DW Muller SM
Administrative Appeals Tribunal
DW Muller (Senior Member)
This is an application to review an objection decision of the Deputy Commissioner of Taxation dated 14 April 1994. The decision related to the income year ended 30 June 1992 and disallowed two items of claimed expenditure. Firstly, an amount claimed to have been incurred by the applicant taxpayer in getting his wife to collect his wages and, secondly, expenditure incurred on food and drink as a long distance truck driver.
2. This matter was heard in Brisbane on 29 November 1994. The applicant appeared with his accountant, Mrs. Scott, and the respondent was represented by an officer of the respondent. The applicant abandoned his claim in relation to expenditure incurred in getting his wife to collect his pay.
3. The relevant period for the purpose of this review was 1 July 1991 to 19 April 1992. During that period the applicant taxpayer worked as an employed long distance truck driver. His base was Brisbane and he travelled to Townsville, Cairns, Sydney, Melbourne and Adelaide. He claimed an amount of $8564 as being expenditure on food and drink for the 206 days he spent away from home for work purposes. His claim was not allowed on the basis that he had failed to substantiate his travel expenses.
4. The applicant gave evidence and he was cross-examined at the Tribunal hearing. He also produced his log books for the relevant period. He told the Tribunal that it was his custom to have three square meals per day. His physical appearance certainly corroborated that evidence. He said that when he was working he suffered from dehydration and to compensate he usually drank a lot of soft-drink whilst driving. He said words to the effect that it would be impractical to ask for a receipt for every item that he bought and to then retain such receipts. He was somewhat vague about the costs of various meals and drinks such as bacon and eggs, hamburgers, T-bones, orange juice and other drinks but his figures added up to about $40 per day whilst on truck driving trips. He said that at the relevant time his employer was a one-man operation which employed 15 to 20 men. His employer paid a wage which included a component for travel allowance but the employer did not have the accounting or secretarial staff to do the paperwork necessary to specifically set out the travel allowance on the pay slips.
5. The applicant said in his evidence to the Tribunal that he had previously had discussions with a Ms. W from the Australian Taxation Office about the requirements for substantiation. He said that he understood from Ms. W that his log book record would provide sufficient substantiation and that he had conducted his affairs on that basis until this current problem arose. In a statement tendered to the Tribunal Ms. W said that she could not remember the conversation.
6. I find that the applicant was a truthful witness and that his log books accurately record his trips and days away from home for work purposes. Consequently, I find as follows:
- (a) The applicant spent 206 days away from home for work purposes as a long distance truck driver during the relevant period (1 July 1991 to 19 April 1992);
- (b) He spent on average $40 per day during the said 206 days on food and drink;
- (c) He was paid a wage which included a travel allowance component but such component was not specifically documented by his employer due to his employer's lack of staff;
- (d) He thought that he was complying with the substantiation requirements by keeping a log-book record of his trips. This state of mind was brought about by his conversation with Ms W.
7. The relevant provisions of the Income Tax Assessment Act 1936 are as follows:
``82KZ(1) [Requirements for deduction] Subject to this Subdivision, a deduction is not allowable under this Act in respect of an expense incurred by a taxpayer, being-
- (a) an eligible expense in relation to a meal allowance or in relation to a travel allowance; or
- (b) an employment-related expense or a travel expense,
- (d) in any other case - documentary evidence of the expense is obtained by or on behalf of the taxpayer.
82KZ(4) [Overtime meal or travel allowance] Where-
- (a) the amount of-
- (i) an overtime meal allowance paid or payable to a taxpayer (in this sub- section referred to as the `relevant taxpayer'); or
- (ii) a travel allowance that was paid or is payable to a taxpayer (in this sub-section also referred to as the `relevant taxpayer') and relates solely to travel by the taxpayer within Australia, (whether or not the allowance was paid or is payable under an industrial instrument) is, in the opinion of the Commissioner, reasonable having regard to the total of the amounts of the outgoings that it would be reasonable for a taxpayer to whom the allowance was paid or is payable to incur-
- (iii) if sub-paragraph (i) applies - in respect of the food and drink to which the allowance relates; or
- (iv) if sub-paragraph (ii) applies - in respect of the travel to which the allowance relates, in respect of accommodation, the purchase of food and drink, and expenditure incidental to the travel; and
- (b) the total of the amounts of the eligible expenses in relation to the allowance incurred by the relevant taxpayer and claimed by the relevant taxpayer as deductions in respect of the year of income in which the expenses were incurred does not exceed the amount of the allowance,
this section and section 2KZA do not apply, and shall be deemed never to have applied, in relation to the relevant taxpayer in relation to any of the expenses referred to in paragraph (b).
82KU(1) [Receipt, invoice for non- depreciation expense] A reference in this Subdivision to documentary evidence of an expense incurred by a taxpayer is, except in the case of depreciation, a reference to a
ATC 110document, being a receipt, invoice or similar document, that-
- (a) sets out-
- (i) in any case - in the English language; or
- (iii) the date on which the expense was incurred;
- (iv) unless sub-paragraph (v) applies - the name of the person who supplied the goods or services to which the expense relates;
- (v) if the goods or services to which the expense relates were supplied in the course of a business carried on by a person - the name of the person or the business name under which the person carries on the business;
- (vi) the amount of the expense expressed in the currency in which the expense was incurred;
- (vii) the nature of those goods or services; and
- (viii) the date on which the document was made out;
- (b) is supplied by or on behalf of the person referred to in sub-paragraph (a)(iv) or (v), as the case may be; and
- (c) is obtained by or on behalf of the taxpayer at, or as soon as reasonably practicable after, the time when the expense is incurred.
