Hiremani and Commissioner of Taxation

[2020] AATA 1653

(Decision by: Senior Member L Hespe)

Gurusidesh Hiremani
and Commissioner of Taxation

Tribunal:
Administrative Appeals Tribunal

Member:
Senior Member L Hespe

Legislative References:
Income Tax Assessment Act 1936 - The Act
Income Tax Assessment Act 1997 - The Act
Taxation Administration Act 1953 - The Act

Case References:
Commissioner of Taxation v Finn - (1961) 106 CLR 60
Commissioner of Taxation of the Commonwealth of Australia v Forsyth - (1981) 148 CLR 203
Commissioner of Taxation of the Commonwealth of Australia v Payne - (2001) 202 CLR 93
Handley v Commissioner of Taxation of the Commonwealth of Australia - (1981) 148 CLR 182
John Holland Group Pty Ltd v Federal Commissioner of Taxation - (2015) 232 FCR 59
Lunney v Commissioner of Taxation of the Commonwealth of Australia - (1958) 100 CLR 478
Newsom v Robertson - [1953] Ch 7

Hearing date: 20 March 2019
Decision date: 5 June 2020

Melbourne
File Numbers 2017/4038


Decision by:
Senior Member L Hespe

REASONS FOR DECISION

1. Mr Hiremani applied for review of the Respondent's objection decision disallowing his objection against an income tax assessment for the year ended 30 June 2016 and shortfall penalty assessment.

2. Mr Hiremani claimed a number of deductions when lodging his return. In a voluntary disclosure prior to audit, Mr Hiremani reduced his claims. During the course of the hearing Mr Hiremani abandoned some of these reduced claims. This decision addresses the remaining disputed claims.

3. The deductions are summarised in the following table:

Item Amount claimed in return Voluntary Disclosure Amount allowed on audit or objection Claim at commencement of hearing Claim pressed by conclusion of hearing
D1: Work related car expense $10,000 $4,800 $0 $4,800 $3,300
D3: Work related clothing expense $500 $300 $150 Accepted the amount allowed on objection N/A
D4: Work related self-education expense $19,750 $17,789 $0 $4,386 $3,833.50

Plus taxi fare of $40.10

D5: Other work related expenses (travel related expenses, overtime meals and home office) $60,000 $37,272 $1,662 $20,610.20

Comprising:

$10,492.20 of accommodation and meal expenses related to travel

$3,078 of overtime meals

Home office expenses of $5,760

Travel costs (bus and airfares) $1,280

Travel expenses of $1,517.66

4. Mr Hiremani was also assessed for penalties. The decision on objection was that he was liable to penalties on the basis of a failure to take reasonable care.

Evidence before the Tribunal

5. The evidence before the Tribunal consisted of a number of documents provided by Mr Hiremani in the form of:

(a)
a bank statement for the period 19 September 2015 to 20 November 2015, disclosing a payment to ACTE Pty Ltd for $3,833.50 made on 9 November 2015 and for a payment made on 10 November 2015 in the amount of $40.10 for a taxi;
(b)
a credit card statement from American Express for the period 2 October 2015 to 1 November 2015 disclosing a payment to YHA Canberra on 20 October 2015 of $540.66 and two meals eaten in Canberra totalling $94.00;
(c)
a tax invoice/receipt from YHA Australia for a night's accommodation in Canberra for the night of 30 July 2015 for the amount of $131.00;
(d)
a tax invoice/receipt from YHA Australia for a night's accommodation in Canberra for three nights of 22 to 24 July 2015 for the amount of $567.00;
(e)
a photocopy of a cover to a textbook entitled "A Guide to the Project Management Body of Knowledge (PMBOK Guide): Fifth Edition";
(f)
a tax invoice issued by ACTE Pty Ltd trading as DDLS dated 9 November 2015 for the sum of $3,833.50 (specifying the course dates 9 November 2015 for five days);
(g)
a letter of agreement setting out terms of employment and a document entitled "APPENDIX: AGREEMENT FOR (Project name- ATO) SHIFT WORK PERSONNEL";
(h)
a trust ledger from the real estate agent acting for Mr Hiremani's landlord showing the rents paid by Mr Hiremani for his apartment;
(i)
an e-ticket, receipt/tax invoice, and itinerary from Virgin Australia for a trip from Melbourne to Canberra on 23 February 2016 for a total fare of $185.00;
(j)
a copy of a statutory declaration Mr Hiremani made at a police station on 1 February 2017;
(k)
a document prepared by Mr Hiremani entitled "Evidence" which contained both submissions and assertions of fact;
(l)
a letter from his employer stating that during Mr Hiremani's employment he was required to travel between Melbourne and Canberra for work purposes every four weeks; and
(m)
a letter from his employer dated 2 November 2016 terminating his employment.

