HILL v FC of T
Members:G Lazanas SM
Tribunal:
Administrative Appeals Tribunal, Sydney
MEDIA NEUTRAL CITATION:
[2016] AATA 514
G Lazanas (Senior Member)
INTRODUCTION
1. Mr Edward Hill has sought review of a decision made by the Commissioner of Taxation to disallow in full an objection made by Mr Hill against an amended assessment issued to him in respect of the income tax year ended 30 June 2012 (the relevant year). The key issues to be determined are whether Mr Hill is entitled to claim certain deductions pursuant to s 8-1 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) for work-related car expenses and for work-related travel expenses, namely, meals and accommodation.
2. Mr Hill maintains that he is entitled to claim the deductions on the basis that he was an itinerant worker in the relevant year and, furthermore, the expenses were incurred by him in gaining or producing his assessable income. He also argued that he is entitled to rely on the Commissioner's public tax rulings, including that titled Taxation Ruling : Income Tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses (). He says that, by virtue of s 357-60 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (TAA 1953), the Commissioner is bound to apply the ruling if the law turns out to be less favourable to him. That is to say, Mr Hill claims to be protected from any adverse fiscal consequences because of the public ruling issued by the Commissioner.
3. The question for the Tribunal is whether the Commissioner's decision with respect to Mr Hill's objection is correct. I have decided that Mr Hill is not entitled to claim as deductions the so called work-related travel expenses and work-related car expenses and that the Commissioner's objection decision is correct. I have taken into account the statutory regime for rulings that Mr Hill referenced. In my view, Mr Hill is not an itinerant worker. His reliance on the Commissioner's public tax ruling is similarly misplaced.
THE ISSUES
4. Broadly, two principal issues arise for determination. They are whether Mr Hill is entitled to claim deductions pursuant to s 8-1 of the ITAA 1997 for the relevant year, namely:
- (a) deductions in the amount of $5,325 for work-related car expenses; and
- (b) deductions in the amount of $32,543 for work-related travel expenses.
5. The determination of both issues largely turns on whether Mr Hill was an 'itinerant' worker in the relevant year. However, that is not the end of the matter as Mr Hill also claims to have public tax ruling protection for any underpayment of tax which necessitates a review of the statutory provisions in the TAA 1953 regarding the Commissioner's rulings regime.
6. Mr Hill, as the taxpayer, bears the onus of proving that the amended assessment is excessive: s14ZZK(b)(i) of the TAA 1953.
THE FACTUAL BACKGROUND AND EVIDENCE
7. The following findings of fact are based on the evidence of Mr Hill, including that given by him at the hearing, the T-Documents, and the income tax return of Mr Hill's wife that was put into evidence by the Commissioner at the hearing. Mr Hill was the only person who gave evidence.
8. Mr Hill has undertaken some tertiary studies and has various qualifications including in business management and accounting. He said he has some familiarity with taxation laws through those studies and that he prepared and lodged his income tax returns, including for the relevant year. Mr Hill stated that he has worked in a variety of jobs including, most recently, as a secretary manager of a football club and a caretaker of grounds.
9. During the relevant year, Mr Hill engaged in the following employment arrangements:
| Period of employment | Location of employment | Employer | Job description |
| October 2011 - November 2011 | Bellata | Cargill Australia Limited (Cargill) | Bunker hand |
| November 2011 - January 2012 | West Wyalong | Cargill | Bunker hand |
| January 2012 - February 2012 | Moree | Agforce Pty Ltd (Agforce) | Chemical mixer |
| February 2012 - March 2012 | Parkes | Agforce | Mixer/driver |
| March 2012 - April 2012 | Moree | Agforce | Mixer/driver |
| April 2012 - June 2012 | Ashley | Auscott Ltd (Auscott) | Forklift driver |
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10. Mr Hill stated that he worked exclusively at the site at Bellata during his employment with Cargill for the months of October 2011 to November 2011 where he was employed as a bunker hand on a short-term basis for a period of 4 to 5 weeks. Mr Hill explained that his job as a bunker hand involved labour work, including unloading grain from semitrailers. Mr Hill had organised his employment at Bellata four weeks prior to commencing employment.
11. When the work at Bellata was finishing, Mr Hill organised his next job, also a bunker hand job at West Wyalong, which started one week after his employment at Bellata ceased. His employment at West Wyalong was arranged through a local recruitment agency with Cargill remaining as his employer. However, his move to West Wyalong was not as a result of being transferred or re-located by Cargill. Mr Hill worked exclusively at the site at West Wyalong during his employment with Cargill for the months of November 2011 to January 2012. He said it was very short term work because the site flooded and his employment was terminated.
12. During the first week of January 2012, Mr Hill searched for employment opportunities on "The Grey Nomads" website and through that website he organised his next job at Moree with Agforce. That job commenced in the last week of January 2012 in conjunction with the start of the cotton season. He worked as a chemical mixer which involved him driving trucks to the regional airstrips and refuelling planes.
13. At around the end of January 2012, Agforce offered Mr Hill a position in Parkes to undertake the same role and duties he carried out in Moree. He worked in Parkes in the period from early February 2012 to March 2012. While working at the Parkes site, Mr Hill resided in a house that was provided by Agforce. He then moved to Moree, working in the same role with the same employer for the period March 2012 to April 2012.