82KU(6) [Undocumentable expense] Where, at, or as soon as reasonably practicable after, the time when a taxpayer incurs an expense that, by virtue of sub- section (7) or (8), is an undocumentable expense-
- (a) an entry setting out-
- (i)... the particulars that would be set out in documentary evidence of the expense (other than particulars of the date on which the documentary evidence was made out);
- (ii)...; and
- (iii) particulars of the date on which the entry is made and the name of the person making the entry,
is made in the English language, by or on behalf of the taxpayer, in a diary or similar document; and
- (b) the diary or similar document is signed, in relation to the entry, by the person making the entry,
then, for the purposes of this Subdivision-
- (c) the taxpayer shall be deemed to have obtained documentary evidence of the expense; and
- (d) so much of the diary or similar document as sets out those particulars shall be deemed to be documentary evidence of the expense.
82KU(7) [Relevant expense not exceeding $10] For the purposes of sub-section (6), where-
- (a) a taxpayer claims as a deduction in respect of a year of income an expense (in this sub-section referred to as a `relevant expense')-
- (i) that was incurred by the taxpayer during the year of income; and
- (ii) the amount of which does not exceed $10 or such higher amount as is prescribed for the purposes of this sub-paragraph; and
- (b) the total of the amounts of the relevant expenses claimed by the taxpayer as deductions in respect of that year of income does not exceed $200 or such higher amount as is prescribed for the purposes of this paragraph,
the expense referred to in paragraph (a) shall be deemed to be, and always to have been, an undocumentable expense.
82KU(8) [Expenses deemed undocu- mentable] For the purposes of sub-section (6), where the Commissioner is satisfied, having regard to the nature of an expense incurred by a taxpayer, that it would be unreasonable to expect the taxpayer to have obtained documentary evidence of the expense, the expense shall be deemed to be, and always to have been, an undocu- mentable expense.
82KZAA(1) [Substantiation sections not applicable] Where:
- (a) a taxpayer claims to have incurred an expense during a year of income; and
- (b) having regard to:
- (i) the nature and quality of evidence that the taxpayer has available to substantiate the claim; and
- (ii) special circumstances affecting the taxpayer, including, but not limited to, the following:
- (A) the extent to which the taxpayer attempted to comply with the substantiation sections;
- (B) whether the taxpayer's failure to comply with the substantiation sections was inadvertent or deliberate;
the Commissioner, in the course of reviewing the claim after the making of the assessment of the taxpayer's taxable income of the year of income, is satisfied that:
- (iii) the expense was incurred by the taxpayer during the year of income; and
- (iv) it would be unreasonable for the substantiation sections to apply in relation to the taxpayer in relation to the expense; and
- (c) the Commissioner's review is undertaken;
- (i) of the Commissioner's own motion; or
- (ii) in considering an objection against the assessment of the taxpayer's taxable income of the year of income; or
- (iii) in considering whether to make an amendment of the assessment of the taxpayer's taxable income of the year of income in response to a request made by the taxpayer before the commencement of this section;
the substantiation sections do not apply in relation to the taxpayer in relation to the expense.''
8. The method by which the applicant was paid by his employer failed to specify an amount for travelling allowance. The consequence of this is that the applicant cannot take advantage of the provisions of s. 82KZ(4). He must substantiate his claim in respect of an expense incurred for it to be allowable as a deduction.
9. It is clear that the log book record kept by the applicant does not satisfy the definition of ``documentary evidence'' contained in s. 82KU(1), in that it is not a receipt, invoice or similar document.
10. I am satisfied that in this case the expenses associated with the purchase of a large number of small items of food and drink are such that it would be unreasonable to expect the applicant to have obtained documentary evidence of the total expense. Consequently, I find that the expense is an ``undocumentable expense'' within the meaning of that term in s. 82KU(8).
11. I find that although the expense was an ``undocumentable expense'', the applicant did not satisfy the provisions of s. 82KU(6) in that he did not keep a record of the expenses in a diary or similar document. Therefore, prima facie, a deduction is not allowable under the Act in respect of this expense incurred by the applicant.
12. The final matter for determination is whether or not the provisions of s. 82KZAA should be invoked in the applicant's case. Section 82KZAA is a provision designed to neutralise to some extent the harsh result which could follow a strict adherence to the provisions of the Act. Similar ameliorating provisions are to be found in the Social Security Act 1991. Such provisions are usually invoked when it is clear that to not do so would produce a result that is unfair, unjust or inappropriate in all the special circumstances of the case.
13. I am satisfied that the discretion should be exercised in favour of the applicant in this case for the following reasons:
- (a) He did incur the expense of $40 per day for 206 days, that is a total of $8,240.
- (b) He kept a log-book record of his trips and he was led to believe that this would be sufficient compliance with the substantiation provisions by an employee of the Australian Taxation Office. His failure to adequately comply was not deliberate.
- (c) It would have been unreasonable to expect the applicant to have obtained documentary evidence of all of the items of expense, or even the major portion of them.
- (d) All in all it would be unreasonable for the substantiation sections to apply in relation to the expense incurred by the taxpayer.
14. The objection decision under review is set aside. The applicant is to be allowed a deduction of $8,240 as travel expenses incurred by him during the period 1 July 1991 to 19 April 1992.