6. Mr Hiremani also gave oral testimony at the hearing.

7. Subsequent to the hearing, Mr Hiremani provided the Tribunal with a copy of his course materials for the PRINCE2 course.

8. In so far as Mr Hiremani's oral and written testimony is concerned, the Tribunal observes that Mr Hiremani was prone to exaggeration, his evidence lacked precision and, in some instances, credibility.

9. Mr Hiremani asserted that he was unable to produce any log book, further receipts or other supporting documents (including his diary) because he had kept these all in a briefcase which he left in a taxi whilst going to meet friends on a Saturday night in September 2016 and that his computer had been reformatted without backups. Mr Hiremani said that one of his friends "does accounting" and was going to help him with his tax return that night. Mr Hiremani claimed that he did not notice that his bag was missing until after dinner. He claimed he rang the taxi company that night upon realising his bag was missing but the bag was not found.

10. In support of his assertion Mr Hiremani produced a copy of a statutory declaration he made at a police station on 1 February 2017. Mr Hiremani said that the Australian Taxation Office (ATO), in making a request of him to make a voluntary disclosure upon reviewing his tax return, had asked him for receipts in support of his claim. In response to his claim that he had lost his receipts together with his briefcase, the ATO had requested a copy of a police report. Mr Hiremani made the statutory declaration before a police officer in the apparent understanding that this would satisfy the ATO's request for a copy of a police report.

11. The Tribunal does not accept that Mr Hiremani's failure to produce records in the form of receipts and bank statements is attributable to the loss of property left behind in a taxi. The story lacks credibility and is unsupported by any corroborating testimony or contemporaneous documents. The so-called police report made at least four months after the fact was no more than a statutory declaration made before a police officer, at a misunderstanding of a request from the ATO made in the course of a review of Mr Hiremani's affairs. It is not contemporaneous.

12. In making the following findings, the Tribunal has relied upon the contemporaneous records before it.

Facts

13. Between 23 February 2015 and 2 November 2016, Mr Hiremani was an employee of Abacus Innovations Australia Pty Ltd, a subsidiary of Lockheed Martin Australia, which performed IT services for the ATO.

14. Mr Hiremani described himself as a Change and Release Manager. His position description according to his employer was Release Co-ordinator and according to his letter of employment, a Business Process Analyst Senior. Whatever his title, he was involved in the "change and release" of IT software. The description of his duties provided by his employer included "to provide coordination of release and deployment activities as directed by the release manager", "ensure that deployments are effectively managed during the deployment windows", "prepare and conduct post release reviews and post implementation reviews when required", "as part of a team, prepare and conduct release advisory board", "act as an escalation point during the deployment of releases" ,"prepare and distribute release-related communications", "provide reports to Change and Release manager to determine trends or problems in processes, execution or education" and "[w]ork closely with the change and release managers, ensure objectives for both are met".

15. Although in his position description his role was described as providing reports to the "Change and Release manager", Mr Hiremani's evidence was that he reported to a "Service Transition Manager" who managed the Release Managers and Release Co-ordinators. Mr Hiremani's evidence was that a Release Co-ordinator executed the release of software (usually overnight or over the weekend) and the Release Manager met with stakeholders to find out what changes needed to be made to software applications. It was part of Mr Hiremani's responsibilities to chair the meetings with stakeholders, at which releases were discussed. Mr Hiremani said that he wanted to become a Project Manager because a Project Manager, unlike a Change and Release Manager, would have entitled him to more pay. The Tribunal accepts this evidence.

16. Mr Hiremani's letter of employment was dated 23 April 2015. It nominated his principal place of work as the Kingston office of Lockheed Martin in the Australian Capital Territory. The terms of employment also provided that all travel, accommodation, meals, entertainment etc, which are business expenses incurred by Mr Hiremani whilst on company business, would be reimbursed by Lockheed Martin on presentation of relevant supporting documentation. Mr Hiremani did not receive any such reimbursements.

17. Lockheed Martin was contracted to provide services to the ATO for a specific project, outside of regular business hours and between February 2015 and February 2016, which required Mr Hiremani to participate in a shift roster for the duration of the ATO project for 38 hours over 26 weeks. After this period, Mr Hiremani was to cease his shift work and his terms of employment with Lockheed Martin were to revert back to the terms that were in place immediately prior to the commencement of his shift work agreement. Mr Hiremani was entitled to an additional shift allowance as compensation for being a shift worker.