14. During the second week of March 2012 and in conjunction with the onset of the harvest season, Mr Hill contacted the site manager of Auscott at Ashley regarding job availabilities. The site manager offered Mr Hill a position with Auscott at the Ashley site as a forklift operator. Mr Hill worked exclusively at the site at Ashley during his employment with Auscott for the months of April 2012 to June 2012.
15. Mr Hill stated that he did not have any written employment contracts with respect to any of the jobs that he undertook during the relevant year or, if he had any, he could no longer locate any copies. He said, and I accept, that the work at each of the sites was short-term and seasonal in nature. Mr Hill stated that none of his employers paid him any allowances during the relevant year. This was supported by the PAYG payment summaries provided to him by each of the employers contained in the T-Documents.
16.
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Mr Hill and his wife had a house at the relevant time in Springfield, which he asserted was his usual place of residence. Mr Hill's wife was the registered owner of two vehicles in respect of which Mr Hill claimed deductions for work-related car expenses, namely, a Toyota LandCruiser and a motorhome. Mr Hill stated that he and his wife had travelled in 'flotilla' style to the various sites. That is to say, his wife drove the Toyota LandCruiser and he drove the motorhome. He said that his wife was not licensed to drive the motorhome. With the exception of Parkes (where he stayed at a house provided by his employer), Mr Hill stayed with his wife in the motorhome which they brought with them and which they parked in rented caravan sites near each of the places where he worked.17. Mr Hill stated that he was away, from his usual place of residence at Springfield, for "a total of 280 days for the fiscal year in question". The Commissioner did not take issue with where Mr Hill ordinarily resided during the relevant year, accepting that it was his Springfield home, even though he and his wife were away for some 280 days and, for most of that time, living in their motorhome. I am prepared to proceed on the same basis.
18. Mr Hill had claimed deductions for the two vehicles (LandCruiser and motorhome) in his tax return using the cents per kilometre method. However, the claimed amount of $5,325 did not reconcile with the number of kilometres that Mr Hill claimed to have travelled with the two separate vehicles based on the prescribed cents per kilometre. At the hearing, upon being shown his wife's income tax return for the 2012 income year, and realising that she had also claimed a deduction for the LandCruiser, Mr Hill suggested that his claim had only ever been made for one vehicle, the motorhome. However, this assertion contradicted previous statements that Mr Hill had made, including in his letter to the Commissioner dated 2 February 2014 responding to the Commissioner's initial audit queries. Mr Hill had relevantly stated at that time, when explaining how he had calculated his car expenses claim that "the distance travelled was entered into etax and claim calculated. Distance for motorhome was 4,339 klm and car was 5,145 klm."[1]
19. The evidence with respect to whether Mr Hill had returned home between his various jobs was also inconsistent. Mr Hill maintained in his oral evidence that he did not go home between his different jobs but that he travelled from job site to job site, that is, after he finished working at Bellata, he drove directly to West Wyalong, then he drove from West Wyalong to Moree and so on. He had also told the Commissioner in an email dated 8 March 2015, in response to specific queries, that "[he] did not go home between jobs as time did not allow".[2]
I returned back to my usual place of residence at the end of each shift, which comprised up to 3 weeks duration.[3]
T10-249. I returned home after each shift rotation, my home is the same as it has been in Springfield …, since 2010.[4]
T10-250.
20. The various accounts were plainly irreconcilable which left Mr Hill in the awkward position of asserting at the hearing that the correct position is that he had not returned home between his different jobs and that he had travelled from site to site. He suggested, in cross-examination, that he must have made a typo when he prepared his objection. He said that he had meant to say that he did not return home, and he had omitted to insert the word "not". This explanation was not plausible in the face of the express terms in the objection where he stated in two separate places that he returned home. I do not accept that Mr Hill made typos, as the sentences referenced above in [19] would have been quite different if he had intended to say the opposite, that is, that he did not return home. In all the circumstances, I find that he did return home after each shift based on the version of events which Mr Hill gave in his objection in September 2014 as it is the more contemporaneous account. Accordingly, I find that Mr Hill had returned home to Springfield for short periods between each of his different jobs.
21.
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In response to numerous questions put to Mr Hill in cross examination about some invoices and receipts that he had provided to the Commissioner during the income tax audit and that were contained in the T-Documents, he said that he had claimed deductions for only some of the invoices because some expenditure was for personal items or incurred on behalf of others or incurred by his wife, for example, gifts for him, such as a suit tie. However, he could not demonstrate to the Tribunal with any specificity what expenses he had in fact claimed deductions for in his income tax return. In other words, there was no reconciliation of the expenses and the total claims made. Additionally, the amount in respect of which Mr Hill had originally claimed deductions was $32,543 but in later correspondence this changed to $35,115.[5]22. Mr Hill asserted that substantiation of the expenses had never been a major focus of the Commissioner's audit and, moreover, he claimed to have been told by a taxation officer in a telephone discussion in or about December 2015 to not send through any spreadsheet or "MYOB documents" (which I understood to be a reference to documents produced using software known as MYOB). I noted at the hearing that this was contrary to the Tribunal's written direction on 3 December 2015 that Mr Hill give to the Tribunal and to the Commissioner by 29 January 2016 "a statement and/or spreadsheet setting out, detailing and explaining the breakdown of expenses" incurred by Mr Hill. This made it clear that substantiation of the expenses is an issue for the Tribunal. I reject Mr Hill's suggestion that a taxation officer encouraged him to not comply with the Tribunal's direction as to the filing of that evidence and that any such encouragement would be sufficient to justify non-compliance with the Tribunal's direction. Furthermore, Mr Hill claimed to have prepared the relevant spreadsheets but did not bring the relevant documents to the hearing. I find that he made no attempt to properly explain the expenses for which he had claimed deductions and, in circumstances where many of the invoices included in the T-Documents referenced purchases of meals and alcohol as well as personal items, such as shoes, deodorant and cigarettes, it was impossible to know precisely what Mr Hill had claimed his deductions for. Even if Mr Hill did prepare the spreadsheet, not producing it at the hearing means that he has not assisted in discharging his burden of proof.
