PM Roach SM
Administrative Appeals Tribunal
P.M. Roach (Senior Member)
At a time when substantial inroads are being made in clearing up the backlog of undetermined tax objections, it must be expected that for some time matters will continue to come forward for determination only after undue delay on the part of the Commissioner in discharging his statutory duty to refer objections for independent review. Occasionally such delays will be extreme. This is an instance in the category of extreme delay.
2. In September 1978 the Commissioner assessed the income tax return of the applicant for the year of income ended 30 June 1978. He disallowed a claim described by the Commissioner in the adjustment sheet as "fares to and from work" $2,995. On 13 November 1978, within the period of 60 days and only 60 days allowed to the taxpayer to institute an objection to the assessment, the taxpayer objected. Some 10 months later the Commissioner disallowed the objection. Within the strictly limited period of 60 days allowed to the taxpayer, the taxpayer requested reference to a Board of Review for review. That was on 1 November 1979 [sic]. Despite representations by the applicant, and in particular representations in writing in September 1981, February 1982, and March 1983, his objection was not forwarded to a Board of Review until December 1985 [sic].
3. On 1 July 1986 responsibility for determination of the objection passed to this Tribunal and the matter was listed for hearing on a circuit sittings at the first opportunity in October 1986. That hearing date had to be vacated because of an accident involving the applicant that day and the matter came on for hearing on the next circuit sittings. Regrettable though the delay is, it cannot influence the determination upon the objection.
4. In the mid-1970s the applicant was a young married man working in the field of courts administration in the State of New South Wales. He resided with his wife and infant children at Wollongong. He then secured a promotion to a position as a relieving Clerk of Petty Sessions to be headquartered in a regional city and from that city to serve courts throughout the district. His duties in that appointment would involve frequent travel to a range of courts. He transferred from Wollongong to that city with his wife and children. His costs of removing furniture and possessions were met by the State, and the State also paid motor vehicle travelling expenses. After a short interval occupying rented premises arranged privately, he moved into accommodation provided by and rented from the State. The family were to remain resident in that accommodation until July 1978 when they transferred to Sydney in consequence of the applicant taking up another appointment in that city. Once again, the State bore the costs of removal of furniture and possessions and provided for motor vehicle travelling expenses. While living in the regional city the applicant was successful in securing promotion to another position within courts administration in another regional city 70 km distant from the first-mentioned regional city. Thereon he proposed to his superiors that, in lieu of him transferring with his family to the second city, in which event he would be entitled to claim the removal and other expenses incidental to the transfer, he should be permitted to continue to reside in the Government-provided accommodation in the first-mentioned city and, in lieu of the transfer allowances, be paid "travelling expenses" to partially indemnify him for the increased costs he was about to bear in travelling between his home and new place of employment. The proposal was approved on a basis which would ensure that the State was not put to greater expense than it would have borne had the family moved residence. That approval was on the basis that the "travelling expenses" ("at the specified journey rate less $12.50 per week up to a maximum of $41 per week") would be paid until permanent accommodation was
ATC 779obtained or until the expiration of six months from the taking up of the appointment, whichever happened earlier. The allowance was so paid for the entire period of six months. As it turned out, no permanent, accommodation was obtained in the second city because, shortly after the expiration of the initial six months, the applicant was transferred to metropolitan Sydney.
5. In his return of income to 30 June 1978, the applicant returned as assessable income "value of board, quarters or residence provided free or for less than full value by employer". His contention that assessable income was so derived was not challenged. He acknowledged the benefit to have been derived for the entire 52 weeks of the year and that the value to him was $10 per week, thereby increasing his assessable income by $520. He also acknowledged having received by way of travelling allowance the sum of $760.
6. The applicant claimed a deduction for $2,995, being costs of travel. Quantum is not in dispute. That claim fell into two parts. First, as to $76.50 it was a claim for the costs of all return journeys (3 km each way) between his home and workplace in the first regional city between 1 July 1977 and termination of his employment there. For the rest ($2,919), it related to the balance of the year and the cost of travelling between his home in the first regional city and his workplace (70 km away) in the second regional city.
