Federal Commissioner of Taxation v. TomsJudges:
Mr Toms is a logging contractor. In the fiscal years ended 30 June 1983 and 30 June 1984, he felled trees for saw logs and veneer logs in various parts of the Ewingar State Forest. The work was done, it would appear, in the former year under contract for a company which had itself contracted for the supply of logs with two mills, and in the later year as a member of a partnership which had contracted with the mills to supply logs. The logging was selective, and the trees to be felled were marked by Forestry Commission officers. A base was set up in the forest, from which some eight to 15 men worked, and Mr Toms proceeded from there by four-wheel drive vehicle to predetermined logging areas within a radius of some 20 kilometres. The working day was from 6.30 a.m., when Mr Toms would leave the base, until about 4.30 p.m. to 5 p.m. when he would cease work.
Mr Toms' home was at Grafton, some 108 kilometres from the forest base. He claimed that this was too far to travel each day to his work in the forest, so that it was necessary to establish a caravan at the base, where he stayed from Monday to Friday each week. Other loggers and forestry workers also camped at the base. Mr Toms stayed there for a total period of four years.
The caravan was a 16-foot-long Chesney caravan previously purchased by Mr Toms for $2,400 for family use. When it was installed in the forestry base camp, Mr Toms travelled to it on Monday mornings and returned to his home at Grafton on Friday afternoons. Another man, who worked with him, also occupied the caravan throughout the two fiscal years in question.
The issue before the Administrative Appeals Tribunal [reported as Case U228,
87 ATC 1268] was whether, in each of those years, Mr Toms was entitled to deductions for income tax purposes related to the cost of maintaining camp quarters for himself in the caravan, including such items as the cost of fuel for heating and lighting, depreciation, maintenance and painting of the caravan, and the additional costs involved in the provision of food at a campsite. There was no dispute about further deductions claimed by the taxpayer in respect of the use of his four-wheel drive vehicle to get from the base to each day's place of work in the forest.
In Mr Toms' returns for the two years, claims were made respectively of $2,880 and $3,120 in respect of what were described as ``Camping Costs - Forest''. At the hearing before the Tribunal, it was made clear that the figures were not based on any precise or accurate calculations. The Tribunal concluded that in the one year the taxpayer should be allowed a deduction assessed at $30 per week for 48 weeks, totalling $1,440, and in the other year a deduction calculated at $33 per week for 48 weeks, totalling $1,584. In doing so, the Tribunal accepted Mr Toms ``as a completely honest witness''. But it said [at p. 1270]:
``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.''
The Tribunal considered that the taxpayer's position was to be contrasted with that of the urban commuter, the cost of whose routine travel to and from work would be denied deductibility under the decision of the High Court in
Lunney v. F.C. of T. (1957-1958) 100 C.L.R. 478. The Tribunal likened the
ATC 4375taxpayer's position rather to that of a person whose employment involves more than one place of work, so that travel between those places may be deductible:
Taylor v. Provan (Inspector of Taxes) (1975) A.C. 194. In such a case, the employment may ``involve the duty of travelling. It is not a question of getting to the place of employment, but the employment may be actually to travel...'' (See Nolder v. Walters (1930) 15 T.C. 380 at p. 388, per Rowlatt J., a passage cited by Wynn-Parry J. in
Sanderson (Inspector of Taxes) v. Durbidge (1955) 1 W.L.R. 1087 at p. 1092.) The Tribunal concluded [at p. 1271]:
``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.''
The Commissioner's appeal is based on two broad contentions. One is that the figures allowed by the Tribunal were not supported by evidence of expenditure, so that, as it was said, the Tribunal had been guilty of mere guesswork in the allowance it made. I should be very sorry to encourage the view that the Administrative Appeals Tribunal is bound to approach a question before it in a spirit of technicality, or that it is not at liberty to estimate in a case where precision is impossible. It is its duty to seek to arrive at the correct or preferable decision. In the present case, I think it was open to the Tribunal, on the evidence, to conclude that the figures it found probably reflected the items in respect of which it assessed those figures. The more solid ground on which the Commissioner's appeal is based is that the Tribunal erred in law in treating the circumstances as constituting ``a further category of exception to the general rule''. The Commissioner says it was not open to the Tribunal, in the circumstances disclosed by the evidence, to hold that the expenditure in question was deductible under sec. 51(1) of the Income Tax Assessment Act 1936.