18. In so far as the ATO project was concerned, most of Mr Hiremani's work involved working on his laptop at home for 12-hour, overnight shifts to release software changes and updates to the ATO's IT systems and, from time to time, connecting to the ATO network, through a desktop computer (which he did at the Melbourne or Docklands offices of the ATO or from the Canberra offices of Lockheed Martin). Mr Hiremani was rostered to work 12-hour shifts for four nights and then was rostered off for four nights.

19. The Appendix to his letter of employment setting out the terms of his shift work also stated that the "company may require you to travel for work from your place of residence".

20. Mr Hiremani's evidence was that the letter of engagement was inaccurate. Following his engagement, Mr Hiremani was rostered on to a night shift. His primary duties involved the release of software updates which could only be performed overnight and Mr Hiremani did not have night-time access to the ATO offices so it was not possible for those duties to be performed in the offices of the ATO. Mr Hiremani needed to perform those duties away from the ATO office; as he was living in Melbourne, he performed his night-time work at his home, and attended the ATO offices in that city. According to Mr Hiremani, part of his engagement required him to be in the Canberra office of Lockheed Martin for three days each month. Mr Hiremani chose to live in Melbourne with his young family because rental properties were cheaper than in Canberra.

21. Mr Hiremani owned a family car. Mr Hiremani claimed that he drove to Canberra seven times in the financial year ended 30 June 2016 to perform work in the Canberra office. Because he was unable to provide a log book, as part of preparing for the hearing, he estimated the distance travelled between Canberra and Melbourne (as 700km) and provided an estimate of what he believed his odometer would have shown. Mr Hiremani also testified that on occasion he took a bus to travel between Canberra and Melbourne or on a few odd occasions travelled by plane. Mr Hiremani believed he took the bus three times and a plane twice, but he had no contemporaneous records to support this other than a single receipt from Virgin Australia for the amount $185.00. The Tribunal is not satisfied that Mr Hiremani has been able to establish how many times he drove to Canberra.

22. None of his travel costs were reimbursed by his employer.

23. Mr Hiremani had in his possession three laptops - one supplied by Lockheed Martin, one supplied by the ATO and one which he personally owned. Mr Hiremani's evidence was that he carried his personal computer with him as a backup to communicate with other people over the internet (through Skype) in case the other two would not connect to the internet. Mr Hiremani's evidence was that the phone issued to him by Lockheed Martin did not allow him to make Skype calls or make a conference call.

24. Although far from clear, it appears that Mr Hiremani downloaded information from the ATO network to his ATO-issued laptop when attending Canberra by connecting to a desktop computer at the offices of Lockheed Martin, which was connected to the ATO network. Mr Hireman's evidence was that it was a "very complex setup".

25. Lockheed Martin communicated with him on the Lockheed Martin-issued laptop. As a result, Mr Hiremani considered that it was necessary for him to take both the ATO-issued laptop and the Lockheed Martin-issued laptop (together with their docking stations) with him to Canberra. Mr Hiremani described the docking stations as "huge" and "heavy" and his laptops as "very bulky".

26. His evidence was that he also considered that he needed to have his personal computer with him when he travelled as a backup to dial in to Skype in case he needed to communicate with somebody. He regarded himself as being on call to answer questions 24/7 even though he was on a 12-hour shift roster. His evidence was that he took calls outside of his shift hours about once or twice a month for about 15 or 20 minutes at a time.

27. The Tribunal does not accept that Mr Hiremani used his personal computer for work purposes whilst travelling with an ATO laptop and a Lockheed Martin laptop. It is not credible that a third laptop was required in order to cover off on a possible 15- to 20 minute phone call over three days when he was not rostered to do nightshift work.

28. When travelling by plane or bus, Mr Hiremani said he checked in his laptops.

29. Mr Hiremani was not paid for the time he spent travelling between Canberra and Melbourne. Mr Hiremani's evidence was that sometimes he would drive from Melbourne to Canberra through the night and other times during the day, on his rostered days off. His travel costs were paid for by neither Lockheed Martin nor the ATO. Nor was he paid a travel allowance. Neither the ATO nor Lockheed Martin arranged his travel.

30. Mr Hiremani's claims for deductions for self-education expenses were related to courses he undertook in November 2015 which he claimed were necessary to enable him to better perform his job as a Change and Release manager. He had requested his employer to provide training, but the employer had declined. One of the courses for which he claimed a deduction was a PRINCE2 certification run by DDLS, a provider of corporate IT training. In the past, Mr Hiremani had applied for a higher paid role as a Project Manager through Lockheed Martin but the agency had told him that he needed certification for such a role. Mr Hiremani provided the Tribunal with a copy of a tax invoice dated 9 November 2015 issued to him by ACTE Pty Ltd trading as DDLS for the sum of $3,833.50.

