Case R99

Judges: HP Stevens Ch
TJ McCarthy M

PM Roach M

Court:
No. 1 Board of Review

Judgment date: 27 September 1984.

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P.M. Roach (Member)

The taxpayer in this reference is an electrical mechanic who, at the commencement of the year of income in question, was a bachelor; a suitor for the hand of the lady now his wife; and an employee of an electrical contractor by whom he had been employed from the commencement of his apprenticeship. In the year 1976 he had purchased a block of land in the small town of X some 100 kilometres by road from the City of Sydney with a view to ultimately establishing his matrimonial home there. During his courtship he and his fiancee had considered plans for the design of their future home. Prior to June 1981 the taxpayer resided at the home of his parents in the Sydney metropolitan area. His wife-to-be also resided in the Sydney metropolitan area.

2. In June 1981 he was transferred in his employment to the district in which town X was located. Being too far distant from the home of his parents for it to be reasonable to commute on a daily basis he arranged to be accommodated in town X at the home of friends. At the time he was transferred to the district of X it was expected that the position would last only some six weeks, but it subsequently happened that his employer secured a series of other jobs in the

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district of X and as a result the taxpayer continued to be employed in that district throughout the year of income ended 30 June 1982.

3. While working in the X district the taxpayer worked a six day week and on most weekends the taxpayer travelled in his own motor vehicle to Sydney late on Saturday, returning on Monday morning in time to commence his working week. His principal purpose in so travelling to Sydney was to court his bride-to-be. On those occasions he resided with his parents and had his personal washing done there. He paid his parents for the services they rendered, as he did the friends with whom he resided in X. Within a very short period of time after arriving in X he undertook the formal preliminaries to enable house construction to commence and the physical work of construction commenced in August 1981. Construction of the residence was completed in July 1982 and thereon the taxpayer moved into possession. In November 1982 he married and since that date he and his wife have lived in that particular home in X. Prior to moving into his new home, the taxpayer had maintained his postal address at the home of his parents and had there kept his refrigerator, clothing and other items. At no time during the year of income was the taxpayer assured of long-term employment, either in the district of X or with his particular employer. On one occasion during the year of income when it appeared likely that one employee in a group of eight to which the taxpayer belonged would be retrenched, the taxpayer with his workmates took leave to avert retrenchment. At a later date he was in fact retrenched and he only secured four months employment in the 12 months following. At the date of hearing the taxpayer was again employed by his original employer and working in the Sydney metropolitan area. In order to hold that employment the taxpayer resides with his parents at their home mid-week and returns to his own home at weekends.

4. By reason of having assigned the taxpayer to work in the district of X his employer became bound by the provisions of the relevant industrial award to pay ``a living-away allowance''. The relevant provision of the industrial award provided: - ``On distant work the employer shall... provide reasonable board and lodging or pay a living-away allowance of $... per week of seven days but such allowance shall not be wages''. The definition of ``distant work'' read as follows: - ``Distant Work is that in respect of which the distance or the travelling facilities to and from the place of work make it reasonably necessary that the employee should live and sleep at some place other than his usual place of residence at the time of commencing such work''. The employer paid the taxpayer at the relevant rate in force from time to time during the year of income.

5. In the income tax return prepared on behalf of the taxpayer and adopted by him, the taxpayer returned $4,892 under item 6(c) as ``Living-away-from-home allowance'' and claimed a deduction under item 14 (``deduction relating to living-away-from-home allowance shown at item 6(c)'') the sum of $4,788 in respect of a period of receipt of 52 weeks. In fact the allowance was paid in respect of a period of 47 weeks. In consequence it appears that in calculating the quantum of the deduction to be claimed the agent deducted from the amount of allowance received $2 for each of 52 weeks rather than $2 for each of 47 weeks. The Commissioner adjusted the returned income of the taxpayer in respect of ``living-away-from-home allowance'' increasing the taxable income of the taxpayer by $4,788. The taxpayer objected and it is his objection which is before the Board for determination.

6. In the statement furnished by the Commissioner in accordance with reg. 35(1) the Commissioner's reasons for disallowing the taxpayer's claim were stated as follows -

``(i) No part of the amount of $4,892 received by the taxpayer in the year of income ended 30 June 1982 is a `living-away-from-home allowance' as defined in sub-section 51A(3) of the above Act;

(ii) Accordingly, no amount is allowable as a deduction in the above year of income pursuant to the provisions of sub-section 51A(1) of the above Act;

(iii) Alternatively, no part of the amount of $4,788 claimed by the taxpayer as a deduction relating to living-away-from-home allowance is an allowable deduction under sub-section 51(1), or any other section of the Act.''

7. It is common ground between the Commissioner and the taxpayer that the sum of $4,892 is assessable income. The essence of the