The Tribunal treated the respondent's situation as comparable to that of a worker whose work requires him to travel. Obvious examples are commercial travellers and maintenance tradesmen required to move constantly from one location to another. As Professor Parsons says in his Income Taxation in Australia (1985) p. 477, such a workman ``is entitled to deductions of travel expenses because shifting places of work dictate that he travel''. (The principle justifies the allowance to the taxpayer of the cost of getting by four-wheel drive vehicle to each day's worksite, and a further illustration of its application is to be found in F.C. of T. v. Charlton (infra, at p. 4421).) So the question is whether, in the present case, it was open to the Tribunal to regard the taxpayer's choice to reside from Monday to Friday in his caravan at the base camp as dictated by travel needs of a kind that would qualify for deductibility.
The guiding principles for Australia were laid down by the High Court in Lunney v. F.C. of T. (supra). That case was concerned with fares paid by taxpayers, whether employed or carrying on their own businesses, in daily travel between their homes and places of employment or business. Dixon C.J. at p. 485 said: ``Both in Australia and in England the view has always prevailed that expenses of travelling from home to work or business and back again are not deductible''. At p. 499, in the joint judgment of Williams, Kitto and Taylor JJ., it is stated:
``(T)o 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.''
They went on to point out that taxpayers ``have, within limits, the right to choose where their homes shall be so that a taxpayer's daily journeys between his home and place of work are rendered necessary as much by his choice of a locality for his residence as by his choice of employment or occupation. And indeed the purpose of such journeys is, at least, as much to enable him to reside at his home as to attend his place of work or business''. Although, at first sight, it might seem this statement is applicable
ATC 4376to a case involving rail or other fares rather than the expenses of setting up a caravan at a base camp, further consideration suggests that the caravan was rendered necessary as much by the taxpayer's choice of the place of his residence in Grafton as by his choice of employment in the State forest, and its purpose was to enable him to retain his residence at Grafton although employed in the State forest. Had he lived at a town closer to the forest, there is no question the caravan would have been unnecessary.
The joint judgment, while noting, at p. 501, that the legislative provisions in England have not been identical with sec. 51 (see also per Dixon C.J. at p. 486, and see the comment of Mason J., in
Handley v. F.C. of T. 81 ATC 4165 at p. 4172; (1981) 148 C.L.R. 182 at p. 195, that ``the English decisions are... to be distinguished'', a comment based on the differences from the Australian section both of the statutory provisions and also of the practice of the Commissioners under the English legislation), stressed that nevertheless the decisions in England assert a principle, with which their Honours agreed, that ``expenditure incurred by a taxpayer in order to travel from his home to his place of business'' is not ``a business expenditure or an expenditure incurred in, or, in the course of, earning assessable income'', but on the contrary ``is properly characterised as a personal or living expense''. Their Honours added:
``(A)t the most, it may be said to be a necessary consequence of living in one place and working in another.''
Lodge v. F.C. of T. 72 ATC 4174; (1972) 128 C.L.R. 171 (where a working mother was denied a deduction in respect of nursery fees incurred for her infant daughter during the working day), Mason J. at ATC pp. 4175-4176; C.L.R. p. 175 expressed the view that Lunney's case turned upon the character of the expenditure incurred. His Honour again relied upon this view in his judgment in Handley v. F.C. of T. (supra, at ATC pp. 4171-4172; C.L.R. p. 194). The correctness of the decision in Lodge's case was challenged, but the challenge was dismissed, in
Martin v. F.C. of T. 84 ATC 4513. At 4515 Bowen C.J., Toohey and Lockhart JJ. said:
``The expenditure incurred in kindergarten fees was a prerequisite to the taxpayer's employment in the sense that it allowed her to take on the jobs in question. But there was nothing about the expenditure which was relevant or incidental to the work which she was engaged to perform. The expenditure was not incurred in, or in the course of, performing the work for which she was employed, that of a steno secretary.''