31. At the time Mr Hiremani took the course, it was conducted through a combination of on-line and face-to-face classes. The face-to-face classes were held at DDLS offices on St Kilda Road, Melbourne. The assessment took the form of an on-line examination.

32. After the hearing, Mr Hiremani provided the Tribunal with a copy of materials relating to the course, including a description of the course from DDLS and a copy of the course materials. DDLS described PRINCE2 as "a release-change-based approach for project management, providing an easily tailored and scalable method for the management of all types of projects, across industries, both locally and internationally" and as an "international project management standard". It is a process or method for project management. The course materials are entitled "A Guide to the Prince 2 Project Management Body of Knowledge", they describe project management as a profession, and the Body of Knowledge as including proven traditional practices as well as evolving practices. It comprises reference materials used by the Project Management Institute for its professional development programs. The audience for the guide is described as "anyone interested in the profession of project management", including program managers, project managers and other project team members. DDLS describes the course as being designed for Project Managers, Team Leaders, Project Support Staff, Quality Managers, and Project Stakeholders.

33. Mr Hiremani was not a member of any professional institute or organisation.

34. Mr Hiremani's deduction for self-education expenses included the sum of $100 which he said was the cost of a textbook. The Tribunal was provided with a photocopy of the cover of the textbook, but with no documentary evidence of Mr Hiremani paying for the textbook or documentary evidence of its cost.

35. Mr Hiremani lodged his income tax return for the year ended 30 June 2016 on 10 October 2016. His return disclosed gross income of just over $100,000 and total deductions of $82,250 which comprised the amounts set out at paragraph 3 above.

36. Following the lodgement of his return, Mr Hiremani received an audit notification letter and voluntary disclosure form on 2 November 2016. In his voluntary disclosure form dated 1 December 2016, Mr Hiremani reduced his claims as set out in paragraph 3 above.

Deductibility of Work Expenses

37. At the commencement of hearing, Mr Hiremani's claims for "Other Work Related Expenses" comprised:

(a)
Accommodation and meal expenses related to travel $10,492.20;
(b)
Overtime meals $3,078;
(c)
Home office expenses $5,760; and
(d)
Travel costs (bus and airfares) $1,280.

38. Section 900-15 of the Income Tax Assessment Act 1997 (1997 Act) provides:


To deduct a work expense:

(a)
it must qualify as a deduction under some provision of this Act outside of this Division; and
(b)
you need to substantiate it by getting written evidence.

39. A "work expense" is defined in s 900-30(1) of the 1997 Act as "a loss or outgoing you incur in producing your salary and wages."

40. During the hearing, Mr Hiremani accepted that by reason of Division 900, he was not entitled to a deduction for "work expenses" that were not substantiated by written evidence, unless there was a specific exception that applied.

Travel Related Expenses - Accommodation, meals and travel costs

41. There is an exception from the need to substantiate an expense if it is a travel allowance expense for travel within Australia and the Commissioner considers that the total of the losses or outgoings claimed for travel covered by the allowance are reasonable. A travel allowance expense is defined in s 900-30(3) of the 1997 Act as an allowance paid by an employer to cover losses or outgoings incurred for travel away from home. Mr Hiremani accepted that he was not paid a travel allowance and therefore the exception did not apply.

42. The only written evidence which Mr Hiremani was able to provide for travel related accommodation and meal expenses were: YHA receipts for $567 for three nights over 22 to 24 July 2015 and for the night of 30 July 2015 for $131.00; an American Express credit card statement showing a payment for: $540.66 to YHA Canberra and two meals eaten in Canberra (total $94); in addition to the receipt from Virgin Australia for a flight for $185.

43. The Tribunal notes that Mr Hiremani was not required to keep a travel record in addition to these receipts because his expenses were neither business travel expenses nor expenses for travel that involved him being away for six or more nights in a row: ss 900-85 and 900-95 of the 1997 Act.

44. Even if the substantiation requirements were satisfied, to be deductible, an expense must also satisfy s 8-1 of the 1997 Act. The expense must be incurred in gaining or producing assessable income (here, wages or salary) and not be of a private or domestic nature.

