J Block SM

Administrative Appeals Tribunal (sitting as the Small Taxation Claims Tribunal)

Decision date: 14 July 1998

J Block (Senior Member)

The Applicant objected on 12 December 1997 against an assessment numbered 203163-001 issued on 8 December 1997 for the year ending 30 June 1997 (the ``relevant year'') in respect of the disallowance of certain motor vehicle expenses amounting to $1,319 (the ``vehicle expenses'') and also a penalty imposed in respect thereof (the ``penalty'') and to certain mobile phone expenses amounting to $150 (the ``phone expenses''). By notice dated 4 March 1998, the Respondent disallowed the Applicant's objections.

2. The Applicant was represented by Mr Ken Clifton of Ken Clifton & Associates, Certified Practising Accountants, while the Respondent was represented by Ms Virginia Rands, an officer of the Respondent. The Tribunal had before it the T Documents lodged in accordance with section 37 of the Administrative Appeals Tribunal Act and in addition certain other documents tendered at the hearing; the additional documents consisted of an amplified set of those documents (forming part of the T Documents) which bear the letter ``M''.

The Respondent tendered exhibit R1 entitled ``Telephone calls related to call backs for the month of December 1996'' and exhibit R2 which is headed ``Illawarra Area Health Service - Shoalhaven Hospital - Job Description''.

3. The Tribunal also had before it a Statement of Agreed Facts signed on behalf of both parties, the text of which can usefully be set out in these Reasons as follows:

``Statement of Agreed Facts

Motor Vehicle Expenses

1. The applicant is a Radiographer working at the Shoalhaven District Hospital in the X- Ray Department.

2. Her regular working periods are 8am to 6pm on an 8 day 70 hour roster.

3. The applicant normally parks in the general all day parking area, enters by the main hospital entrance and takes X-Rays in the main X-Ray department.

4. The applicant is on a roster for after hours emergency X-Rays, and is frequently called in to the hospital to various departments to deal with emergency X-Rays. She does the X-Rays and then goes home. The average time of each call-out would be approximately 1 hour. Often she is called in twice a day, sometimes several times. She receives no allowance or pay for actually being on call, and is only paid if required to attend at the hospital.

5. When performing her work for the Casualty Department, the applicant parks in the restricted emergency area, not in the general all day parking which is some 150 metres further away.

6. The applicant is paid a kilometre allowance by her employer for the trips she makes to the hospital to deal with emergency cases.

Mobile Phone

7. The applicant originally claimed $150 for mobile phone expenses in her 1997 tax return. This consisted of 50% of the cost of purchase of the phone, and 50% of the monthly access fees.

8. An error was made by the auditor in disallowing $200 when only $150 was claimed. This error has now been rectified.

9 The hospital has supplied the applicant with a beeper. The beeper was the main method of contact by the hospital.

10. The applicant states that the mobile phone was acquired to make her more contactable and to be able to make emergency calls. For example if her car breaks down on the way to the hospital to deal with an emergency.

11. The hospital now provides mobile phones for the on-call staff to use.

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12. No work calls have been made from the mobile phone since its purchase. There have been no incoming work calls to the phone.

13. Thirty-one private calls were made on the mobile phone from the date of its purchase to the end of the 1997 income year.

14. The phone was used predominantly by the applicant when travelling to the hospital, but was used once by her daughter when travelling to university, and some local calls were made by other members of the family.

15. The applicant has claimed and was allowed an amount of deduction for a number of work-related calls made from her home telephone.''

4. The Applicant alone gave oral evidence; the Tribunal accepts that her evidence was truthful. The Tribunal intends to deal firstly with the vehicle expenses, secondly with the phone expenses and lastly with the penalty. It was common cause between the parties that there was no issue of substantiation before the Tribunal and that accordingly it was incumbent upon the Tribunal to make findings as to the appropriateness or otherwise of each of the two deductions and the penalty. The Respondent did not, in the assessment, impose a penalty in respect of phone expenses.