F.C. of T. v. Charlton 84 ATC 4415 Crockett J., in the Supreme Court of Victoria, considered a situation somewhat analogous to the present. The taxpayer was a pathologist whose home was in the Melbourne suburb of Fitzroy. During the relevant period, he performed a number of autopsies at Bendigo for which he was paid fees and, in order to avoid the fatigue of the travel which would otherwise have been involved, he retained a flat at Bendigo which was available to him. He wrote up the drafts of his autopsy reports at the flat, where he also kept certain medical texts. Crockett J., at pp. 4419-4420, referred to the personal nature of expenses incurred by a taxpayer in travelling from his home to his place of work. He added:
``The Commissioner contends (correctly in my view) that, if the taxpayer should choose to reside so far from the place where it is necessary for him to be in order to gain his income that he not only needs to incur expense in travelling to that place but also to incur expense in the provision to him of some accommodation transitory or discontinuous in its use and secondary to or temporarily supplemental of his actual home, then that expense, too, is for the same reason non-deductible.''
At pp. 4420-4421 his Honour stated the conclusion:
``The taxpayer's election to live in Melbourne and not in Bendigo meant that the rental expended on the flat in order to enable him to secure accommodation in which to recuperate from the rigours of travel and the nature of his work was an expenditure dictated not by his work but by private considerations. There was an exception to this in the month of May. He was then required by his employment to work in both Wangaratta and Bendigo. The nature and circumstances of that work made the taking of rest at Bendigo necessary. The keeping of a flat during that month was
ATC 4377dictated by his income-producing activity and was incidental to his work.''
I am unable to distinguish the situation of Mr Toms from Charlton's case. The principles there applied are supported by the authorities to which I have adverted. Those principles require that the exception perceived by the Tribunal in cases of the present kind should be rejected. It follows that it was not open to the Tribunal to find the expenditure proved in this instance deductible under sec. 51(1).
However, there is an outstanding question. The Tribunal found, as a matter of probability, that the caravan was used, not only as a place of lodging from Monday to Friday, but also as a place of temporary shelter for the applicant and his assistant (who for at least a part of the period appears to have been actually his employee) when work was required to be interrupted by bad weather. It was also, the Tribunal found, ``used as a place within which to store the logging equipment of the applicant''. Although it cannot be said that the objections were drafted with clarity, I think they do raise a question whether some allowance should be made in respect of depreciation of the caravan under sec. 54 as ``property, being plant or articles owned by a taxpayer and used by him during [the year of income] for the purpose of producing assessable income''. It is clear that the nature of the caravan does not debar it from falling within this section:
Quarries Limited v. F.C. of T. (1961) 106 C.L.R. 310. Nor does the fact that the predominant use of the caravan was not for the purpose of gaining assessable income. That consideration, as is shown by the decision of Mason J. in
F.C. of T. v. Faichney 72 ATC 4245 at pp. 4249-4251; (1972) 129 C.L.R. 38 at pp. 45-47, merely requires that the amount of the deduction otherwise allowable be apportioned under sec. 61. Having regard to the express findings made by the Tribunal, I do not think it is open to me to disregard the use held to have been made of the caravan, for the purposes mentioned above, as ``so slight that it should be disregarded'' (see Faichney's case at ATC p. 4251; C.L.R. p. 47).
For these reasons, I must uphold the Commissioner's appeal. I will set aside the decision of the Tribunal and propose to remit the matter to it for determination according to law. I note that the Commissioner has agreed to pay the taxpayer's costs without any order being made to that effect, and that the parties expressed, at the hearing, their willingness, in the event that I should take the views which I have taken, to endeavour to strike by agreement an appropriate figure in respect of depreciation of the caravan, in order to obviate the necessity for the matter to be further debated in the Tribunal. In order to allow time for consideration of the appropriate figure, I shall refrain from making any order at this stage except that the Commissioner bring in short minutes of orders reflecting these reasons on a date to be fixed.