Sciberras and Commissioner of Taxation

[2011] AATA 509

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(Decision by: Senior Member D Letcher, QC)

Sciberras
and Commissioner of Taxation

Tribunal:

Member:
Senior Member D Letcher, QC

Subject References:
INCOME TAX
Allowable deductions
whether expenditure on travel between home and workplace an allowable deduction
transport of tools between home and work
where work commenced
whether transport integral to income-earning activity
whether transport essential to the performance of work
whether expense incurred by the only practicable means of transport
whether secure alternative to transport
decision under review affirmed

Legislative References:
Road Transport Reform (Dangerous Goods) Act 1995 - the Act
Road and Rail Transport (Dangerous Goods) Act 1997 (NSW) - the Act
Transport Operations (Road Use Management) Act 1995 (QLD) - the Act

Case References:
AAT Case 9654 - (1994) 29 ATR 1031
Commissioner of Taxation v Payne - (2001) 202 CLR 93
Commissioner of Taxation v Vogt - [1975] 1 NSWLR 194
Crestani v Commissioner of Taxation - (1998) 40 ATR 1037
Federal Commissioner of Taxation v Collings - (1976) 10 ALR 475
Lunney v Commissioner of Taxation - (1958) 100 CLR 478
Taxation Case L49 - (1979) 79 ATC 339
Tribunal Case 75 - (1987) 18 ATR 3544

Other References:
TR 95/19

Decision date: 25 July 2011

Sydney

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Decision by:
Senior Member D Letcher, QC

REASONS FOR DECISION

1. Mr Sciberras was a fuel tanker driver employed by Cootes Transport Group Ltd. ("Cootes") in financial year 2007. He lived in Woongarrah on the Central Coast of New South Wales. He drove his Commodore sedan about 60 km to the Newcastle Caltex terminal where his employer's trucks were based. He might need to reach this base at various hours of the day or night depending upon his roster, changes (not infrequent) to that roster and whether prime-movers or tanker trailers have arrived late. He drove petrol and other fuels to mines and petrol stations in the Hunter Valley and country New South Wales.

2. His employment was subject to his employer's written Policy and an Industrial Award. Neither document required him to carry tools to work nor to repair his vehicle if it had a defect. In fact, while the Cootes Driver Manual required him to carry a number of licences, manuals and directories, he was instructed in the case of any breakdown or defect to report by his vehicle's mobile phone to the mechanic on call at Newcastle.

3. Mr Sciberras says he took the view that he had a duty of care to other road users to repair his vehicle quickly, that he had duties under the now repealed Road Transport Reform (Dangerous Goods) Act 1995 and its state equivalents (the repealed Road and Rail Transport (Dangerous Goods) Act 1997 (NSW) and the Transport Operations (Road Use Management) Act 1995 (QLD)), and Occupational Health and Safety Legislation to restore his vehicle to roadworthiness promptly and to do this he needed tools and gear in addition to the Personal Protection Equipment ("PPE") prescribed by his employer. Altogether he claimed this other collection of tools and equipment weighed in at over 39 kilos.

4. On the basis that this equipment was required to gain his income and that the only practical way to transport it to his base was by private car, Mr Sciberras claimed the expenses of his car travel to and from work for the financial year 2006-2007. The Commissioner of Taxation refused the deduction and disallowed the Objection from which decision Mr Sciberras appeals to this Tribunal.

5. It is a settled decision in Australian law that expenses of a tax payer's travel between home and work are not deductible from income, but are regarded as a pre-requisite to earning rather than being regarded as incurred in the course of the activity and the essential character of the expense is 'private and domestic'.

6. Lunney v Commissioner of Taxation (1958) 100 CLR 478 was a decision of the High Court dealing with:

"...a question of income tax law which has been accepted as settled for the last two generations. It is 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...Both in Australia and England the view has always prevailed that expenses of travelling from home to work or business and back again are not deductible."

7. The judgement of the esteemed Dixon CJ is notable for its brevity (5 paragraphs) and its questioning of the long-accepted principle:

"I confess for myself, however, that if the matter were to be worked out all over again on bare reason, I should have misgivings about the conclusion."

8. In the years since that decision the courts have outlined several exceptions to the general rule but they are few.

9. In Commissioner of Taxation v Vogt (1975) 1 NSWLR 194, Waddell J allowed the travel expenses of a musician who played trumpet, flugel horn and electric bass with amplifier at Marrickville RSL, the Musicians Club, EMI Records and Daley Wilson Big Band concerts. Not surprisingly he concluded that travel with his instruments by bus was impracticable and claimed the expenses of obtaining and running a station wagon. His home was his place of practice and storage of the equipment. It was held that "the mode of his travel was simply a consequence of the means which he employed to get his instruments to the place of performance" (at 201) and the expenditure lacked a personal and domestic character. It was a condition of his employment that he brought those instruments to the various places of work.

