Case K29

HP Stevens Ch

CF Fairleigh QC

No. 1 Board of Review

Judgment date: 2 June 1978.

H.P. Stevens (Chairman) and C.F. Fairleigh Q.C. (Member): The taxpayer is a clerk employed by a public authority. In his return of income for the year ended 30 June 1976 the taxpayer claimed a deduction of $1,603 for ``Living expenses at (a country town) while earning income'' - and there is an annexure to the return as follows: -

``Last year I claimed an amount for my living expenses at (the country town) which was disallowed. I am convinced that this expense is a legitimate expense which should be allowed and accordingly I have included the exact amounts (I omitted insurance) which I incurred throughout the year. The 40 weeks for mileage was because I did have extended leave and while responsible for rent did not incur mileage expenses.

Naturally I expect this item to be disallowed again in which case I hope to appeal and fully explain the circumstances with a view to having this anomalous precedent corrected.''

2. The Commissioner adjusted the taxable income as returned by disallowing that claim and a notice of assessment issued accordingly. The taxpayer objected thereto and the Commissioner decided to disallow the objection so far as relates to that claim. That decision was referred to a Board for review. Because of a matter which has no present relevance the Board is concerned with a notice of amended assessment.

3. The parties agreed on certain facts as reduced to writing and these were supplemented by oral evidence of the taxpayer. In brief the position is as follows: -

4. The basis of the difference between the parties is that the taxpayer sees no merit in the stress placed by the Commissioner on the choice which was open to the taxpayer in either having or not having his family living with him in the country town once he chose to accept the position there; and the Commissioner sees no merit in the stress placed by the taxpayer on the necessity of making the outlays here in issue when regard is had to the language of sec. 51(1) and the cases decided thereon. The taxpayer specifically rejects any suggestion that earlier decisions of any Board of Review constitute a precedent; of course, he is right in this. On the other hand the Board is bound to apply the principles which are to be found in decisions of the Courts. Furthermore the reasoning in other Board decisions can be of assistance.

5. The first matter for consideration is travelling expenses. The principle of Lunnev and
Hayley v. F.C. of T. (1958) 100 C.L.R. 478; 11 A.T.D. 404 is that whether a person has one job or two or more and whether he is an employee or is self-employed the expenditure on travelling between his place of residence and his place of work is prima facie characterized as a personal or living expense.

6. There are exceptions in respect of the self-employed, often dependent on the residence being also the place of business (e.g.,
F.C. of T. v. Green (1950) 81 C.L.R. 313 as construed by McTiernan J. in Lunney at p. 491; 409). There are also exceptions in respect of the employee and these principally turn on the question whether the outlays on travelling were incurred pursuant to the conditions (i.e., the terms express or implied) of the employment, viz.,
F.C. of T. v. Finn (1961) 106 C.L.R. 60, i.e., the ``four conclusions'' per Dixon C.J. and ``acting within the scope of his employment'' per Kitto J.;
F.C. of T. v. Ballesty 77 ATC 4181, i.e., the necessity to comply with the terms of the contract of employment;
F.C. of T. v. Kropp 76 ATC 4406, i.e., the underlying theme that a contract of employment although terminated in law was to be regarded as notionally subsisting and incorporating a provision that the taxpayer should travel overseas and gain experience there;
F.C. of T. v. Vogt 75 ATC 4073, i.e., expenditure on travelling to work incurred as part of the operations by which the taxpayer earned his assessable income;
F.C. of T. v. Smith 78 ATC 4157;
F.C. of T. v. Lacelles-Smith 78 ATC 4162, i.e., the circumstances of the employment were that it was necessary to spend money on travelling to earn greater money in the future. Similarly when the employee is engaged in employment of an itinerant nature the employee is entitled

ATC 284

to a deduction for expenditure on travelling from the time of leaving home to attend the first of several places of work (
F.C. of T. v. Wiener 78 ATC 4006). So also where the journeys begin as a result of performance of the duties of the employment at the taxpayer's home (
F.C. of T. v. Collings 76 ATC 4254).

7. It is not possible to find anything in that line of authority which would enable the taxpayer to escape the net which is cast by Lunney and Hayley (supra) for the principle thereof clearly applies whether a taxpayer has one home or two. As to something which is done as a matter of personal convenience and not expressly or impliedly ``by reason of or in pursuance of a contract of employment'' see
Tan Keng Hong v. New India Assurance Co. (1978) 1 W.L.R. 297.

8. It cannot be said that this taxpayer's expenditure on travelling has a direct effect on income in the relevant sense (cf.
F.C. of T. v. Hatchett 71 ATC 4184; (1971) 125 C.L.R. 494, viz., the teacher's Higher Certificate resulted ipso facto in an automatic increase in salary (possession of the certificate carried with it a higher salary range immediately) but the university degree did not have that result).

9. The second matter for consideration is the outlay on rent for the cottage. In
F.C. of T. v. Faichney 72 ATC 4245 at p. 4249; (1972) 47 A.L.J.R. 35 at p. 37 Mason J. said: -

``There is no definition of the expression `private or domestic nature'. However the examples of expenditure of a private or domestic nature which leap to the mind are those which could not conceivably be incurred in gaining assessable income e.g. the... rent paid for the taxpayer's dwelling house.''

Therefore the second matter must also be determined against the taxpayer.

10. The final issue concerns the outlay on electricity for the cottage. This inevitably follows the decision as to rent. The only instances where claims for an outlay on electricity consumed in a residence have been allowed are where the claims have been in respect of a proportion attributable to a room in the residence being used at times for business purposes (Faichney supra).

11. The conclusion is that the expenditure on travelling, rent and electricity was private and domestic in character. It was not incurred by the taxpayer in the course of gaining or producing assessable income present or future.

12. The Commissioner's decision on the objection is to be upheld and the amended assessment is to be confirmed.

Claim disallowed


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