KL Beddoe SM
Administrative Appeals Tribunal
K.L. Beddoe (Senior Member)
The question at issue in this application is whether the applicant taxpayer is entitled to deductions amounting to $740 in respect of motor vehicle expenses incurred by the applicant in travel between her home and various places where she performed income-producing work as a nursing sister.
2. At the conclusion of the hearing of this application on 24 October 1986 I stated my reasons for decision extempore finding in favour of the applicant taxpayer. No transcript was taken in the proceedings so that the Tribunal has no record of the oral reasons except the precis recorded in my bench book.
3. A copy of the decision in writing was subsequently served on each party.
4. On 21 November 1986 the respondent Commissioner applied in terms of subsec. 43(2A) of the Administrative Appeals Tribunal Act requesting a statement in writing of the reasons of the Tribunal for its decision. In accordance with subsec. 43(3) a copy of these reasons is to be served on each party to the proceedings i.e. the applicant taxpayer and the respondent Commissioner.
5. The question in issue raises the classic subsec. 51(1) issue as to whether the travel expenses incurred in the course of gaining or producing the applicant's assessable income or are private expenses. For present purposes the relevant words of subsec. 51(1) are:
"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
ATC 176producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings... or of a... private or domestic nature."
Amalgamated Zinc (de Bavay's) Ltd. v. F.C. of T. (1935) 54 C.L.R. 295 at p. 303 Latham C.J. said:
"The phrase `losses and outgoings actually incurred in gaining or producing the assessable income' may, in relation to outgoings, be read as meaning that the outgoings must be an expenditure which has an effect in gaining or producing income, e.g., the purchase price of goods which are subsequently sold... in order to make the section intelligible it must, in my opinion, be read as meaning `losses and outgoings actually incurred in the course of gaining or producing the assessable income'."
7. The test was further explained by the High Court in
Ronpibon Tin N.L. and Tongkah Compound N.L. v. F.C. of T. (1949) 78 C.L.R. 47 at pp. 56-57. The Court said:
"For expenditure to form an allowable deduction as an outgoing incurred in gaining or producing the assessable income it must be incidental and relevant to that end. The words `incurred in gaining or producing the assessable income' mean in the course of gaining or producing such income... In brief substance, to come within the initial part of the sub-section it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if known be produced, would be accepted to produce assessable income."
8. The specific question of travel between an employee's residence and his place of employment was raised in
Lunney v. F.C. of T. (1957-1958) 100 C.L.R. 478 where Williams, Kitto and Taylor JJ. stated at pp. 498-499:
"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."
9. In Lunney's case the High Court considered a number of English decisions consistently rejected the notion that expenditure incurred by a taxpayer in order to travel from his home to his place of business is, in any sense, a business expenditure or an expenditure incurred in, or, in the course of, deriving assessable income. At p. 501 their Honours (Williams, Kitto and Taylor JJ.) stated:
"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 s. 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'."
10. It seems clear enough that the authority of Lunney's case was subsequently accepted by the High Court in
F.C. of T. v. Maddalena 71 ATC 4161; (1971) 45 A.L.J.R. 426. However, it should also be recognised that Lunney's case is restricted as authority to the situation of employees and professional men travelling between their home and their particular place of employment or business. This is made clear by the judgment of Dixon C.J. in Lunney's case and also the dissenting judgment of McTiernan J. in that case. It is also made very clear by the analysis of the law by Rath J. in
F.C. of T. v. Collings 76 ATC 4254.
11. The facts of this case are relatively straightforward. The applicant is a registered nurse being registered with the Nurses Registration Board of her State. Commencing
ATC 177in April 1983 she has worked as a nurse on what might be called a subcontract basis. This basis of engagement may be more fully described by quoting a paragraph in the applicant's notice of objection:
"6. I am nursing sister who works relief shifts which means I am not employed or contracted to any one hospital. Rather, I am registered with the Nursing Agency which obtains the shift work for me. During 1983/84 I worked at the following hospitals:Total No. of Hospital Shifts Worked St Vincent's 45 Prince Henry's 3 Queen Victoria 27 St Andrews 14 Royal Children's 4 Prince Alfred 4 Other sundry 9 --- 106 ---
Because of the nature of relief shift work, I may work at a number of different hospitals during any one week. Accordingly, to be able to achieve continuity of work, it is necessary for me to use my home as my operating base. Any calls to me from my employment agency are made to my home, and therefore it is properly regarded as a place of work.
In turn, any enquiries by me to the employment agency or to the hospitals to arrange shift work are made from home. Further, I can be sent to any hospital at any time, day or night for a shift, and the only point at which I can be contacted is my home.
Because I am virtually on call 24 hours a day, it is not practical to operate from an office or premises which is not my home. Accordingly, my home doubles as my office or operating base."
12. The applicant gave evidence before the Tribunal which confirmed the assertions of fact in para. 6 of her notice of objection. Apparently the Commissioner was content to accept those assertions of fact also because, following on the lodgment of the notice of objection, the Commissioner allowed the objection in part by allowing the claim amounting to $192 in respect of the telephone expenses. This left the only issue before the Tribunal i.e. the motor vehicle expenses for consideration. I also note that the Commissioner did not tender the applicant's income tax return to the Tribunal so that the Tribunal does not have any evidence before it of the information provided by the applicant in her income tax return. However exhibit A indicates that the Commissioner has also allowed deductions in respect of the applicant's uniforms, stationery, and passport photos apparently given to the agency by the applicant. I infer this to be the case from the information in exhibit 1.