ADMINISTRATIVE BACKGROUND
23. Before turning to the legislative framework and relevant taxation principles, it is necessary to say something briefly about the administrative background to this proceeding.
24. On 14 October 2012, Mr Hill lodged his income tax return for the year ended 30 June 2012 reporting, amongst other things, deductions for work-related car expenses in the amount of $5,325 and work-related travel expenses of $32,543, being the subject of these proceedings.
25. On 22 October 2012, the Commissioner issued Mr Hill with a notice of assessment for the 2012 income year.
26. On 19 December 2013, the Commissioner issued a letter to Mr Hill informing him that his income tax return for the 2012 income year had been selected for audit.
27. On 16 June 2014, the Commissioner's audit of Mr Hill's income tax affairs for the relevant year was finalised. The Commissioner determined that Mr Hill was not entitled to deductions for work-related car expenses in the amount of $5,325 nor for work-related travel expenses of $32,543 and, on 26 June 2014, the Commissioner issued to Mr Hill a notice of amended assessment which had the effect of increasing his taxable income. He also issued Mr Hill with a notice of assessment of penalty at the rate of 25% on the basis that he did not exercise reasonable care when he prepared his income tax return.
28. On 10 September 2014, Mr Hill lodged an objection with the Commissioner with respect to the notice of amended assessment (but not the administrative penalty). On 16 March 2015, the Commissioner issued his objection decision disallowing the objection in full.
29. On 25 May 2015, Mr Hill lodged with the Tribunal an application for review of the Commissioner's objection decision with respect to his amended assessment for primary tax.
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30. The key taxation provisions relevant to this case are the general deductibility provisions as well as specific provisions regarding car expense claims. In addition, certain provisions relevant to the rulings regime are also important.
31. Section 8-1 of the ITAA 1997 relevantly provides as follows:
8-1 General deductions
(1) You can deduct from your assessable income any loss or outgoing to the extent that:
- (a) it is incurred in gaining or producing your assessable income; or
- (b) it is necessarily incurred in carrying on a *business for the purpose of gaining or producing your assessable income.
(2) However, you cannot deduct a loss or outgoing under this section to the extent that:
- …
- (b) it is a loss or outgoing of a private or domestic nature; or
- … [original emphasis]
32. Section 6-5(1) of the ITAA 1997 provides:
(1) Your assessable income includes income according to ordinary concepts, which is called ordinary income . [original emphasis]
33. The issues in this case turn on s 8-1(1)(a) and whether a particular "loss or outgoing" was "incurred in gaining or producing … assessable income". Paragraph (b) of s 8-1(1) does not apply as Mr Hill was an employee and not carrying on a business.
34. It is well settled that incurred "in" gaining or producing means incurred "in the course of" gaining or producing assessable income. In
Ronpibon Tin NL & Tongkah Compound NL v Federal Commissioner of Taxation (1949) 78 CLR 47 (Ronpibon), the High Court explained at 57:
it is both sufficient and necessary that the occasion of the loss or outgoing should be found in whatever is productive of the assessable income or, if none be produced, would be expected to produce assessable income.
35. In
Commissioner of Taxation v Payne (2001) 202 CLR 93 (Payne) at [11], the High Court rephrased the issue in s 8-1(1)(a) of the ITAA 1997 as involving the following question: "is the occasion of the outgoing found in whatever is productive of actual or expected income?"
36. I will briefly set out below the relevant principles with respect to the deductibility of work-related travel expenses and work-related car expenses. This is followed by an outline of the basic statutory provisions regarding the rulings regime.
37. The starting point for a discussion of travel expenses is the decision of the High Court in
Lunney v Federal Commissioner of Taxation (1958) 100 CLR 478 (Lunney) which stands for the general principle that a deduction is not allowable for the cost of travel by an employee between home and their workplace. In Lunney, the taxpayers, a joiner employed by a shipping company and a dentist carrying on his profession on his own account, claimed deductions for fares incurred in travelling between their homes and places of work. The majority of the High Court held that the expenses incurred by each of the taxpayers in travelling between home and work were not deductible. Williams, Kitto and Taylor JJ held as follows, at 498:
The question whether the fares which were paid by the appellants are deductible under s. 51 [Income Tax and Social Services Contribution Assessment Act 1936-1956] should not and, indeed, cannot be solved simply by a process of reasoning which asserts that because expenditure on fares from a taxpayer's residence to his place of employment or place of business is necessary if assessable income is to be derived.