5. (a) During the year ended 1997 (the ``relevant year'') the Applicant was employed as a radiographer by the Shoalhaven Hospital (the ``hospital''). As such she worked 70 hours each fortnight with 8 days on (``working days'') and 6 days off. A working day commenced at 8am and lasted until 6pm. In general terms the Applicant would be on-call after hours for 4 of those working days. The rostering system might vary in respect of public holidays but the number of on-call days in each cycle was never less than 4. When on-call, the Applicant had to be available throughout the night; in respect of the relevant year, she was called out on 154 occasions.

(b) The Applicant resided outside Nowra, the town in which the hospital is situated. To drive from her home to the hospital took between 10 and 15 minutes; this period might be extended if the call was received when she was not at home and when she was, for example, at a friend's home or at a restaurant. However, the Applicant would ensure normally that she was never more than 20 minutes away from the hospital. The Applicant was supplied with a beeper to enable the hospital to contact her.

(c) In respect of out-of-hours calls, the Applicant received a per kilometre travel allowance and remuneration calculated on the basis that the duration of each call (if shorter) was 4 hours. Her remuneration structure involved other elements which need not be detailed. The duration of a call would be timed to commence from the time of contact with the hospital which would usually (although not invariably) be at her home.

(d) In respect of out-of-hours calls, the Applicant parked in the restricted emergency parking area rather than, as was otherwise the case, the general all day parking area some 150 metres distant from the restricted area.

6. (a) Each out-of-hours call commenced with beeper contact from the hospital which required the Applicant to telephone the hospital. Although each call was timed for remuneration purposes to commence on first contact, the Applicant did not perform any radiological services of any kind at or from her home. The hospital contact required her immediate attendance at the hospital and gave instructions as to where she would take the relevant X-rays. Her duties did not involve the giving of advice to or in respect of the patient from her home. On the contrary it was abundantly clear that she travelled to work (and not on work) in order to take the necessary X-rays.

(b) The Applicant would customarily, if she intended to be in an area where the beeper might not work, notify the hospital of the telephone number where she could be reached.

(c) It is convenient at this juncture to note (although this aspect is relevant to the phone expenses) that since the Applicant lived outside town, her car journey to the hospital would take her, in its initial stages, through an unbuilt area and where no ordinary phone service would be available.

7. The starting point in respect of the costs of travel from home to work must always be the decision in
Kenneth Edmund Lunney v FC of T (1958) 11 ATD 404; (1958) 100 CLR 478 which held that such expenses are of a ``private'' nature, thus falling foul of the exclusionary provisions of section 51(1) of the Income Tax Assessment Act (``ITAA'').

8. In
FC of T v Collings 76 ATC 4254, Rath J allowed a deduction of certain travel costs to a

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computer consultant. In respect of the judgment in Collings, the following extracts are relevant or helpful:

(a) At page 4257, his Honour said:

``In order to assist in diagnosing and correcting computer faults whilst at home, the taxpayer was provided by her employer with a portable terminal which connected to the computer through the telephone line. She estimated that she used the portable terminal on three or four occasions a week, though each occasion might require as many as ten telephone calls on the terminal. The telephone receiver is put into the terminal, and the operator than works from the terminal conversationally to the computer. If the problem could not be dealt with at home then the taxpayer was required to go to the office and, as she put it, `resuscitate with better diagnostic means'. As she said `it is not easy to diagnose a computer over the telephone'.''

(b) and at page 4262, his Honour said:

``... I am not concerned with those normal daily journeys that have their sole relation to a person's choice of his place of residence; I am concerned with journeys which begin as a result of performance of the duties of the employment at the taxpayer's home. The journey from home to the office is undertaken, not to commence duty, but to complete an aspect of the employment already under way before the journey commences . The journey home again has not this same character, but it might be looked upon as the completion of a process that began when the taxpayer whilst at home (or perhaps elsewhere, such as at a cinema) was called upon to resolve some problem of malfunction of her employer's computer.''

