has or has not been engaged (at his work)."

8. What he did was reasonable and, in a pragmatic sense, necessary but, as a Full Bench of the High Court said in
F.C. of T. v. Green (1950) 81 C.L.R. 313 at p. 317:

"It is not enough in order to establish a right to a deduction to show that it was proper or reasonable for the taxpayer to make the expenditure which he claims as a deduction. For example, it is perfectly reasonable and proper for a taxpayer to incur living expenses and many expenses of a private or domestic nature, but such expenditure is expressly excluded from deductibility by the final words of the first sub-section of s. 51. Thus... a taxpayer cannot deduct ordinary living expenses."

9. Exceptions to the general rule have always been acknowledged. However, this is not a case in which it has been recognised that the characterisation of the expenses should change because of the circumstances giving rise to the expenses. The applicant is not an itinerant worker whose need to be accommodated away from his ordinary place of residence is occasioned by constant changes in his place of work. Nor is he a worker who has been sent away from his normal place of work by his employer and thereby obliged to incur expenses in consequence of being so sent away. Nor is this a case - such as it might have been - in which the employer (SAW-CO) is claiming a deduction for the expenses of providing on-site accommodation and sustenance for its workers; and of the worker being assessed only on the "value" to him of the facilities availed of.

10. If success for the applicant necessitates that he establish that his claim falls within the range of already recognised exceptions to the general rule, then the claim must fail. However, if this Tribunal fails to recognise his claim as being as legitimate an exception as that of the commercial traveller, or the travelling public servant, or others who in some circumstances are recognised as eligible for deductions - assuming it to be a legitimate exception - it is improbable that claims of persons in like circumstances to the applicant will ever receive the recognition they deserve according to law.

11. The applicant ordinarily resided in his matrimonial home in a normal social community. He lived within a family unit in the midst of other family units. In that context he belonged to a typical residential group comprising a mix of all ages and both sexes. To

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earn his income he had to go into the forest to work. There he lived in the primitive conditions of a forest camp. It would not be appropriate to describe that camp as his place of residence. His circumstances there were far removed from the circumstances of the London barrister who travelled from that city to another to there perform on a temporary basis the judicial duties of a Recorder and who incurred expenses in travelling for that purpose and in residing in hotel accommodation to enable him to carry out his work. The claim of that taxpayer was disallowed as not having been necessarily incurred in the performance of the duties of his office - a very narrow point (cf. Ricketts v. Colquhoun (1926) A.C. 1). His situation was in sharp contrast to that of the urban commuters whose claims to routine, daily travelling expenses were considered and rejected by the High Court of Australia in
Lunney v. F.C. of T.; Hayley v. F.C. of T. (1957-1958) 100 C.L.R. 478. His case is rather closer in kind to that of the Canadian brewery magnate who took to arranging brewery amalgamations in North America and the United Kingdom. He resided in the Bahamas and from there travelled frequently in the course of his work to the United Kingdom. He was not remunerated for his efforts but his travelling and accommodation expenses were reimbursed to him. An attempt to assess the international airfares as income failed (
Taylor v. Provan (1975) A.C. 194). His case is similar to that of a person who, having travelled to Newcastle from Sydney to work for several days in succession, resides in Newcastle for the duration of his stay and claims the expenses of his meals and accommodation incurred in doing so. The claim of such a person for his meals and accommodation expenses is allowable, not because it it impossible for him to commute, but rather because it is sufficiently unreasonable that he should do so so as to be reasonably judged impracticable.

12. This applicant baches in the bush in a caravan. Commuting is not impossible but it is impractical. In the bush he does not reside at the worksite but rather at a campsite from which the worksite is reasonably accessible. He forgos the comfort and convenience of residing within a family group, within a typical social community, and the occupation of residential accommodation of conventional housing standards. He is not to be likened to those more affluent people who, for example, maintain two places of residence: one in the inner city to be occupied overnight between working days and the other well removed from the inner city to which they retreat when the demands of work permit. Nor is he to be likened to the person who maintains his principal residence (with his family should he have one) in the remoteness of a forest, or the outback, or in other places rarely given over to human habitation.

13. I find - as a matter of probability - that the caravan was used from time to time as a place of shelter for the applicant and his companion during working hours when weather was so bad as to make work unsafe. I also find - as a matter of probability - that it was also used as a place within which to store the logging equipment of the applicant. I so find despite the fact that, in contrast to [Case U225,
87 ATC 1253], no evidence to that effect was given: in the sense that no transcript will record the applicant or any other witness as having stated those things. However, I think it reasonable and appropriate to make the findings that I have because such usage flows naturally from the nature of the facilities, their location, and the appropriateness of their use.

14. In my view, the circumstances of this applicant are sufficiently exceptional for them to be recognised as falling within a further category of exception to the general rule. In so finding I am not deterred by any thought that there is about to be a substantial redeployment of the Australian workforce which will result in massive inroads on the Revenue.

15. For the foregoing reasons, the decision of the Tribunal will be that the decisions of the Commissioner upon the objections of the applicant be varied and taxable income reduced by $1,440 and $1,584 in the years of income ended 30 June 1983 and 1984 respectively.

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