38. Their reasons were essentially twofold. First, merely because certain expenditure must be incurred in order to be able to derive assessable income, does not necessarily mean that the expenditure is incidental and relevant to
ATC 7113
the derivation of assessable income or that it is incurred in the course of gaining or producing assessable income. A travel expense is a prerequisite to the earning of assessable income in the sense that one must arrive at work, rather than being incurred in the course of gaining that income. The second reason is that the essential character of such expenditure is of a private or domestic nature. That is to say, it is a personal, living expense to do with the taxpayer's choice of where to live. An apt illustration of the application of these principles isAAT Case 4633 (1988) 19 ATR 3927; 88 ATC 929 where the taxpayer, a skilled welder, travelled 150 kilometres each Monday to the country to his work site where he resided in camp accommodation for the week. He claimed a deduction for his travel costs, which were denied by the Tribunal on the Lunney principles.
39. One of the exceptions to this general rule is where a taxpayer's job is itinerant as in travelling from place to place, in which case, a deduction for car and travel expenses will be allowed. This exception was first canvassed in Australia, in a decision of Northrop J in
Federal Commissioner of Taxation v Genys (1987) 17 FCR 495 (Genys). The taxpayer in that case was a nurse who used an employment agency to seek relief work at various hospitals. When a hospital was in need of additional staff, it would contact the agency, which would then contact the taxpayer. The taxpayer claimed the car expenses incurred in travelling to the various hospitals, a claim which the Commissioner disallowed. The taxpayer's appeal was dismissed by the Federal Court on the basis that the taxpayer's work could not be described as itinerant since she did not travel between two places of work after the commencement of her duties, but simply drove from home to work and back again. The following statement of Northrop J in Genys is important with respect to the nature of
itinerant
work
, at 498:
However, the general proposition laid down in Lunney (supra), notwithstanding that it remains good law, is not exhaustive. In
Garrett v Federal Commissioner of Taxation (1982) 58 FLR 101; 82 ATC 4060, the Supreme Court of New South Wales constituted by Lusher J, held that it had no application to the following situations:
- (a) where the taxpayer keeps necessary equipment or instruments at his home which he needs for the purpose of performing his work, and by reason of its bulk, such equipment needs to be transported by vehicle from the home to his place or places of work and where the equipment is used at home;
- (b) where the taxpayer incurs expenses for travel between two places of business or work; and
- (c) where the employment can be construed as having commenced at the time of leaving home.
A fourth situation, not enunciated in Garrett; (supra), is where the taxpayer travels between home and shifting places of work, that is, an itinerant occupation.
40. In reaching his conclusion, his Honour noted with approval the decision of Brightman J in
Horton v Young [1972] Ch 157 at 164 (a case dealing with self-employed people):
…where a person has no fixed place or places at which he carries on his trade or profession but moves continually from one place to another, at each of which he consecutively exercises his trade or profession on a purely temporary basis and then departs, his trade or profession being in that sense of an itinerant nature, the travelling expenses of that person between his home and the places where from time to time he happens to be exercising his trade or profession will normally be, and are in the case before me, wholly and exclusively laid out or expended for the purposes of that trade or profession. I have used the adverb 'normally' because every case must to some extent depend on its own facts.
41. In another UK decision,
Taylor v Provan [1975] AC 194, Lord Wilberforce held as follows in relation to the requirement that the travel is part of the income producing activity for the expense to be incurred in gaining or producing assessable income (at 215):
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It is only if the job requires a man to travel that his expenses of that travel can be deducted, i.e., if he is travelling on his work, as distinct from travelling to his work. The most obvious category of jobs of this kind is that of itinerant jobs, such as a commercial traveller. It is as a variant upon this that the concept of two places of work has been introduced: if a man has to travel from one place of work to another place of work, he may deduct the travelling expenses of this travel, because he is travelling on his work, but not those of travelling from either place of work to his home or vice versa. But for this doctrine to apply, he must be required by the nature of the job itself to do the work of the job in two places: the mere fact that he may choose to do part of it in a place separate from that where the job is objectively located is not enough.
42. The Commissioner submitted that the above passage emphasises "the job" as in a single occupation, such that a single employment duty is required to be carried on in two or more distinct locations such that it can be said that the travel is itself part of the income earning activity, either for one employer or different employers.
43. In
Federal Commissioner of Taxation v Wiener (1978) 8 ATR 335; 78 ATC 4006 (Wiener), the taxpayer was engaged in a pilot scheme teaching foreign languages to primary students at up to five different schools in a day. It was not disputed that expenses incurred in travelling between schools were deductible and the issue was the deductibility of expenses incurred in travelling between her home to the first school of each day and between the last school on each day and her home. Smith J of the Supreme Court of Western Australia held that travel was a fundamental part of the taxpayer's work and that the nature of the job made travel in the performance of her duties essential; it was a necessary element of the employment that transport was available at whichever school the taxpayer commenced her teaching duties and that transport remained at her disposal throughout each of those days. In other words, the taxpayer was viewed as an itinerant worker.