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dispute is whether it is within the scope of the definition in sec. 51A(3) which provides:

```living-away-from-home allowance' means so much of any allowance or benefit paid or granted in money or otherwise as the Commissioner is satisfied is in the nature of compensation to the employee for the additional expenses (not being expenses which are allowable under section 51) incurred by him, or which would be incurred by him if the allowance or benefit were not received, through having to live away from his usual place of abode in order to perform his duties as an employee.''

8. The first question for the Board's consideration is whether the taxpayer did live ``away from his usual place of abode'' in order to perform the duties of his employment in the year in question. Upon the evidence it is quite clear that the place where the taxpayer resided was the home of his friends in X, except when he was residing with his parents or was elsewhere on vacation or otherwise.

9. The question then to be considered is whether on the occasions that his place of residence was the home of his friends at X, that place was also his ``usual place of abode''. Everyone has a place of abode. If a person has only one place of abode then that place is his ``usual place of abode''. Some persons have more than one place of abode in which case the question can be asked, which of those places of abode is his or her ``usual place of abode''.

10. In the case of a married man with a family who is temporarily absent from the family home, albeit for a prolonged period, it is relatively easy to conclude that his ``usual'' place of abode is the family home so long as it is his intention to return there. The question is more difficult to answer in relation to many young men and women who are unmarried.

11. A child residing with his parents has their usual place of abode as his usual place of abode whether the child be an infant, of tender years, a teenager or an adult. Some children reside at the home of their parents until marriage. They then leave to establish a new abode. When they do the new residence becomes their ``usual place of abode''. Others leave home earlier. Upon such a departure it may be possible to say that the child has adopted a new place as his ``usual place of abode'' (as in Case K64
(1959) 10 T.B.R.D. 330 ; Case H3,
76 ATC 9 , and Case N31,
81 ATC 167 ) or that while residing at a new place, the family home nonetheless remains his ``usual place of abode'' (as in Case H109
(1957) 8 T.B.R.D. 499 ; Case L64
(1960) 11 T.B.R.D. 395 ; Case M24
(1961) 12 T.B.R.D. 144 ; and Case N7
(1962) 13 T.B.R.D. 17 ).

12. In this reference I am satisfied that until his departure for the town of X, the taxpayer had as his place of abode, and usual place of abode, the home of his parents. I am also satisfied that his ``usual place of abode'' came to be his newly constructed residence in X from the time he occupied it, but not at any earlier date. Prior to occupation it was merely a proposed future place of abode and no more. The question then is, did the residence of his friends in the town of X become his ``usual place of abode'' at all, and if so, when?

13. While residing there he actively set about the construction of his future residence although his only physical contribution was to install the electric wiring. On the other hand, at all times his continued employment was insecure in the sense that there was no long-term assurance of either continued employment in the district of X or with his employer. I also take into account the circumstance that throughout the year of income the taxpayer frequently resided at the home of his parents and from there continued the courtship of his bride-to-be. Having regard to all of those circumstances I hold as a matter of fact that throughout the year of income his ``usual place of abode'' continued to be the residence of his parents in Sydney. I am also satisfied that he had to ``live away from his usual place of abode in order to perform his duties as an employee''.

14. The next question then becomes whether the Board, as the ``alter ego'' of the Commissioner, ``is satisfied'' that the allowance which he received ``is in the nature of compensation to the (taxpayer) for the additional expenses (not being expenses which are allowable as a deduction under sec. 51) incurred by him, or which would be incurred by him if the allowance or benefit were not received''. The award whereby the taxpayer became entitled viz-a-viz his employer to the allowance does not relate the quantum of the payment in any way to the quantum of additional expense to be incurred by employees who become eligible for the allowance. It is payable whether or not the employee is married; has dependants; is living alone or with his

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family; incurs increased expenses; and regardless of the quantum of expenses or additional expenses (if any) incurred. Nonetheless the allowance is something the employer is obliged to pay if distance or travelling facilities ``make it reasonably necessary that the employee should live and sleep at some place other than his usual place of residence''. I am satisfied that it is appropriate to consider that the allowance so paid is ``in the nature of compensation'' to the employee for having to be so absent.

15. The next question then is whether it is in the nature of compensation ``for the additional expenses'' to be incurred by the taxpayer. The taxpayer's evidence was that additional expenses were incurred by reason of the distance between Sydney and town X. To travel between Sydney and town X necessarily required that he incur expense in travelling by his own motor vehicle. The taxpayer gave evidence that other expenses were incurred. There is no basis in the evidence for finding that they were additional expenses in the sense of being over and above the expenses which would have been incurred but for the assignment of the taxpayer to town X. Notwithstanding the latter point, I am satisfied that the taxpayer has established that the payments he received were ``in the nature of compensation'' for additional expenses.

16. The next question to be considered is the effect of the words ``so much of any allowance as... is in the nature of (such) compensation''. If some portion only of the allowance was in respect of such compensation, the balance of the allowance must have been attributable to something else. There being no evidence of any other purpose or end to which the amount paid was attributable I find that the whole of the allowance was a ``living-away-from-home allowance'' within the meaning of that phrase as defined by sec. 51A(3). Accordingly, the taxpayer is entitled to a deduction in ``an amount ascertained in accordance with sec. 51A''.

17. The material parts of sec. 51A(2) provide that:

``the amount of the deduction allowable under this section shall be (in the circumstances of this case) an amount calculated... at a rate per week that the Commissioner considers reasonable in the circumstances, which rate shall not exceed the excess of the weekly rate of the allowance over $2.''

Neither in the Commissioner's formal statement of reasons for disallowing the taxpayer's claim (cf. para. 6), nor in the proceedings before this Board, did the Commissioner challenge in any way the quantum of the deduction claimed by the taxpayer. That being so I find no reason to reduce the claim of the taxpayer from the amount of $4,788 claimed.

18. There remains a question as to whether the deduction should be increased by $10 to take into account the factors referred to in para. 5 of these reasons. As there is nothing in sec. 51A(2) relevant to this reference which establishes any necessary correlation between the amount received as assessable income and the amount allowable as a deduction I find no basis for doing so.

19. Accordingly I would allow the taxpayer's objection and reduce the assessment of taxable income accordingly.

Claim allowed