(Tribunal's emphasis; all underlined portions of passages quoted constitute emphasis inserted by the Tribunal)

9. Rath J in Collings referred extensively to the decision of the House of Lords in
Owen v Pook (1970) A.C. 244 and in respect of which the following references are pertinent:

(a) At pages 4263-4264:

``In Owen v Pook (above) the principal facts were as follows. The taxpayer was in practice as a general medical practitioner at his residence at Fishguard. He held part time appointments with the South West Wales Hospital Management Committee as (i) obstetrician and (ii) anaesthetist at the Pembroke County War Memorial Hospital at Haverfordwest, which is 15 miles from Fishguard. There was a scarcity in the area of persons qualified to do this work. Under the terms of the appointment he was on stand-by duty at the following times (i) as an obstetrician - one weekend a month; (ii) as anaesthetist - on Monday and Friday nights and one weekend a month. During these periods he was required to be accessible by telephone. All his work in connection with these appointments was concerned with emergency cases at the hospital. On receipt of a telephone call from the hospital he gave instructions to the hospital staff (eg to prepare the patient for an operation) . Usually he then set out immediately to the hospital by car. Sometimes he advised treatment by telephone and then waited a further report. Not every telephone call resulted in a visit to the hospital. Sometimes the telephone call was received when he was out on his medical rounds and not thus necessarily at his house. His responsibility for a patient began as soon as he received a telephone call .


The majority view was that the taxpayer carried out the duties of his employment in two places, namely at the hospital and at his home. Lord Guest said at (pp. 256-7):

`... In the present case there is a finding of fact that Dr Owen's duties commenced at the moment he was first contacted by the hospital authorities . This is further emphasized by the finding that his responsibility for a patient began as soon as he received a telephone call and that he sometimes advised treatment by telephone... There were thus two places where his duty is performed, the hospital and his telephone in his consulting room .'''

(b) And further at page 4267 his Honour states:

``... Thus Dr Owen's two places of work were his home and the hospital, in respect of his hospital appointment . So far as the appointment was concerned, the hospital authorities did not require him to work at

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home; all they required was his availability on call. In the result his travelling expenses would obviously have been deductible if he had lived 30, instead of 15 miles from the hospital.''

10. Perhaps the most relevant aspect of the judgment in Collings is to be found at page 4268 as follows:

``... When called at her home, the taxpayer immediately had the responsibility of correcting the malfunction in the computer. She might there and then diagnose the trouble, and provide the remedy; or she might decide that she would have to make the journey to the office, and if she took this course she was during the journey on duty in regard to the particular problem that had arisen.''

11. Case S82,
85 ATC 608 concerned a highly qualified nursing sister employed as a flight sister on an air ambulance. Clauses 12 and 13 of the decision of P.M. Roach (Member) in Case S82 are relevant in respect of the vehicle expenses; they read as follows [at page 611]:

``12. However, the taxpayer relied upon a further consideration, namely, that when she received a phone call from base advising her that she was required to attend for duty she was then advised by base of the identity of the patient to be transported, with some particulars of the state and condition of the patient. Sometimes the information as to the medical condition of the patient was considered to be inadequate for the taxpayer's purposes and she would request base to ascertain additional information from those then having charge of the patient. Ordinarily this additional information would be provided to her when she arrived at the base but occasionally it would be supplied to her before she departed for the base. On the basis of the information provided she could on occasion give notice to base of matters she wished to be attended to in preparing the patient for presentation to her on her arrival at the base. So it was said that not only was the taxpayer `on duty' during the waiting period at her home, a duty for which she was being remunerated, but in addition the performance of her nursing duties commenced with the delivery of that information to her so that from that point of time forward she was professionally responsible for the well-being of the patient. In that way her claim was likened to that of the `on-call' anaesthetist whose claim for travelling expenses between his home when he was on-call and the hospital were allowed by the House of Lords:
Owen v Pook (1969) 2 All E.R. 1. That finding was founded in a fact recorded in the case stated, namely [at p. 3]:

`All his work in connection with those appointments was concerned with emergency cases at the hospital. On receipt of a telephone call from the hospital he would give instructions to the hospital staff (eg, to prepare the patient for an operation). Usually he then set out immediately to the hospital by car. Sometimes he advised treatment by telephone and then awaited a further report... His responsibility for a patient began as soon as he received a telephone call.'