45. It is well established that the cost of travel between home and work is not deductible. Nor is the cost of travel between two unrelated places of work. It is not sufficient that there be a causal connection between travel and work, but rather that there is an immediate connection. Travel between a place of residence and a place of work may, in layman's terms, be said to be necessary for work purposes but it does not make the expenses of travel deductible because the travel is not part of the process by which income is earned: Lunney v Commissioner of Taxation of the Commonwealth of Australia (1958) 100 CLR 478 at 496, 499; Commissioner of Taxation of the Commonwealth of Australia v Payne (2001) 202 CLR 93 at 101 [14] (Payne). The income earning activity does not commence until arrival at the place of work. Similarly, the costs of travel between unrelated income earning activities is not deductible because the travel does not form part of the process by which income is earned: Payne at [14].

46. The situation is different where the income producing activity may be said to commence prior to or upon leaving home. In that situation, the travel forms part of the gaining or producing of assessable income. This includes travel undertaken at the employer's direction and where the employee is paid for the period of travel. Thus in John Holland Group Pty Ltd v Federal Commissioner of Taxation (2015) 232 FCR 59 (John Holland) the costs of air travel undertaken at the direction of the employer and where the employee was rostered on from the time of arrival at the airport would have been deductible to the employee (at 67-8 [34]-[36], 70 [45], 75-6 [58]) but the costs of travel from home to the airport were not (at 72-4 [56) because their employment duties did not commence until arrival at the airport.

47. The letter provided by Mr Hiremani's employer stating that it was necessary for Mr Hiremani to travel between Melbourne and Canberra for work purposes is, of itself, of little assistance. It is true that Mr Hiremani had to attend the Canberra office in order to do his job and in order to get paid. However, Mr Hiremani's travel from Melbourne to Canberra was necessary because Mr Hiremani chose to live in Melbourne. Neither Lockheed Martin nor the ATO paid for his travel or organised his travel nor did Mr Hiremani travel during the hours for which he was paid. On the days he travelled, he did not commence his work at home and travel whilst continuing that work. This is not a case of Mr Hiremani travelling between two places of work during the course of producing his income. Merely because a person works from home on some days and in the office on other days does not make all costs of travel between home and the office deductible: Newsom v Robertson [1953] Ch 7 at 14 per Somervell LJ and at 16 per Denning LJ. In travelling from Melbourne to Canberra he was not travelling in the course of carrying out his employment; he was travelling from home to an office. The fact that Mr Hiremani travelled a longer distance between his place of residence and his office does not alter this outcome: John Holland at 76-7 [60]. The Tribunal concludes that none of Mr Hiremani's travel expenses are allowable deductions because even to the extent to which they are substantiated by written evidence, the expenses do not relate to travel that is sufficiently connected with the production of his income.

Overtime Meals

48. At the hearing, Mr Hiremani accepted that he was not entitled to claim overtime meal expenses as he was unable to substantiate the claim with written evidence and he could not rely upon the exception to that requirement provided for in s 900-60 of the 1997 Act because he was not paid a meals allowance as defined in s 900-30.

Home Office Expenses

49. The Commissioner allowed Mr Hiremani a deduction on account of the costs of electricity, internet costs and phone costs. The allowance of those deductions was not in issue before the Tribunal.

50. Mr Hiremani's remaining claim for home office expenses relate to a proportion of the rent he paid on his apartment. Although Mr Hiremani provided the Tribunal with a ledger report from the real estate agent acting for his landlord, setting out the rent he paid on his apartment in Melbourne, Mr Hiremani also accepted during the hearing that based on the decisions of the High Court in Handley v Commissioner of Taxation of the Commonwealth of Australia (1981) 148 CLR 182 and Commissioner of Taxation of the Commonwealth of Australia v Forsyth (1981) 148 CLR 203, he was not entitled to a deduction for any part of his rent on the apartment. Although Mr Hiremani performed work in his apartment for the ATO, he worked from a bedroom and living room that were integrated parts of his family place of residence. The entirety of the rent he paid in respect of that apartment was not an outgoing incurred in gaining or producing assessable income and was of a private or domestic nature.

51. The Tribunal has thus concluded that none of the amounts claimed for "Other Work Related Expenses" are allowable deductions.

Car Expenses

52. Mr Hiremani claimed a deduction for car expenses on the basis of his assertion that he had driven the family car to Canberra seven times in the financial year ended 30 June 2016 to perform work in the Canberra office. He was unable to provide a log book.

53. Division 28 of the 1997 Act applies to individuals.

54. In so far as is relevant, for the year ended 30 June 2016 section 28-12 provides:

(1)
If you owned or leased a car, you can deduct for the car's expenses an amount or amounts worked out using one of 2 methods.
(2)
You must use one of the 2 methods unless an exception applies. If you can't use either of the methods, you can't deduct anything for the car expenses.