44. In
Re Kerry and Federal Commissioner of Taxation (1998) 39 ATR 1252, the Tribunal held that the taxpayer was itinerant on the basis that she was travelling between home and shifting places of work and, therefore, travel was an essential feature of her duties. The taxpayer in that case was a casual on-course totalisator operator, available to be rostered for duty at Randwick, Rosehill, Canterbury, Warwick Farm, Gosford and Wyong racetracks. She was also available for roster duty for day-time trotting meetings at Harold Park, by a different employer. She claimed deductions for the whole of her travel expenses, from home to the first track, from that track to the next location where her shift work was undertaken and from the last track back home. The Tribunal noted that the taxpayer's places of employment from where she carried out her work were fixed and not unknown. However, that factor was not considered to be material. The Tribunal considered the test to be whether travel was an essential feature of her duties. In this regard, the Tribunal decided that on the 48 days involved in the dispute, the taxpayer was dispatched to several racecourses, travelling directly from home to the first race meeting and required to travel between racecourses on a regular basis. Accordingly, the whole of her travel expenses were deductible.
45. With respect to deductions for car expenses, s 28-12 of the ITAA 1997 relevantly states as follows:
(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 4 methods
…
(2) You must use one of the 4 methods unless an exception applies. If you can't use any of the methods, you can't deduct anything for the *car expenses.
46. Section 28-25 sets out how one calculates a deduction using the cents per kilometre method which is what Mr Hill used in respect of his claims in the relevant year. That section provides, as follows:
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(1) To calculate your deduction using the "cents per kilometre" method, use this formula:
Number of *business kilometres
travelled by the *car in the income year× Rate of cents/kilometre
determined under subsection (4)
for the car for the income year(2) But you can use this formula for the first 5,000 *business kilometres only. If the *car travelled more than 5,000 business kilometres, you must discard the kilometres in excess of 5,000.
(3) Business kilometres are kilometres the *car travelled in the course of:
- (a) producing your assessable income; or
- (b) your *travel between workplaces.
You calculate the number of business kilometres by making a reasonable estimate.
(4) For the purposes of subsection (1), the Commissioner may, by legislative instrument, determine rates of cents per kilometre for cars for an income year.
…[original emphasis]
47. The prescribed rate allowed as a deduction was 75 cents per kilometre for a large car for the relevant year: Part 2 of Schedule 1 of the Income Tax Assessment Regulations 1997.
48. Turning to the statutory provisions relevant to rulings issued by the Commissioner, s 357-60(1) of Schedule 1 to the TAA 1953 relevantly provides as follows:
(1) …a ruling binds the Commissioner in relation to you (whether or not you are aware of the ruling) if:
- (a) the ruling applies to you; and
- (b) you rely on the ruling by acting (or omitting to act) in accordance with the ruling.
49. In other words, the Commissioner is statutorily bound to his views expressed in a ruling when dealing with a taxpayer if the ruling applies to the taxpayer and the taxpayer relies on the ruling by acting in accordance with it. In this way, a taxpayer's liability to tax can be substantively modified.
WAS MR HILL AN ITINERANT WORKER IN THE RELEVANT YEAR?
50. Whether an employee's work is 'itinerant' is determined by the nature of the individual's duties and not their occupation or industry. It is a question of fact to be determined by reference to a careful analysis of the facts and circumstances. As Mr Hill and the Commissioner made submissions by reference to , it is appropriate to discuss the matter using the same framework, especially as that ruling also summarises the relevant cases. The Commissioner states that the following factors at paragraph 7 of are relevant for the purpose of determining whether someone is an itinerant worker:
- (a) travel is a fundamental part of the employee's work…;
- (b) the existence of a 'web' of work places in the employee's regular employment, that is, the employee has no fixed place of work…;
- (c) the employee continually travels form one work site to another. An employee must regularly work at more than one work site before returning to his or her usual place of residence…;
- (d) other factors that may indicate itinerancy (to a lesser degree) include:
- (i) the employee has a degree of uncertainty of location in his or her employment (that is, no long term plan and no regular pattern exists)…;
- (ii) the employee's home constitutes a base of operations…;
- (iii) the employee has to carry bulky equipment from home to different work sites…;
- (iv) the employer provides an allowance in recognition of the employee's need to travel continually between different work sites..
- (References to other paragraphs as they appear in paragraph 7 of are omitted)
51. Mr Hill argued that he was 'itinerant' because he said he was travelling on his employment. He said that the travel was a
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fundamental part of his work due to the very nature of his employment. Mr Hill submitted that as he was only employed for a short time at each place of employment as the work was seasonal, he would have to travel to each consecutive work place until the season finished and then returned home. He stated that his claim for travel is only for travel from his home at Springfield to his place of employment, but not for any incidental travel while at the towns. He said that this pattern of work places constituted a 'web' of work places which were organised by him prior to each job finishing. Moreover, as the work was seasonal and subject to cancellation because of weather and other changing circumstances, he said there was uncertainty in the length of his employment.52. The Commissioner argued that Mr Hill was not 'itinerant' because travel was not a fundamental part of Mr Hill's work as it did not arise out of the nature of his employment with each employer. That is, Mr Hill was under no obligation with any employer to work at multiple sites. The Commissioner submitted that Mr Hill worked at only one work place at any given time. Further, the Commissioner pointed out that Mr Hill's duties in relation to his employment did not commence at the Springfield property nor at the various caravan parks where he parked his motorhome. Thus it could not be said that travel was incurred in the course of gaining or producing assessable income; cf
John Holland Group Pty Ltd v Federal Commissioner of Taxation (2015) 232 FCR 59 at [45] and [58]. Rather, Mr Hill travelled from his home at Springfield and from the camping ground where he had parked his motorhome to where he worked in order to get to his workplace. When he finished the work at each workplace, he returned home for up to 3 weeks before commencing at another workplace.