10. The Judge referred to three determinants of the "essential character" to the expense - it was incurred as "part of" the income earning operation, it was "essential" to the operation and it was "attributable" to the carriage of instruments. Essentially, the vehicle was for the equipment and without the vehicle there would be no income.

11. In AAT Case 9654 (1994) 29 ATR 1031, an RAAF Airborne Electronics Analysts was required to take on flights personal flying gear weighing about 20kg, sometimes up to 30kg, which in practice could be kept in a locker at the base, but by choice he kept the gear in the boot of his car. The reverse of Vogt was decided, namely that the mode of transporting the gear "was simply a consequence of the means adopted by the applicant in conveying himself to and from his place of employment". The deduction was not allowed.

12. An Ansett Ground Flight Engineer was on the other side of the line. In Crestani v Commissioner of Taxation (1998) 40 ATR 1037 the applicant took by car his box of tools weighing about 27kg on a trolley to a room at his airport workplace where there were no effective security measures against theft. The Tribunal found that the tools could not be conveniently carried for any distance, that the applicant used his own tools frequently on aircraft maintenance and that he had no real choice as to his mode of transport. Even though the applicant agreed that he would have travelled by car even if he had no tools to carry, it was held that vehicle expenses were deductible, the expense being reasonably attributable to the tools which formed an essential part of the engineer's work.

13. The tools were an essential part of the engineer's work, were personally owned and were probably "the best tools that man can buy". The Tribunal was assisted by Clause 138 of Public Ruling Taxation Ruling TR95/19 which dealt specifically with airline employees and referred directly to "bulky equipment" and the lack of a secure area for storage at the workplace. The Tribunal noted that this was a case where the home was not one of several places of work (cf Federal Commissioner of Taxation v Collings (1976) 10 ALR 475) and cited Tribunal Case 75 (1987) 18 ATR 3544 where it was remarked that "this taxpayer is one of those fortunate few who is able to hitch a free ride to work on his toolbox..."

14. Taxation Case L49 (1979) 79 ATC 339 concerned a pilot who claimed he had two places of work being his home and the airport, but it was held that his employment duties commenced at the airport and his "work" at home was to retain his endorsement as a Boeing 707 pilot. Because he was not travelling "'on his work'" but "'to his work'" the expenditure was disallowed except for trips to receive inoculations or to arrange extra work.

15. In Federal Commissioner of Taxation v Payne (2001) 202 CLR 93, the High Court affirmed Lunney (1958) 100 CLR 478. A pilot employed to fly out of Mascot also conducted a deer farm and claimed the expenses of travel between the two places of business. It was held that where the travel was between two places of unrelated income-earning activity the expense was not related in the course of earning from either activity. Attempts to bring the case within Collings (1976) 10 ALR 475 where a computer consultant operated both from home and office on call 24 hours a day were not successful because the two activities were unrelated. These cases concerned travel between two sites of work. In the case of Mr Sciberras I find that his work commenced at the Cootes terminal.

16. The witnesses for the applicant gave evidence of a practice of the drivers to carry minor replacement items for their trucks but it was coupled with an assertion that they had some legal or contractual duty to carry out mechanical repairs in the interests of safety. The respondent's witnesses were Cootes' executives who agreed that numbers of drivers carried tools but that they were not required to do so, the company declined to supply tools and an alternative policy for repairs was in place and well-understood.

17. Mr Alan King was the Senior Cootes Manager at the Wickham Terminal. He initially gave support to Mr Sciberras' claim saying in a letter (not on Cootes letterhead) that the equipment listed was "required for his job as a fuel tanker driver" but qualified that in his evidence referring to "a small array of tools" and basic tasks which "could be performed in the context of safety" such as replacing light bulbs but did not support a case of the company requiring a driver to carry out repairs. He agreed that drivers performed minor repairs "if capable of doing so" and he was aware of drivers carrying tools for "minor tasks" especially on country routes.

18. Damien Coleman was a Cootes mechanic at the Newcastle Terminal who responded to telephone enquiries from stranded drivers and expected drivers to check areas of the drivers vehicle he identified to diagnose a problem. He assisted drivers by supplying them minor items such as fan belts, bulbs, tape etc. but was aware that the Company had consistently refused to supply a basic tool kit to drivers.

19. Darren Pauling was a driver on intra-state country trips who carried some tools, although he was not a mechanic by training. He was one of the applicant's witnesses who asserted that he required such tools "to assist me in abiding by my employer's Health Safety Security and the Environment Policy ("HSS and EP") to carry out minor emergency repairs should the need arise". He was not a trained mechanic and spoke of carrying spare hoses and headlight globes. He agreed that if he went to work without his tools he would still be able to drive his vehicle. His estimate of the weight of spares, tools and equipment was 60-70kg.