55. It was not disputed before the Tribunal that Mr Hiremani owned a car.

56. A car expense is defined in s 28-13 of the 1997 Act as "a loss our outgoing to do with a car".

57. The two methods are the "cents per kilometre method" and the "log book method": s 28-15(2). In his return, Mr Hiremani represented that he had relied on the log book method. At the hearing, Mr Hiremani sought to rely upon the cents per kilometre method. There is no substantiation requirement that must be satisfied in order to use that method: s 28-35.

58. Under the cents per kilometre method, the deduction is calculated as:

Number of *business kilometres travelled by the car in the income year x Rate of cents per kilometre determined under s 28-25(4) for the car for the income year.

The formula applies only for the first 5,000 business kilometres: s 28-25(2) of the 1997 Act.

59. Mr Hiremani applied a rate of 66 cents per kilometre. The Commissioner accepted that was the applicable rate. Mr Hiremani accepted that he could not claim for more than 5,000 kilometres and as such his claim could not exceed $3,300.00.

60. The issue was whether any of the kilometres claimed by Mr Hiremani were "business kilometres". "Business kilometres" are kilometres that the car travelled in the course of producing assessable income or travel between workplaces: s 28-25(3).

61. The Commissioner submitted that he could not be satisfied that the car travelled the kilometres claimed because they were not based on odometer readings; they were just "estimates". However, s28-25(3) of the 1997 Act states "[y]ou calculate the number of business kilometres by making a reasonable estimate".

62. If Mr Hiremani had been able to verify the number of times he drove to Canberra, then an estimate based on pattern of use (by estimating the number of kilometres between Melbourne and Canberra) may well have been reasonable. The difficulty for Mr Hiremani is that there is no reliable evidence before the Tribunal which establishes the number of times Mr Hiremani in fact drove between Melbourne and Canberra during the financial year.

63. There is also a further difficulty. Mr Hiremani could not establish that the kilometres travelled by his car were travelled in the course of producing his assessable income or were travel between his workplaces. As set out above, Mr Hiremani was not paid for the time he travelled between Melbourne and Canberra and when he travelled between Melbourne and Canberra, he was not travelling between workplaces during the course of his employment but between his home and office.

64. The Commissioner has accepted, based on the decision of Waddell J in Commissioner of Taxation v Vogt [1975] 1 NSWLR 194 that a taxpayer is entitled to a deduction under s 8-1 of the 1997 Act for motor vehicle related expenses if the expenditure is attributable to the transportation of bulky equipment essential to the performance of their income earning activities.

65. The Tribunal was not provided with any evidence of expenditure incurred by Mr Hiremani in relation to the motor vehicle. The Tribunal understood Mr Hiremani to have submitted that he was entitled to a deduction for motor vehicle expenses calculated on the per kilometre rate provided for by the Commissioner under s 28-25(4) on the basis that the kilometres travelled by the car were business kilometres because he used the car to transport bulky equipment.

66. There are a number of difficulties with this aspect of Mr Hiremani's submission:

(a)
First, he could not identify a reasonable basis for estimating the kilometres he claimed he had travelled for the purposes of transporting his equipment. He could only guess the number of times he had driven between Melbourne and Canberra for work and he could only guess the number of times he had driven to the Melbourne CBD or Docklands offices of the ATO and was guessing that these kilometres totalled at least 5,000.
(b)
Secondly, the Tribunal is not satisfied that the equipment he claimed to have carried meant they could be transported conveniently only by the use of a motor vehicle. The equipment Mr Hiremani considered necessary for his duties was by his own evidence capable of being packed into luggage that could be transported on a bus.
(c)
Thirdly, the Tribunal is not satisfied that any trips Mr Hiremani made between his home and the ATO office or the office of Lockheed Martin in his family car were in a practical sense for the carriage of his goods rather than for the carriage of himself. The Tribunal does not accept that the transportation of three laptops was an incident of the performance of Mr Hiremani's duties. Mr Hiremani's evidence does not establish that it was necessary or convenient for him to have three laptops on his person in order to carry out his duties whilst at the ATO offices in Melbourne or the offices of Lockheed Martin. In particular, the Tribunal does not accept that the transportation of a personal laptop for the purpose of possibly receiving or making a 15 to 20-minute Skype call outside of his rostered shifts was an incidental part of the performance of Mr Hiremani's duties whilst attending the offices of Lockheed Martin in Canberra or the offices of the ATO.

67. For these reasons, the Tribunal has concluded that Mr Hiremani is not entitled to a deduction for car expenses.

Self-Education Expenses

68. As a work expense, Mr Hiremani was only able to claim a deduction if the amount qualified as a deduction under some section of the Income Tax Assessment Act 1936 (1936 Act) or the 1997 Act outside of Division 900 and he was able to substantiate it by getting written evidence: s 900-15 of the 1997 Act.