53. The Commissioner stated that Mr Hill did not have a 'web' of workplaces as the taxpayer had in the case of Wiener, where the school teacher had to travel in the course of her employment and where it was necessary that transport was available throughout each of her work days, from the time she left home to the time she returned. Moreover, the location of each workplace was known to Mr Hill with a large degree of certainty. The Commissioner argued that Mr Hill was not required to travel between different workplaces as part of his employment; he would travel between the caravan park where he had parked his motorhome and the same workplace for the relevant period of each employment and none of his employers required him to travel from where he was staying to different workplaces. The Commissioner considered Mr Hill's situation in the relevant year to be similar to the case of Genys, involving the nurse allocated to work at different hospitals, who was held not to be an itinerant worker as once she arrived at the hospital she had no further need to travel and the fact that she worked for many different employers via a nursing agency did not make any difference. The Commissioner further pointed out that Mr Hill's payment summaries show that none of his employers paid him an allowance for travel such that it may indicate that travel was a fundamental part of his employment.
54. I agree with the Commissioner's position. The facts in this case do not satisfy me that Mr Hill was an 'itinerant' worker. His duties did not involve him travelling from workplace to workplace as is essential for itinerancy. Mr Hill had made a lifestyle choice to work in regional towns of New South Wales and live in his motorhome, which he parked at camping grounds close to his workplaces. His wife accompanied him on his travels to the country towns. Mr Hill was not required to travel to these different locations in the course of his employment and, therefore, he did not have a 'web' of workplaces. Rather, he chose to travel from his home in Springfield to undertake work in these locations. At the end of each discrete employment arrangement, he returned to his home at Springfield for a couple of weeks. While he performed duties at more than one work location (when looking at the entirety of his separate employment arrangements) in the relevant year, this fact in itself is insufficient to constitute a 'web' of workplaces for the purpose of itinerancy. They constituted consecutive work locations as Mr Hill was exclusively employed by one employer and reporting to one
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work location, at any point in time. Therefore, each work place may be regarded as a regular or fixed place of employment, even if there was some uncertainty about the length of time that he would be employed at each location because of the seasonal nature of work. I reject Mr Hill's argument that simply because he was working on the "seasonal work circuit", as he described it, that he was, therefore, an 'itinerant' worker.IS MR HILL ENTITLED TO DEDUCTIONS FOR WORK-RELATED TRAVEL EXPENSES?
55. Mr Hill contends that he was entitled to claim deductions for the work-related travel expenses for accommodation and meals totalling $32,543 (comprising of $6,348 for accommodation and $26,195 for meals) pursuant to s 8-1(1)(a) of the ITAA 1997 on the basis that he was itinerant and, in addition, because he was away from his usual place of residence at Springfield. He said that as he was sleeping away from home, he was entitled to claim expenses for meals and accommodation expenses pursuant to paragraph 89 of Taxation Ruling : Income tax: substantiation exception for reasonable travel and overtime meal allowance expenses (). That paragraph states as follows:
Sleep away from home
89. We consider the term 'travel away from the employee's ordinary residence' means, for most employees , that the travel involves an overnight stay; that is, the occupation of accommodation or the occasion of an outgoing on accommodation, for example sleeps in a motel/hotel or, for a truck driver, sleeps in their truck. Some employees may work at night and sleep during the day; therefore, the term ' sleep away from home ' is used in this Ruling. [original emphasis]
56. As already noted at [54] above, I am of the view that Mr Hill is not an 'itinerant' worker. As to Mr Hill's secondary reliance on , that paragraph is contained in the 'Definitions' part of that ruling and is concerned with explaining the phrase "travel away from the employee's ordinary residence". While the paragraph probably aptly describes Mr Hill's sleeping arrangements in broad terms, that is, the fact that he was sleeping away from his home at Springfield, it is clear on its terms that has no application to Mr Hill. First, paragraph 2 of states that "[t]his ruling applies to individuals who incur work-related deductions for travel expenses or overtime meal expenses where these expenses are covered by an allowance paid by the person's employer". In other words, it proceeds on the basis that the expenses are work-related deductions for travel expenses, which they are not in Mr Hill's case. Secondly, none of Mr Hill's employers in the relevant year paid him any allowance. Mr Hill further argued that his situation was "no different to a shearer staying on a farm and travelling to the shearing shed and back at the end of the day, or a Sydney lawyer staying in a hotel in Brisbane, as he is in court there, and travelling to the court and back again".[6]
57. I agree with the Commissioner's submission that Mr Hill's factual circumstances are similar to those of the taxpayer in
Barrett v Commissioner of Taxation [2000] AATA 184, which concerned a taxpayer that was a carpenter who had four different employers during four discrete periods in a single year. In that case, the taxpayer's home was 640 kilometres from Sydney and he would travel to Sydney for work and return home once every two months. The Tribunal was not satisfied that the taxpayer's expenses on accommodation and meals were deductible because the taxpayer chose to work in Sydney, none of his employers required him to live away from his usual place of residence to work and, furthermore, none of the employers paid him an allowance.
