BJ McMahon SM
Administrative Appeals Tribunal
B.J. McMahon (Senior Member)
The applicant was employed as an officer of the N.S.W. Department of Agriculture. Following a reorganisation of his branch, his position was deleted and a similar position was created to which he was assigned. The duties relating to that position were to be carried out in the field but his headquarters were to be located at Newcastle. The applicant then lived with his family in the far northern Sydney suburb of Berowra. He decided that travelling from Berowra to Newcastle on weekdays was impractical. He therefore took up weekly board and lodging privately at Toronto, a suburb of Newcastle. For this he paid $65 per week for 39 weeks, a total of $2,535. This amount was claimed as an allowable deduction pursuant to sec. 51(1) of the Income Tax Assessment Act 1936 ("the Act"). The claim was disallowed and the present application is brought to review that decision.
Section 51(1) of the Act is in the following terms:
"51(1) 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."
On the hearing of the application the applicant did not give evidence. Indeed the evidence was left in a very unsatisfactory state. A copy of the applicant's income tax return was tendered. It contained a paragraph in exactly the same terms as the objection. As it was signed by the applicant, I received it as being the only direct evidence of the facts. The terms of the relevant paragraph and of the objection are as follows:
"(1) The amount claimed for Living Away from Home expenses of $2535 is an allowable deduction pursuant to the Provisions of Section 51(1) of the Income Tax Assessment Act 1936-1983 (as amended). Details of this claim were
ATC 338furnished with [taxpayer's] 1984 Income Tax Return. These details are reiterated below -
[Taxpayer] was transferred to the Newcastle area on 1st October, 1983. As a result of this transfer, [taxpayer] is required to live away from home during the week at his own expense. He receives NO reimbursement from his employer for his living away expenses. Minimum weekly cost of living away from home - Rent & Board paid - $65 per week, 39 weeks. As the taxpayer was transferred to an area too far from his home at the direction of his employer, these expenses were incurred. Therefore, the expense of $2535 was incurred as a direct consequence of the taxpayer's employment and position."
The applicant's agent also tendered a copy of the Crown Employees' (Transferred Officers Compensation) Award because, as he said, that had been given to him by his client. He was not aware of the relevance of it and could not draw my attention to any particular clause in the award. In its terms it is evidently for the purpose of regulating conditions of employment and of providing compensation for some expenses incurred by an officer "who has been assigned to a new location, other than from one part of the metropolitan area to another, at which he is to perform duty and who, as a consequence of such assignment, finds it necessary to leave his existing residence and seeks to take up a new residence...".
The only relevant clause appears to me to be cl. 4 dealing with the cost of temporary accommodation in the case of transferred officers. This provides for payment of an allowance in certain stipulated circumstances where a transferred officer is required to vacate his existing residence. The present application, however, is not a case under the former sec. 51A of the Act dealing with a living away from home allowance. The evidence was that the applicant was not reimbursed for the cost of his board and lodging. The reason for tendering the award, therefore, is rather obscure. The applicant's case is simply that the deduction was incurred as a direct consequence of the applicant's employment and was incurred as a prerequisite to the earning of assessable income.
It is true that sec. 33(1)(c) of the Administrative Appeals Tribunal Act provides that this Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate. However, it has been observed on many occasions that evidence of probative value must be put forward, even if the best available evidence is not. Mere hearsay or versions of important facts given from the Bar table simply on instructions will not be considered adequate in order to establish facts that are relevant to an applicant's claim.
In the present circumstances, however, I have been prepared to assume in the applicant's favour that all the facts alleged in the notice of objection and indicated from the Bar table are, in fact, correct. They do not, in my opinion, substantiate a claim for the allowability of the deduction.
The applicant's case is indistinguishable in principle from the facts considered in Case K29,
78 ATC 281. In that case the taxpayer was a clerk employed by a public authority at its head office in Sydney. He was subsequently promoted to a position in a country town, and for the period he was there, lived in a cottage which he rented from the authority. Throughout the whole of that period the taxpayer maintained his residence in Sydney where his wife and children continued to reside. While employed in the country town, it was the taxpayer's normal practice to drive to it from his family home in Sydney each Monday morning and return to his family home each Friday evening. The taxpayer did not receive any allowance from his employer while he was in the country town. The expenses incurred in travelling between the country town and his Sydney residence, and for rent and electricity paid in respect of the country cottage, were disallowed.
Such expenses were "private and domestic" and fall within the exception of sec. 51(1) of the Act.
The fact that the expenses in that case were composed principally of fares, does not detract from the principle applicable in the present circumstances in relation to board and lodging. Such expenses are of a private and domestic nature. They are intrinsically so.
F.C. of T. v. Faichney 72 ATC 4245 at p. 4249, Mason J. pointed out:
"There is no definition of the expression `private or domestic nature'. However, the examples of expenditure of a private or domestic nature which leap to the mind are those which could not conceivably be incurred in gaining assessable income e.g. the expense of private entertainment or rent paid for the taxpayer's dwelling-house."
As a matter of legal logic, there is no difference in principle between the rent paid for the taxpayer's dwelling house and the amount paid for his board and lodging. The fact that he maintained his principal establishment for the housing of his family does not change the character of the moneys paid for his accommodation and sustenance elsewhere. They continue to be private and domestic. Furthermore in this case they are not relevant to the earning of assessable income.
An application of the principles discussed in
Lunney v. C. of T. (1957-1958) 100 C.L.R. 478 leads to the conclusion that the expenses of living away from home are not expenses that are incurred in the interests of the employer; they are incurred as a consequence of the employee's decision to maintain his usual abode in a place remote from his place of work. Thus, not only can it be said that the taxpayer's board and lodging were private and domestic expenses, it seems to me that such expenditure is not in any relevant sense incurred for the purposes of earning assessable income. It is properly characterised as a personal or living expense. As was said in Lunney at p. 501:
"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 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."
The decision under review is therefore affirmed.