(I add that that responsibility would continue in relation to any patient whom he authorised to be anaesthetised until the patient had recovered.)

13. Important though the role of nurses is, whether it be a general ward; a recovery room; an intensive care unit; or in a storm- tossed aircraft tending a critically ill patient with no medical practitioner in attendance, I cannot accept that prior to the patient being physically entrusted to the care of a nurse casts on her responsibility for a patient while at the same time the immediate responsibility for that patient lies with others, including medical practitioners, in whose care the patient then is .''

Clause 13 of P.M. Roach's decision would apply also to a radiologist, who in relation to any given patient, would be in much the same position as a nursing sister; the immediate responsibility for that patient would be with the doctor who ordered the taking of the relevant X-rays.

12. In
FC of T v Genys 87 ATC 4875 (also a case concerning a nursing sister) Northrop J said at page 4881:

``The question that falls to be decided by this Court is whether, on the facts of the present case, the taxpayer's home could be said to be her place of work. Whether a home constitutes a taxpayer's place of work

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necessarily depends on the nature and extent of the activities undertaken by the taxpayer in the home. In the present case, I am of the opinion that the mere receipt of telephone calls from the agency requesting the respondent to work a particular shift is not sufficient to constitute the respondent's home a place of work . The respondent is under no obligation to accept the offer of work, hence, accessibility at home is not something that could said to be required of her in the course of her employment. Nor does the respondent commence her duties upon receipt of the call, as did the taxpayers in Owen v Pook and Collings . In those cases, the taxpayers gave advice and instructions from the home, so that if it was necessary for them to travel to their places of work they could be said to be travelling on their work, not merely to their work. Here, the taxpayer's duties did not commence until her arrival at the hospital .

I am not helped by the argument that the taxpayer had to travel by car in order to keep her travel time to a minimum and that if she went by public transport she would not be fulfilling the requirements of her particular employer. I am of the opinion that the taxpayer, despite the short notice she was often given, and the exigency of car travel, was in a similar position to those `thousands of employees' that Lord Donovan referred to in Owen v Pook, who have to be on stand-by duty at their homes and are required to obey a summons to cope with some emergency. Such employees do not have two places of employment and neither, in my view, does the taxpayer.''

Again the position of the Applicant is analogous to that of the nursing sister in Genys.

13. (a) Mr Clifton both in the objection and in argument contended that his client's case was distinguishable on the basis that when on-call she parked her car in the restricted parking area rather than in the general parking area. Since both parking areas were parking areas of the hospital, this distinction cannot be relevant.

(b) Mr Clifton argued also that the number of out-of-hours calls, involving as it did a considerable volume of work, was sufficient in some manner (although not precisely explained) to put his client's case in a category which was different from that of the two nursing sisters. The Tribunal cannot agree that any such argument is in any way relevant. Moreover, the fact that the out-of-hours calls were separately remunerated and the fact that a travel allowance was paid in respect of such calls are also not to the point.

(c) In the objection, Mr Clifton wrote:

``Now if a CPA accountant was to travel directly (from home) to a client's premises and parked in their parking area he would be entitled to claim this as work related travel as it was not to travel to their `normal' place of business. This claim could be made even if the `normal' work carpark was only 50 metres up the road. It is this basis that we have made the claim for travelling expenses as it is not to her `normal' place of employment and most definitely not to her `normal' carparking area.''

I have previously made the point that the fact that the journey was made to a different parking area is entirely irrelevant. I consider in addition that the first statement in the objection as to the deductibility of such a trip to a CPA accountant is clearly erroneous.