58. Accordingly, Mr Hill is not entitled to deductions in the amount of $32,543 for work-related travel expenses as those outgoings were not incurred in gaining or producing assessable income: s 8-1(1)(a) of the ITAA 1997. The essential character of those amounts is properly characterised as private and domestic in nature: s 8-1(2)(b) of the ITAA 1997. Furthermore, Mr Hill did not properly substantiate his claimed
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deductions for the relevant year nor was he entitled to relief from the substantiation rules set out in Division 900 of Part 5-30 of the ITAA 1997.IS MR HILL ENTITLED TO DEDUCTIONS FOR WORK-RELATED CAR EXPENSES?
59. Mr Hill claimed that he was entitled to deductions in the amount of $5,325 for work-related car expenses pursuant to s 8-1 of the ITAA 1997 because he was an 'itinerant' worker during the relevant year and those expenses were incurred in gaining or producing his assessable income. As I have found that Mr Hill was not an 'itinerant' worker, it follows that the expenses were not incurred in gaining or producing his assessable income: Lunney at 498-9; Ronpibon at 56. Furthermore, the essential character of the outgoings is properly characterised as private or domestic in nature: s 8-1(2)(b) of the ITAA 1997. This is because the car expenses were incurred by Mr Hill so that he could arrive at the places of work and put himself in a position to perform his duties of employment with his various employers. Mr Hill's travel was not incurred in the performance of those duties of employment. Moreover, Mr Hill is not entitled to claim the work-related car expenses using the cents per kilometre method as he was not the owner of the vehicles for the purposes of s 28-12(1) of the ITAA 1997:
Scott v Commissioner of Taxation (2002) 51 ATR 1080. He also did not clarify the quantum of his claim, namely, as to the number of kilometres travelled with his motorhome.
IS MR HILL ENTITLED TO PUBLIC RULING PROTECTION?
60. Taxation Ruling is a public ruling which provides guidelines for establishing whether an employee is carrying out itinerant work and the tax treatment of transport expenses incurred by employees carrying out itinerant work , as evident from its title "Income tax: employees carrying out itinerant work - deductions, allowances and reimbursements for transport expenses". The Commissioner is bound by his views in this ruling where, as noted above at [48] and [49], the ruling applies to a taxpayer and the taxpayer relies on the ruling by relevantly acting in accordance with the ruling.
61. Mr Hill placed heavy reliance on the following examples in paragraphs 43 and 55 of , to support him being an 'itinerant' worker and entitled to claim deductions for his work-related travel and car expenses:
43. Example: Valerie is a fruit picker. She does not have a regular circuit, but organises her next job before completing the work at the current farm. Valerie normally works and lives at many properties before returning home, remaining at each farm for two to three weeks. Valerie is engaged in itinerant employment because:
- (a) her employment has a web of work places; and
- (b) there is continual travel from one farm to another before returning to her normal place of residence.
…
55. Example : Ian is a shearer who has agreements with various property owners and therefore travels on a circuit to the same farms each year returning home only periodically. When he finishes work at a property, he travels directly to the next property on his circuit. Although there is no uncertainty in Ian's employment pattern, his work is considered itinerant. This is because:
- (a) travel is a fundamental part of his work;
- (b) his work structure displays a 'web' of workplaces; and
- (c) he continually moves from one place of work to another before returning home.
62. Mr Hill said that his work pattern was basically the same as that of Valerie the fruit picker (in paragraph 43 of ), and Ian the shearer (in paragraph 55 of ) in the relevant year. He submitted that in neither of the explanations given by the Commissioner in the public ruling was the length of work at any one site used as justification for being an 'itinerant' worker. Mr Hill submitted that travel was a fundamental part of his work as he was only employed for a short time at each place of work and then he would have to travel to his next place of work, until he finished the
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season and returned home to Springfield. Mr Hill further submitted as follows:The term "itinerant" does not have a black and white definition. It is open to interpretation by the user and accordingly based on the evidence above and the examples supplied by the Australian Taxation Office, people like myself who work on the seasonal work circuit are itinerant workers.
The Australian Taxation Office has made reference several times in its Statement of Facts, Issues and Contentions (dated 29 April, 2016) that the work I was doing was seasonal and short term. They have also listed dates and places of employment which support my claim as an itinerant worker. Most periods of employment were only for a few weeks, as in the example 43 in TR 95/34.[7]
Applicant’s Response to Respondent’s Outline of Submissions dated 24 May 2016, page 4.
63. The Commissioner argued that Mr Hill's reliance on was not principled and without factual foundation and, therefore, should be rejected. The Commissioner referenced the following passage in the decision of French J (as he then was) in
BHP Billiton Direct Reduced Iron Pty Ltd v Deputy Commissioner of Taxation and Another (2007) 67 ATR 578 at 605:
The word "ruling" has an obvious capacity to mislead. It is capable of conveying the impression that rulings published by the Commissioner have legal force. Insofar as it relates to the interpretation of the law, a ruling has no greater status than an administrative opinion. Insofar as it relates to the way in which a discretion conferred by law would be exercised, it has no greater status than an administrative policy. There is a risk of an unwarranted elevation of rulings, by virtue of their terminology to a kind of "de facto law".