13. The claim in respect of motor vehicle expenses amounting to $740 is calculated on a rate per kilometre basis which was conceded by the Commissioner's representative as having been incurred by the applicant. I am not sure that I can accept that the basis upon which the claim for motor vehicle expenses was made is a proper basis in the terms of the Act but I am prepared to infer that the applicant would have incurred losses and outgoings including depreciation amounting to $740 in respect of 3,444 km travelled by the applicant in a Galant sedan purchased by the applicant in July 1983.
14. The applicant's income-producing activity is to work as a casual nursing sister employed by various hospitals through an agency which specialises in arranging such casual work for nursing sisters. The normal procedure is so for hospitals which require additional nursing assistance to contact the agency and for the agency to then make arrangements for a particular nursing sister on their books to undertake the particular shift requested by the hospital. The evidence is that these arrangements are very often made at extremely short notice, quite often after the particular shift had commenced at the hospital because the hospital realises that due to extraordinary or emergency situations it does not have enough sisters on duty in its intensive care units. I say intensive care units because this is the field of speciality of the applicant taxpayer. The applicant made it clear in her evidence that she is required by the particular hospital to get to the hospital as quickly as possible and it was essential that she travel by car so as to reduce travelling time to a minimum.
15. There is no continuity in the work arranged by the agency for the applicant,
ATC 178changing from day to day as the exigencies of running intensive care units in major public hospitals from day to day.
16. The applicant is normally paid for her work by the particular hospital although one hospital paid her through the agency i.e. the agency paid the applicant and the agency received payment from the hospital. There was no evidence before the Tribunal as to how the agency derived its remuneration in respect of its services but I infer that the agency received a commission from the hospital for arranging the emergency employment.
17. I find as a fact that when the applicant set out from her home to travel to a hospital and return she was travelling on her duties as an employee of the particular hospital that had contracted to employ her on that day.
18. The applicant's case was that she was carrying on a business from her home, her home was therefore headquarters or base of operations and therefore when she travelled from her home to a hospital for the purpose of producing assessable income such expenditure was an allowable deduction. The applicant relied in particular on the decision of the Supreme Court of New South Wales in
F.C. of T. v. Ballesty 77 ATC 4181 and sought to distinguish a decision of Taxation Board of Review No. 1 reported as Case R8,
84 ATC 157.
19. The respondent Commissioner sought to rely on the decision in A-G for
N.S.W. v. Perpetual Trustee Co. (Ltd.) (1951-1952) 85 C.L.R. 237 to rebut the applicant's argument that she was carrying on a business. In particular the respondent relied upon dicta of Kitto J. at pp. 299-300 where his Honour discusses the law relating to the master and servant relationship and provided the following analysis:
"It will be seen that three elements are involved: first, the relationship must entail, on the part of the servant, obedience to orders; secondly, the obedience to orders that is required is obedience to orders in doing work; and, thirdly, the doing of the work must be for the benefit of the master, that is, it must relate to his own affairs."
20. Applying that analysis to the facts of this case it is clear enough that the applicant is an employee. Furthermore it appears that she is employed by each hospital on a day to day basis the agency acting as agent for the particular hospital when it gives the applicant instructions as to where and when she is to report for duty. The applicant does not make any decision herself as to where she is to work or her hours of work, although she can make herself "unavailable" on a particular day. Nor does she make any decision as to the nature of the work she is to perform as an intensive care nursing sister, It is perfectly true that, as a nursing sister, she must exercise professional care and judgment in the performance of her work and must make decisions constantly in the course of her work about the care of patients. That arises out of her professional status rather than determining whether or not she is in a master/servant relationship. "Business" is defined to exclude occupation as an employee (sec. 6(1)).
21. I therefore agree with the respondent's submission that the applicant was not carrying on a business from her home.
22. The respondent then argued that the facts of this application brought the application within the decision in Lunney's case (supra) so that the cost of travel between the applicant's home and her various places of employment was not deductible. There must be considerable doubt as to whether the High Court would have made the same decision in Lunney's case if the evidence had disclosed that Mr Lunney's circumstances were the same as this applicant who is required to travel from home to different places of employment from day to day on an ad hoc basis very often in circumstances where the notification of time and place of employment depends upon the exigencies of the employer's business.
23. In my view this application comes within the terms of the decision of Rath J. in F.C. of T. v. Collings ATC 4254 where his Honour had to decide whether travel expenses incurred outside normal working hours and as the circumstances at the time demanded were allowable deductions. His Honour concluded that they were.
24. In the course of his reasons for judgment his Honour discussed the authorities in detail and after referring to the leading authorities went on to make the following observations as to the law at pp. 4267-4268:
"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 hand 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 with or without the aid of her portable terminal. Lord Reid said (in Taylor v. Provan) that it was necessary, in Owen v. Pook, that whoever was appointed should incur travelling expenses. Similarly it would, in a practical sense, be necessary for any person on duty 24 hours a day seven days a week to incur travelling expenses. 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)."
25. I am bound by the decision in Collings' case to allow the applicant's claim.
26. If I am not right in this view it seems to me that the same answer must be given on the authority of
F.C. of T. v. Wiener 78 ATC 4006, which involved a claim for travelling expenses by a schoolteacher. The teacher was required to travel to a number of schools each day and on different days of the week. The Supreme Court of Western Australia had to decide whether the cost of travel from home to the first school each day and from the last school to home each day was deductible. The Court said it was. In his reasons for judgment Smith J. stated 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."
Bearing in mind that in Wiener's case the travel was to a prearranged timetable the decision applies a fortiori to the facts of this application, given that the applicant was employed by different employers from day to day on an irregular basis and very often at short notice.
27. The Commissioner's decision on the objection has been set aside and the claim allowed.