14. In conclusion as to the vehicle expenses, the position of the Applicant is clearly akin to that of the nursing sisters in Case S82 and Genys and equally clearly distinguishable from the position of the taxpayers in Collings and Owen v Pook. As the Applicant accepted, she received the calls and in response to them travelled to the hospital to perform her duties there. Unlike the taxpayers in Collings and Owen v Pook, her home could not be described as a place at which work was performed; it was by contrast merely the place at which she received the calls.

In the circumstances the objection decision in respect of the vehicle expenses must be affirmed.

15. (a) In respect of the phone expenses, the Applicant gave evidence that some three months prior to the acquisition of the mobile phone in December 1996 her car broke down in Nowra whilst she was on her way to the hospital on a call. She was able to obtain access to a phone from which she phoned the NRMA. That service took approximately an hour within which to arrive, so that she was necessarily late for her duties at the hospital.

(b) The Applicant said that initially she rather disliked the idea of a mobile phone; her expressions of dislike seemed to relate to the

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manner in which they are carried and used. However, the incident when her car broke down led her to reconsider the position (albeit only after the lapse of a period of approximately three months); in particular she contemplated the possibility that if her car broke down before it entered the town of Nowra, and accordingly without access to a fixed phone with which to phone the hospital, she would be unable to make contact with the hospital.

(c) Eventually in December 1996 the Applicant's husband purchased the mobile phone and established a connection, which in turn resulted in accounts being received by him in his own name. The funds utilised for the purpose of the acquisition and the subsequent accounts belonged to the Applicant and her husband jointly.

(d) The Applicant said that she used the mobile phone when it was first acquired, on a number of occasions, so as to familiarise herself with its use. The mobile phone was throughout most of the relevant year thereafter left in the car, and at all events during her periods on duty at the hospital. The car was borrowed by her daughter on two occasions in February 1997 and April 1997, which accounts for calls made from Bathurst and Liverpool. The mobile phone was, in the result, and during the relevant year, never used in connection with her duties; its use by the Applicant and members of her family was altogether and exclusively private.

(e) The Applicant said (and I accept) that when she first acquired the mobile phone she did not think in terms of a tax deduction; this arose when the time came to prepare her return for the relevant year.

(f) There was evidence by the Applicant that in acquiring the mobile phone her personal safety was also a relevant consideration.

16. There are aspects of the documentation which in this context are incorrect:

(a) In the objection, Mr Clifton noted:

``Having the mobile also allows the hospital to telephone her when she is not at home or is in the car. This is particularly useful where she has just left the hospital to return home.

In most months there is (sic) very minimal private calls out on the phone and the main purpose in purchasing the phone was to receive calls in from work. Due to the high cost of mobile phone calls out the taxpayer avoided (as much as possible) making work or private calls out on the mobile phone.''

In fact the evidence indicated that there were never any calls by the hospital to the mobile phone.

(b) Similarly M28 states:

``Mobile phone - used for emergency contact by hospital and answering pager. Primary purpose is to be available in emergency's etc.''

As set out previously there were no such calls to the mobile phone.

17. (a) Professor Parsons in Income Taxation in Australia argued in Chapter 9 (and see in particular clause 9.11) that:

``It is the view of this volume that where an issue is raised as to the relevance of an expense, a decision to compromise by apportioning and allowing a deduction of part of the expense is not appropriate. In circumstances such as Magna Alloys & Research Pty Limited (1980) ATC 5542 if the board of directors is moved in part by a purpose of conferring a gratuitous benefit on the officers of the company - a benefit that is not a reward for services - it is not appropriate to allow a deduction of some part of the expense. A decision must be made as to the whole expense. An apportionment would simply express a doubt about relevance; it would not identify an element within the expense that is relevant to income derivation .''

Professor Parsons contended also (in clause 9.4) that:

``The addition of the phrase `to the extent to which' has made no difference to the operation of the general deduction section, where a dissection would be available in any event. Where an expense is capable of dissection, there are in fact several outgoings and each may be separately judged for deductibility.''