64. The Commissioner also argued that the paragraphs relied on by Mr Hill had to be read in context, particularly taking into account the following paragraphs in which the Commissioner viewed as important and which more closely resembled Mr Hill's situation:
44. Although each case must be considered on an individual basis, the frequency of travel between work sites is an important element. What needs to be determined is whether the length of time spent at a work site qualifies it as a regular or fixed place of employment. This will be a matter of fact.
45. Example : Jason is employed as a builder's labourer. He generally works at a single building site for two to three months before moving to another site. Jason is not engaged in itinerant work because:
- (a) each work site is considered to be a regular or fixed place of employment;
- (b) there is no continual travel between work sites;
- (c) travel is not a fundamental part of his duties; and
- (d) there is no web of work places in his employment.
65. Mr Hill did not argue that the Commissioner's views equate to statutory provisions. His argument was to the effect that the Commissioner issued taking into account the various cases on itinerant workers and that, as he had relied on the Commissioner's views, he was entitled to statutory protection for any underpayment of tax because of s 357-60(1) of Schedule 1 to the TAA 1953.
66. In a recent decision of the Full Federal Court in
Commissioner of Taxation v Jayasinghe [2016] FCAFC 79 (Jayasinghe), Pagone and Davies JJ held as follows (at [55]-[56]) in relation to the construction of a taxation ruling issued by the Commissioner:
Rulings issued by the Commissioner are to be construed by reference to the purpose for which the Commissioner is empowered to make them. Section 357-5(1) of Schedule 2 to the Administration Act identifies the object of the Commissioner's power to make lawfully binding rulings to be to enable a taxpayer to find out the Commissioner's view about how certain laws administered by the Commissioner apply to the taxpayer to whom the rulings are addressed. Section 357-5 provides:
357-5 Object of this Part
(1) The object of this Part is to provide a way for you to find out the
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Commissioner's view about how certain laws administered by the Commissioner apply to you so that the risks to you of uncertainty when you are self assessing or working out your tax obligations or entitlements are reduced.(2) This object is achieved by:
- (a) making advice in the form of rulings by the Commissioner available on a wide range of matters and to many taxpayers; and
- (b) ensuring that the Commissioner provides rulings in a timely manner; and
- (c) enabling the Commissioner to obtain, and make rulings based on, relevant information; and
- (d) protecting you from increases in tax and from penalties and interest where you rely on rulings; and
- (e) protecting you from decreases in entitlements where you rely on rulings; and
- (f) limiting the ways the Commissioner can alter rulings to your detriment; and
- (g) giving you protection from interest charges where you rely on other advice from the Commissioner, or on the Commissioner's general administrative practice.
67. His Honour Allsop CJ, who was in dissent in Jayasinghe, agreed with the plurality (at [38]) as to the approach to be taken with respect to rulings issued by the Commissioner:
…The approach to the construction of a taxation ruling such as this should bear in mind the object of the part of the Taxation Administration Act that is set out in s 357-5 of the Act. This is also set out in the judgment of Pagone and Davies JJ. A taxpayer is entitled to read the Taxation Determination in an unvarnished way and as containing an expression of how the Commissioner of Taxation views the law. Thus looked at, one does not go to the 1963 Act. Instead, one seeks to interpret the meaning of the ruling to an ordinary reader, who is a taxpayer.
68. Against that background, (and noting also that the Commissioner has filed an application for special leave to appeal the decision of the Full Federal Court in Jayasinghe to the High Court), the issue for the Tribunal is whether the interpretation which Mr Hill adopted, as an ordinary reader, viewed in objective terms, was an interpretation that was available to him such as to bind the Commissioner. I have decided that the Commissioner is not bound, as the paragraphs of the ruling that he seeks to rely on do not apply to Mr Hill for the reason that the hypothetical example of Valerie the fruit picker (in paragraph 43 of ) had a 'web' of workplaces. Valerie the fruit picker continually travelled from farm to farm and lived at many properties before returning home whereas Mr Hill was exclusively employed by the one employer and worked solely at one workplace at any particular point in time before returning home. Also, the hypothetical Ian the shearer example which Mr Hill separately relied on additionally presupposed the fact of travel being a fundamental part of his work. I agree with the Commissioner's argument that Mr Hill is more like the hypothetical Jason the builder's labourer (in paragraph 45 of ) who had different worksites, but no continual travel between worksites and, in addition, travel was not a fundamental part of his duties.
69. In the circumstances, I do not consider Mr Hill's reliance on the hypothetical examples in assist him as his factual circumstances are quite different. I also note that Mr Hill's purported reliance on was with respect to specific examples given under the heading "Explanations" in and not under the heading "Ruling". There is a potential issue as to whether the Commissioner is, in any event, bound by the examples in these circumstances, as strictly speaking, they are not part of what he describes as the "Ruling". Of course, that issue may depend on what is meant by "a ruling" in s 357-60(1) of Schedule 1 to the TAA 1953. However, as neither party made any submissions about that aspect and I do not consider that the examples in referenced by Mr Hill apply to him, I do not have to decide that issue.
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CONCLUSION
70. For the reasons set out above, Mr Hill is not entitled to claim deductions for work-related travel expenses and car expenses in the relevant year. Accordingly, as Mr Hill has failed to prove that the assessments were excessive, I affirm the objection decision under review.
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