20. Corey Mather, the applicant's "co-driver" (meaning he drove the same vehicle but not in company with Mr Sciberras) carried no spare items but did take about 8-10kg of tools and equipment in the trucks. Glen Douglas, the Cootes "senior trainer driver" was a mechanic and carried tools "all the time" as a driver, such tools including screwdiver and pliers. He said that "99.5% of the guys in our yard would have tools in their bag... Joe Average (driver) would carry tools even if he wasn't skilled". He said that while driving he did "1 or 2 minor repairs a week to ensure safe and continuous operations..." He said that he encouraged all new trainees to carry tools to carry out minor emergency repairs.

21. Each drivers' witness statements included an assertion of requirements for tools such as appeared in Mr Pauling's evidence. It was argued for the respondent that this showed the applicant's case and his witnesses straining to establish a requirement by the employer although the Cootes managers explicitly denied such a requirement existed. Indeed the contrary policy was in place for reasons which made some sense. The Company did not want mechanically unskilled drivers attempting repairs on its sophisticated equipment. The Company had a statutory duty to use only roadworthy vehicles and required a mechanic to attend. The unskilful work of a driver with the best intentions on a vehicle laden with fuel or chemical could produce unfortunate results.

22. Gregory Niven was General Manager of the company in the relevant tax year. He signed the HSS and EP in the Cootes' drivers' manual in 2006. He expected a driver to carry out minor replacements or repairs with a "small array" of tools. He confirmed that there was no secure lockup for drivers' possessions at the depot. His view was that the Company did not ask drivers to do any repairs but did ask them to help with diagnosis of problems.

23. Gregory Burke, who was the current Cootes National Fleet Manager, drew a distinction between what was expected of "interstate" drivers who were frequently out of mobile telephone coverage and capable of minor repairs and "local" drivers who drove 12 hour shifts from adept base and generally had mobile coverage. The latter were instructed to contact the workshop mechanics before attempting even a very minor repair. He placed Mr Sciberras in the latter category. He provided a Schedule detailing repairs and adjustments to Sciberras' usual vehicle in the 2006-2007 tax year showing workshop attention to both minor and major matters. He knew that drivers carried out "basic tasks" such as replacing wiper rubbers or a light globe. He did not regard these as "repairs". He said that the Company had not issued tools to its drivers and did not ask them to carry out repairs.

24. Rhett Parker was the Financial Controller of the Cootes group with no "hands on" expertise but access to personnel and documents he nominated. He reiterated the respondent's case that drivers were not required to repair vehicles, that an alternative system of telephoning the mechanic was in place, that carrying tools was a matter of choice for drivers but that there was an expectation of minor tasks being undertaken by a driver to keep the vehicle on the road and returned to base.

25. A common thread of the cases where an exception to the general rule is found to exist is that the equipment is an essential part of the work being specialist tools suited to the task or items intrinsically involved in the work. In the case of Mr Sciberras, the tools, clothing and manuals were not essentials used in his driving work, nor were they items without which the work could not be done, nor were they required by the contract of employment or provision of law.

26. The relevant exception to the general principle may be stated as follows (in the case of transport equipment) and satisfied if:

(a)

It is an integral part of the income-earning activity;

(b)

It is essential to the performance of the work;

(c)

The expense is incurred as the only practicable means of transporting it; and

(d)

There is no secure alternative to transporting it.

Each of the above criteria must be satisfied.

27. In the case of Mr Sciberras, the evidence disclosed that there were no secure lockers or rooms at the terminal and the gear could not be kept in the vehicle between shifts. This satisfied criterion (d).

28. As to the practicability of alternative means of transport, (criterion(c)), the practicability may be determined by first determining the equipment which is part of the activity and essential to the work. Criteria (a) and (b) would determine the extent and nature of the load needed to be moved.

29. Mr Sciberras put his case for the equipment being an integral part of his work and essential for employment on several different bases.

30. Basis One: The employer's Health Safety Security and the Environmental Policy required him to be "proactive and innovative on environment matters", to have "preventative measures and reporting disciplines in place to avoid health safety and environmental risks" and to abide by "all legislation, codes and...standards".

31. The applicant and each of the applicant's witnesses asserted that he was required as a term of his employment to carry a heavy and bulky array of equipment to comply with the Policy. Each witness when questioned also agreed that he was claiming a similar deduction for travelling expenses.

32. Each of the respondent's witnesses asserted that there was no such requirement and the drivers were employed under industrial awards which contained no such condition. The Policy was Annexure "A" to many witness statements and it reads in full:

33. My view is that the wording of this document is not the language of contract of obligation of the Company or its employees and it is not possible to spell out from it a contractual or other legal duty.