(b) Professor Parsons' book was published prior to the decision of the High Court in
Fletcher & Ors v FC of T 91 ATC 4950; (1991) 173 CLR 1. Fletcher's case dealt with interest which is of its very nature capable of dissection; there has been, to the best of my knowledge, no judicial pronouncement which favours the propositions advanced by Professor Parsons. Accordingly, it would seem, having regard to the express words of the section, and the

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decision in
Ronpibon Tin N.L. & Tongkah Compound N.L. v FC of T (1949) 8 ATD 431, that apportionment is allowable whether or not the relevant expense is capable of dissection. In this instance, the dominant motive, at least at the time of purchase, appears to have been that the mobile phone would be used professionally even though and in the result its use was entirely private. The Applicant herself sought a deduction of 50% only which in the circumstances appears to me to be not unreasonable.

(1) It is clear that the end which the taxpayer had in mind is a relevant element. See in this context ATC page 4957; CLR pages 17 and 18 where their Honours said:

``So to say is not, however, to exclude the motive of the taxpayer in making the outgoing as a possibly relevant factor in characterisation for the purposes of the first limb of s. 51(1). At least in a case where the outing has been voluntarily incurred, the end which the taxpayer subjectively had in view in incurring it may, depending upon the circumstances of the particular case, constitute an element, and possibly the decisive element, in characterisation of either the whole or part of the outgoing for the purposes of the sub-section . In that regard and in the context of the sub- section's clear contemplation of apportionment, statements in the cases to the effect that it is sufficient for the purposes of s. 51(1) that the production of assessable income is `the occasion' of the outgoing or that the outgoing is a `cost of a step taken in the process of gaining or producing income' are to be understood as referring to a genuine and not colourable relationship between the whole of the expenditure and the production of such income.''

[foodnotes not reproduced]

(2) and again at ATC page 4958; CLR page 19, their Honours said:

``... If, however, that consideration reveals that the disproportion between outgoing and relevant assessable income is essentially to be explained by reference to the independent pursuit of some other objective and that part only of the outgoing can be characterised by reference to the actual or expected production of assessable income, apportionment of the outgoing between the pursuit of assessable income and the pursuit of that other objective will be necessary .''

The Tribunal, therefore, accepts, having regard to Fletcher, that apportionment of an expense which is not capable of dissection, may in the proper circumstances, be capable of apportionment.

18. (a) The mobile phone was in the view of the Tribunal purchased with a number of ends in view; it included the ability to telephone the hospital if the Applicant's car broke down; it also included considerations of personal safety and (as its subsequent exclusively private use in fact demonstrated) private use.

(b) I am prepared to accept that although the Applicant's husband in fact acquired the mobile phone, he did so on behalf of the Applicant.

(c) An apportionment of this nature must always and to some extent be arbitrary. On balance, I am inclined to the view that, having regard in particular to the reasons why the mobile phone was originally acquired and the importance assigned to that consideration in Fletcher's case the 50/50 apportionment sought by the Applicant was not unreasonable. Accordingly, the objection decision in respect of the phone expenses is set aside.

19. In respect of the penalty:

As in this matter a penalty of 25% was imposed on the tax shortfall pursuant to ITAA 36, s 14ZS of the Taxation Administration Act does not operate to render the objection decision an ineligible income tax remission decision. The Tribunal notes that this would be so even if the penalty had been less than the 25% limit imposed by s 14ZS: see the decision of the Full Federal Court in
Grollo Nominees Pty Ltd & Ors v FC of T 97 ATC 4585 in which Sheppard, Foster and Whitlam JJ held at page 4642 that where the relevant objection decision before the Tribunal relates to the correctness of the whole of the assessments and not just the correctness of the remission of additional tax, s 14ZS does not preclude a review of the Commissioner's decision.