7. The fact of the first claim is of particular importance to the argument of the applicant. He accepts that, under ordinary circumstances, the costs of travelling between one's residence and place of work or employment does not give rise to an entitlement to a deduction pursuant to the provisions of the Income Tax Assessment Act ("the Act"). (
Lunney v. F.C. of T. and Hayley v. F.C. of T. (1957-1958) 100 C.L.R. 479.) However, like so many other taxpayers, he claims that his circumstances are such that the principles laid down by the High Court of Australia in Lunney and Hayley do not apply. He puts his claim on the basis that in order for him to derive portion of his assessable income, namely the value of the employer-subsidised accommodation, it was necessary both (a) that he be employed by the State, pursuant to which engagement he was obliged to attend at his place of work; and also (b) that he should reside in the accommodation provided. He says that if he failed to perform the duties of his employment, his entitlement to a salary and to reside in the subsidised accommodation would both cease. Similarly, if he failed to personally reside in the accommodation provided, his entitlement to reside there would cease and thereon he would cease to derive assessable income in the form of the value of the rental subsidy. In short, his contention is that unless he had travelled from one place to the other he could not have derived the assessable income that he did from both sources. To that extent the second part of the claim involves no more. It differs only in that the latter journey involved 70 km each way, whereas the former involved 3 km each way. However, there is a further dimension in relation to the latter aspect of the claim, because in that instance the applicant was being paid an allowance by his employer with a view to assisting him to defray the costs of that travel.
8. As to the first argument, I am unpersuaded that it falls outside the scope of the decisions in Lunney and Hayley (ante). In that case Dixon C.J. identified the issue as being (at p. 485):
"whether the fares paid by ordinary people to enable them to go day by day to their regular place of employment or business and back to their homes are deductible expenses allowable against the assessable income earned by the employment or business."
9. In my view nothing turns on the circumstance that the present claim is for "motor vehicle expenses" rather than "fares" paid to transport authorities or private contractors. What is significant is that the travel is between a place of residence and the place of employment at which or from which the assessable income earned is generated. Furthermore, in this instance, it is that employment which generates the subsidy factor as assessable income for the applicant.
10. I am confirmed in my view when I consider the views of a majority of Judges in the High Court of Australia in
Handley v. F.C. of T. 81 ATC 4165; (1980-1981) 148 C.L.R. 182 and
F.C. of T. v. Forsyth 81 ATC 4157; (1980-1981) 148 C.L.R. 203. There the majority of the Court held that not even the substantial income-producing activity carried out by the taxpayers in their private homes in the course of their professional careers as
ATC 780barristers could alter the circumstance that the place of residence occupied by each taxpayer with his family constituted his "home". It was not such a place as would lose its "private" character only because some, and even substantial, income-producing activities were carried out there.
11. In his reasons for decision in Handley, Murphy J. said (at ATC p. 4173; C.L.R. p. 198):
"Many lawyers, to the annoyance of their domestic partners, do a lot of legal reading in the bedroom. Also there is much scientific and anecdotal evidence in favour of the view that intellectual work goes on subconsciously as well as consciously, even during sleep. Perhaps the next claim would be for deducting part of the upkeep of the bedroom, or even a claim for part of the upkeep of the garden in which a barrister thinks about the conduct of cases whilst resting or strolling."
12. Despite the fact that such intellectual work might be productive of income, his Honour's view was that that did not give rise to an entitlement to a deduction. In those circumstances, in my view, it must follow that even if it could be said that the mere act of residing in the home generated assessable income to the point that while asleep, undisrupted by either conscious or subconscious income-producing intellectual activity, a taxpayer earned income that could not be said to generate an entitlement to a deduction. His residence was his home, and his home was "private", and his travelling between that home and his place of work was also "private" in the sense provided for in sec. 51(1) of the Act. For the sake of completeness I observe that that conclusion holds as much for the greater travelling distances involved in the latter period as in the earlier.
13. What distinguishes the second aspect of the claim is not so much distance, but rather the circumstance that the applicant received a "travelling allowance" from his employer. The parties are agreed that that constituted assessable income. It was paid to enable the applicant to travel and it was only payable so long as, and then only to the extent that, he qualified for the payment by travelling. But in my view that does not alter the character of the travel itself. In my view it remains of the character of "private expenditure" (cf. my reasons in Case U29,
87 ATC 229) and no deduction is allowable.
14. I affirm the determination of the Commissioner upon the objection under review.