34. Basis Two : Without all of his equipment, Mr Sciberras was not able to carry out his work as a fuel tanker driver because he could not repair his vehicle, could not operate in adverse weather and could not deliver his fuel loads to specified sites.

35. However, when questioned about the long list of "required items totalling 39.11kg" (at T10 - 221-223) Mr Sciberras agreed that substantial numbers of the books and tools were not required, seldom used or a matter of personal choice. In any event, except for a log book and company Personal Protective Equipment ("PPE") the list contained many duplications, superseded publications, personal items and tools inappropriate to any of the minor running adjustments contemplated by management.

36. He also agreed that in his usual Kenworth prime mover there were two toolbox lockers, an overhead locker and bunk space in which items could be placed and that any items issued by his employer would be replaced if lost or stolen so that there was limited need to remove items from the truck.

37. Basis Three: It was the usual practice of fuel tanker drivers to carry a large array of tools and Mr Sciberras followed the usual practice

38. The evidence was that some drivers carried some tools and others did not. The evidence I accept is that the employer not only did not require drivers to carry tools, it declined to issue toolkits to drivers and made known an explicit policy that drivers should not attempt their own repairs.

39. In fact, each truck was fitted with a mobile telephone and each driver was instructed to report to the mechanic on duty at the terminal any breakdown or accident. Any common practice does not alter the effect of prior judicial decisions. It may be a basis for seeking legislative change if the factual circumstances on which a longstanding rule is based are established to have ceased to exist.

40. To make out one of the exceptions to the general rule, it must be shown that:

(a)

The items transported were bulky or heavy and

(b)

They were required by the nature of the work and were essential to it, or

(c)

the items were transported between several places of work.

41. The terms of employment might require the items explicitly (e.g. Vogt (1975) 1 NSWLR 194 where he supplied his own musical instruments) or implicitly (e.g. Crestani (1998) 40 ATR 1037 where the engineers used their own specialised tools on aircraft) but in each case the items formed part of the work, the work was performed with them and the work could not be performed without them.

42. The evidence in this case does not support the claim. The items transported were not part of the work of driving, the work was not performed with them, they were not required by the nature of the work and the terms of employment did not require the use of the items. Indeed, the clear policy of the employer was that tools should not be used by drivers for repairs as opposed to simple maintenance items and an alternative system of reporting and repairing was in place.

43. Additionally, numerous of the items were shown to be matters of personal choice irrelevant to the tasks or duplications of items provided by the employer. The supposed bulk of the items was illusory.

44. I am not satisfied that the amount of equipment Mr Sciberras says he transported was reasonably necessary to carry out his work as a tanker driver. His employer had an alternative scheme for repairs except for the most minor running repairs. It was a requirement that the driver telephone the base mechanic for assessment and advice. The drivers were not required to restore the trucks to roadworthiness. Indeed, they were discouraged from doing so for good reason.

45. The amount of tools needed for minor adjustments (wipers, hoses, light globes) was minor. The tools were not used to produce the result for which Mr Sciberras was employed. I am satisfied that the claimed obligations imposed by the employer, the statute law or the common law on the driver do not in fact exist in law.

46. My assessment is that a company policy to be "proactive and innovative on environmental matters" and to have "preventative [sic] measures and reporting disciplines in place to avoid health, safety and environmental risks" does not constitute or imply a term of Mr Sciberras' contract of employment. It is a "motherhood" statement of the Company's good intentions rather than something attempting to alter or supplement the Award and course of conduct of the Company's senior personnel. The language does not convey an intention to create a binding contract or affect existing obligations.

47. There is no duty of care known to the law owed to the public at large, requiring tools to be carried in a vehicle so the driver can move the vehicle out of the traffic. The now repealed Road Transport Reform (Dangerous Goods) Act 1995 and its state equivalents (the Road and Rail Transport (Dangerous Goods) Act 1997 (NSW) and the Transport Operations (Road Use Management) Act 1995 (QLD)), imposed no such statutory duty on a driver nor did they imply it as a term of a contract of employment. The Australian Code for the Transport of Dangerous Goods by Road and Rail 1998 incorporated in delegated legislation at the relevant time did not stipulate a duty to repair or to carry tools. The applicant did not point to any specific provision of the Code or legislation to that effect and I am satisfied that there is none.

48. Mr Sciberras has attempted to elevate a choice into a condition, an option into a requirement.

49. To bring himself into the exceptions found in the decided cases, Mr Sciberras would need to prove:

(a)

The mode of travel was dictated by the taxpayer's equipment - (as in Vogt (1975) 1 NSWLR 194 and Crestani (1998) 40 ATR 1037) not the convenience of the taxpayer himself; or

(b)

The travel between two or more places of work during his income-earning time; or

(c)

The equipment carried was required as a term of his contract of employment whether implied or explicit.

50. In my view, the evidence does not support such contentions. I affirm the decision under review.