69. The only expenses in respect of self-education for which Mr Hiremani was able to provide written evidence was the cost of the PRINCE2 course and the related taxi fare.

70. The issue which then arises is whether the cost of the PRINCE2 course qualified as a deduction under s 8-1 of the 1997 Act. The Commissioner accepted for the purposes of these proceedings that the deductibility of the taxi fare of $40.15 would follow the deductibility of the cost of the course.

71. The costs of increasing a person's learning, knowledge, experience and ability in their profession or calling are deductible expenses when incurred by a taxpayer who, at the time of incurring the expense, gains income by the exercise of his skill in that profession or calling: Commissioner of Taxation v Finn (1961) 106 CLR 60 at 70 per Windeyer J (Finn). This includes circumstances where the increased knowledge makes promotion or advancement within that profession or calling, with consequent increase in income, more certain: Finn per Dixon CJ at 67.

72. The Commissioner submitted that the self-education expenses incurred by Mr Hiremani on the PRINCE2 course were not allowable for two reasons.

73. First, the Commissioner submitted that the course was too general in nature. The Tribunal does not accept that the course was general in nature. It was a course tailored to project management, not in a general sense but as a principle-based process; it was targeted to practitioners in the field of project management.

74. Second, the Commissioner submitted that Mr Hiremani undertook the course in order to become a "manager" and he was not a "manager" but a co-ordinator and accordingly the costs of the course did not relate to the gaining of his employment income.

75. This submission is also not accepted. It is based on attaching a significance to a position description that is not warranted by the facts. Irrespective of whether his role is described as a co-ordinator or a manager, he was a participant in the rollout of IT projects. That was the purpose of his engagement. The nature of his work was project based. The content of the PRINCE2 course was targeted at people who were project team members and was designed to increase his learning, knowledge and ability in his profession or calling. His income earning activities were based on the exercise of knowledge within the field of project management and the subject matter of the PRINCE2 course enabled him to improve his skills and knowledge within that field and increase his effectiveness as a project participant.

76. The fact that Mr Hiremani considered that the course would enable him to be engaged in higher paid roles within that field does not mean that he is not entitled to a deduction. In undertaking the course, he was not seeking to embark on a new career or calling. The course was designed to increase his professional proficiency and was advantageous to his existing engagement whilst also increasing his prospects of advancement in a higher position within the same profession or calling: Finn per Dixon CJ at 67-8 and Windeyer J at 70.

77. The evidence before the Tribunal was that Mr Hiremani was employed as a participant in project-based IT work at the time he undertook the course. He was motivated to undertake the PRINCE2 course in order to be considered by his employer for promotions in his calling of project management and it would also improve his performance as a project participant by better understanding the phases of the projects he was working on. He undertook the course in order to upskill in his existing calling or profession and is entitled to a deduction for the cost of the course. The Tribunal has concluded that the PRINCE2 course costs incurred by Mr Hiremani, as evidenced by the tax invoice issued to him are deductible,

78. It is recalled that the Commissioner accepted that the issue of the deductibility of the taxi fare for travel to the course site would be resolved on the same basis as the deductibility of the costs of the PRINCE2 course. As the Tribunal finds the costs of the course to be deductible, on the basis of the Commissioner's concession, the taxi fare of $40.10 is also deductible.

79. The Tribunal notes that s 82A(1) of the 1936 Act provides that:


Where a deduction is, or but for this section would be, allowable to the taxpayer under s 8-1 of the [1997 Act] in respect of a year of income in respect of expenses of self-education, the deduction, or the aggregate of deductions, so allowable to the taxpayer in respect of those expenses shall not be greater than the amount by which the net amount of expenses of self-education exceeds $250.

80. "Expenses of self-education" means, relevantly, expenses necessarily incurred by a taxpayer for or in connection with a prescribed course of education: s 82A(2) of the 1936 Act.

81. A "prescribed course of education" means a course of education provided by a school, college, university or other place of education and undertaken by the taxpayer for the purpose of gaining qualifications for use in the carrying on of a profession, business or trade or in the course of any employment: s 82A(2) of the 1936 Act.

82. The Tribunal concludes that Mr Hiremani's deductions for self-education expenses should be reduced by $250 by reason of s 82A of the 1936 Act. In particular, the Tribunal concludes that course was provided by DDLS at its premises as a "place of education".

Penalties

83. Under s 284-75 of Schedule 1 to the Taxation Administration Act 1953 (1953 Act), a taxpayer is liable to an administrative penalty if they make a statement to the Commissioner that is false or misleading in a material particular.