(a) Clause 14(j) of Taxation Ruling TR 94/4 provides that a taxpayer who engages a registered tax agent is vicariously liable for the tax agent's careless errors, although clause 14(j) in its terms refers to a somewhat different situation, ie one where the taxpayer prepares his or her own return and seeks advice from a tax

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agent as to aspects of it. Clause 14(j) of the Ruling is set out in full as follows:

``(j) a taxpayer who prepares his or her own tax return and seeks advice in respect of a specific matter in the tax return from a qualified accountant or lawyer or similar kind of adviser, and follows the advice provided, would ordinarily be accepted as having exercised reasonable care in respect of the matter on which the advice was sought. However, if the adviser is a registered tax agent, whether or not the adviser is also a qualified accountant or lawyer, the new penalties continue to apply on the basis that the taxpayer is vicariously liable for the tax agent's careless errors if the taxpayer has consulted the accountant or lawyer in his or her capacity as a registered tax agent (ie in respect of the preparation of a tax return). The taxpayer's remedy against his or her tax agent is under section 251M of the ITAA, which provides that a taxpayer may recover from a registered tax agent any additional tax or interest which the taxpayer has become liable to pay through the negligence of the tax agent.''

(b) In
Re Carlaw and FC of T 95 ATC 2166 Deputy President B.J. McMahon said in clauses 23 and 24 of his decision:

``23. I now turn to the question of penalty tax. Section 226G provides that if a taxpayer has a tax shortfall for a year and the shortfall, or part of it, was caused by the failure of the taxpayer or of a registered tax agent to take reasonable care to comply with the Act or the regulations, then the taxpayer is liable to pay by way of penalty additional tax equal to 25 per cent of the amount of the shortfall or part. To indicate the Commissioner's understanding of the meaning of failure to take reasonable care, Taxation Ruling TR 94/4 was promulgated. Paragraph 6 of that ruling is in these terms-

`The reasonable care test requires a taxpayer to take the care that a reasonable ordinary person would take in all the circumstances of the taxpayer to fulfil the taxpayer's tax obligations. Provided that a taxpayer may be judged to have tried his or her best to lodge a correct return, having regard to the taxpayer's experience, education, skill and other relevant circumstances, the taxpayer will not be liable to pay penalty.'

24. The taxpayer is a truck driver. He made claims for deductions pursuant to advice he received from a qualified tax agent, who had been engaged by his union. If a man in that position is advised that he may make a claim, can it be said that he fails to take reasonable care to comply with the Act if the claim is unsuccessful? I think not. Clearly the mere fact that a claim is made cannot thereby render the conduct of a taxpayer careless, particularly when that claim is reasonably arguable.''

(c) Clause 27 of that decision then goes on to state that the professional advice taken by Mr Carlaw had some measure of support:

``... from Case U148, from the article of Mr Durack which I have quoted, and from observations made in Edwards and in the RTA case.''

(d) In this case I accept that the Applicant sought advice from a qualified tax agent. However, the advice given by the tax agent in relation to the vehicle deduction was erroneous and in fact enjoyed no relevant measure of support. A proper reading of the relevant cases would have shown that, in respect of the vehicle expenses, the Applicant had little or no prospect of success, and that claim was persevered with even after the Respondent had furnished case authorities in support of his decision to disallow the claimed deduction; the claim, though not a reckless one, was not reasonably arguable.

In all the circumstances, I consider that some penalty is appropriate; however, I also consider, having regard to the fact that the Applicant is patently honest, and that the claim for the vehicle expenses arose entirely from mistaken advice by the tax agent, that a penalty at the rate of 25% is excessive. The Respondent has the power to impose a lesser penalty pursuant to s 227 of the ITAA, and accordingly, by virtue of s 43 of the Administrative Appeals Tribunal Act, the Tribunal has the same power. I consider that a penalty of 12½% would be appropriate, and accordingly the penalty is reduced.

20. In summary, the objection decision is affirmed in respect of the vehicle expenses excepting only that the penalty referable thereto is reduced from 25% to 12½%, and the

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objection decision in respect of the phone expenses is set aside.

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