84. By claiming deductions in his tax return to which he was not entitled Mr Hiremani made statements that were false.

85. The penalty amount is worked out by reference to the base penalty amount: s 284-85 of the 1953 Act.

86. The base penalty amount is determined in accordance with the table in s 284-90 of the 1953 Act. The decision on objection assessed Mr Hiremani to a base penalty amount of 25% of his shortfall amount (the amount of his income tax liability worked out on the basis of his statement being less than it would have been if his statements were not false) on the basis that the shortfall amount resulted from a failure by Mr Hiremani to take reasonable care to comply with a taxation law (item 3 of the table in s 284-90).

87. The decision on objection was that the penalties on the difference between the amount of deductions claimed in Mr Hiremani's tax return and the amount of deductions claimed at the time of voluntary disclosure were remitted to nil because the Commissioner was satisfied that Mr Hiremani was suffering from some mental health issues at the time he lodged his return. In his objection decision the Commissioner accepted that Mr Hiremani had appointments with his GP in late September 2016 and mid October 2016 and saw a Consultant Psychiatrist in late October 2016. The decision on objection was that a 25% penalty be imposed on the balance of the shortfall amount.

88. In his objection letter, Mr Hiremani represented that:


I must admit that my tax return 2016 was lodged through mygov.gov.au was in a rush, over sightedness/brain fade/snap without tax agent consultation I was not good with mental state of mind as was going through physical and mental illness/stress, anxiety, depression due to termination of my employment with Lockheed Martin. Also, I have lost the expenses receipts/invoices, dockets and logbook, further my computer was formatted and all data was erased.

89. The Tribunal notes that at the time Mr Hiremani lodged his return (October 2016), his employment had not in fact terminated. But the letter of termination does record that Mr Hiremani's performance was being scrutinised and his performance considered unsatisfactory. He had been given a first and final warning letter on 22 September 2016.

90. The Tribunal concludes that the size of the claims for deductions made by Mr Hiremani in his return which resulted in a shortfall were in the nature of initial, extravagant or ambit claims, made in the expectation that they would be a starting point for a negotiation, that were not based on contemporaneous records. Mr Hiremani claims that he took care in preparing his return and that this was the first time he had prepared a tax return. The evidence supports a conclusion that Mr Hiremani did not take reasonable care in preparing his return or in complying with record keeping/substantiation requirements. He filed a tax return claiming very large deductions without consulting a tax agent and without supporting, contemporaneous documents. Nor did he take reasonable care in retaining his supporting documents.

91. The Commissioner in his objection decision remitted the penalty in part on account of Mr Hiremani's mental health issues. The Tribunal was not provided with any evidence or material relating to these mental health issues. No submission was made before the Tribunal that the remission should not have been made. In these circumstances, the Tribunal does not consider it appropriate to disturb that remission decision.

92. Mr Hiremani appeared to contend that a further remission was warranted. The Tribunal is not satisfied that a further remission is appropriate. Mr Hiremani failed to keep supporting records for his claims. There is no evidence before the Tribunal that Mr Hiremani's failure to maintain supporting records over the course of the income year were linked to any mental health issues he may have been suffering from at the time of lodging his return.

93. Mr Hiremani appears to provide two explanations for the absence of supporting records. The first is that he misplaced all his written records. The Tribunal does not accept Mr Hiremani's evidence that all his receipts and records were left behind in a briefcase in a taxi taken to meet his friends on a Saturday night. He made no reference to the incident in his voluntary disclosure form dated 1 December 2016. The second explanation, which was provided in his voluntary disclosure form, was that he had reformatted his computer without backups and this had resulted in a loss of records. No details were given as to when this reformatting occurred. It is concerning that, as an IT professional, he had failed to back up his computer. The Tribunal does not have a basis for concluding that this failure to back up his computer at all was attributable to mental health issues he experienced in September or October 2016.

94. The fact that the Mr Hiremani asserted in February 2017 that he lost his receipts whilst taking his tax return to a friend to look at them indicates that Mr Hiremani was aware at least in February 2017 that it would have been prudent to have the return, in which deductions equalled over 80% of his assessable income, reviewed by somebody. He did not at any stage seek to have his claims reviewed by a tax agent.

95. The Tribunal concludes that, given his failure to keep appropriate records it is not appropriate to further remit the 25% penalty imposed on the balance of the shortfall remaining after taking into account the voluntary disclosure and the deduction to be allowed for the PRINCE2 course and related taxi expenses.

DECISION

96. The decision under review is varied and the matter remitted to the Commissioner for reassessment in accordance with these reasons.