Case C55
Judges:AM Donovan Ch
GR Thompson M
RK Todd M
Court:
No. 2 Board of Review
A.M. Donovan (Chairman), G.R. Thompson and R.K. Todd (Members): The taxpayer in this reference claimed that the Commissioner had wrongly disallowed as a deduction a claim by the taxpayer to a deduction of the sum of $416 as a living-away-from-home allowance pursuant to sec. 51A of the Income Tax Assessment Act.
2. The taxpayer has been for some time and still is the Secretary-Accountant of and jointly employed by a group of organisations which may be decribed as to one section thereof as medical unions and as to the other as hospital and medical benefit societies. We shall hereafter refer to these as ``the unions'' and ``the societies'' respectively. The unions and the societies carry on their activities at R, a town which may be described as a company mining town having not a few of the characteristics of pioneer living. It is at a distance from more orthodox provincial towns sufficient to prevent the sending of children to day schools in those towns, while the school provided in the town itself is in some respects unsatisfactory and, in any event, does not proceed beyond primary level. The climate at and surrounding R is extremely inclement. The cost of living (other than in respect of accommodation) in the town is high, not only because of the cost of food but also because the climate is such as to require abnormal expenditure on light and heat and because some services (such as laundering for the single man) are also costly. The impression with which we were left from the evidence was that few people would choose to live in R without the stimulus of the undoubtedly high wages which we were told the miners receive
3. The taxpayer commenced to occupy the positions referred to in 1955, and until some time during the year ended 30 June 1965, he and his family, save for three of his nine children who were at high schools in three seperate towns and cities in the State, lived at R. With three children already boarded out in various places, the taxpayer and his wife were having to face the problems of the education of their remaining children, and the choice that faced them was between staying in R themselves and sending the children away for their schooling with the consequent need to find board for them on the one hand, and setting up house in a place where proper educational facilities at secondary level were available on a day school basis on the other. The latter course was taken and in the year ended 30 June 1965, the taxpayer's family moved to B, a provincial town having the desired educational facilities, and took up residence there in a house acquired by the taxpayer. They continued to live there until they moved to another town during the year ended 30 June 1970.
4. After his family moved to B, the taxpayer continued to live in the house which he and his family had occupied at R, namely a house rented from the mining company, but when the move was made most of the furniture went with them or was sold. The company wished the taxpayer to move into quarters provided for single men, but this he declined to do, as he not unnaturally perceived that there would be difficulties for a man of his age (he being then about 66) and tastes in living in such quarters. In the result, he continued to live in the same house, but left it furnished in a most spartan fashion suited to what he referred to as his ``frugal requirements''. For a time at all events a married couple with a child also occupied part of the house, but at all times the taxpayer continued to pay the same rent to the company, namely $3.20 per week.
5. The work done by the taxpayer in the course of his employment is substantial and difficulty has been found in finding suitable persons to whom some portion of the work can be delegated. In addition, it appears that the taxpayer, placed as he is in what is a rather unusual position in the town in that he is independent of the company save for his use of a company house, has tended to become something of a ``friend at court'' for employees and their families in relation to various problems of life and work that arise in the town and which are outside the ambit of the ordinary activities of the trades unions. Having observed the skill and fairness with which the taxpayer presented his case to the Board, we do not find it surprising that his knowledge and natural talents should be called in aid in this way. The result is that the taxpayer spends the majority of his time at R and not with his family at their place of residence. Ordinarily he works for 12 consecutive days each fortnight and then returns home to his family. He told us, and we accept, that he enjoys his work immensely but that nevertheless he retains his employment at R only because he sees himself unable at his age to obtain suitable employment in the town where his family lives. It should also be noted that he has felt bound to continue working as long as possible as he has no superannuation benefits to which to look forward.
6. The taxpayer and his wife have at all times been on extremely good terms, and it is clear from this and all the foregoing facts that the taxpayer continues in his work at R, involving as it does his staying there most of the year, as a matter of necessity and that he himself regards the house which he owns and in which his family lives as his home.
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7. It is now necessary to see how the present problem arises. In November 1966, shortly after the taxpayer's wife and family took up residence at B, a meeting of the Board of Management of the unions was held, at which, as the minutes record, the taxpayer ``sought the Board's authority to be permitted for income tax purposes to allocate as from 1 July, 1966, from his current salary, the sum of $6,00 weekly as a `living-away-from-home' allowance''. The minutes go on to record that the taxpayer advised the Board that the major reason resulting in his family moving to, and living in, B was because of the heavy cost he experienced whilst in R in sending his children from the town for higher education, and that it was pointed out that the allowance would not affect the unions financially in any respect. Finally, it was resolved that the ``living-away-from-home'' allowance was unanimously authorised from 1 July 1966, such allowance to be clearly indicated in the unions' books of account. Then, on 20 February 1969, at a meeting of the Board of Management of the societies, as the minutes record, the taxpayer sought an increase in salary, suggesting an amount in the region of $500 per annum. The minutes proceeded to record various matters which he thought entitled him to a higher salary, including his lack of qualification for superannuation benefit, the cost of his children's education and the continuous and rather arduous nature of his duties. It was accordingly resolved that the salary of the taxpayer was to be increased to the extent of $520 per annum and that, of the total remuneration he received, $20 weekly might be allocated as a ``living-away-from-home'' allowance.
8. Pursuant to the first of these resolutions, the taxpayer was treated by his employers as being remunerated to the extent of the sum of $6 weekly by way of living-away-from-home allowance until the date of the second resolution on 20 February 1969. Thereafter his employers treated him as being remunerated to the extent of the sum of $20 by way of such allowance. As from that date his salary was increased by an amount of $520 per annum.
9. By sec. 51A(3) of the Income Tax Assessment Act, ``living-away-from-home allowance'' is defined as meaning ``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 as a deduction under section fifty-one of this Act) 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''. By sub-sec. (2)(c) of the same section, which is the provision necessary to be considered in this reference, the taxpayer is entitled to a deduction of ``such amount, if any, in respect of each week for which the allowance is paid or granted not exceeding the amount by which the weekly rate or value of the allowance exceeds Two dollars, as the Commissioner considers reasonable in the circumstances''.
10. We were not told what, if any, deduction was claimed or allowed in the years ended 30 June 1967 and 1968 respectively. In the year ended 30 June 1969, however, the taxpayer returned the sum of $564 as income by way of living-away-from-home allowance and claimed a deduction of $416 as living-away-from-home allowance. In Item 25 of his return, the rate of allowance was stated as being $11.00 weekly. We were told that the sum of $564 represented 34 weeks at the rate of $6.00 per week, namely $204, and 18 weeks at $20.00 per week, namely $360, giving effect to the second resolution which was passed during the year of income. On this basis, applying the terms of sec.51A(2)(c), the maximum amount which the Commissioner might allow would be $460. In fact, the taxpayer claimed $416 as representing an average amount of $8.00 per week for the whole year. This does not appear to us to be an admissible manner in which to calculate the amount which may be claimed. However, since the amount claimed is less than the maximum amount of theoretical entitlement, we are prepared to consider the claim on the basis that it is made as a claim for $4.00 for each of 34 weeks and for $18.00 for each of 18 weeks of the year in question, but not so as to permit the taxpayer to claim any higher sum than the sum of $416 which he claimed in his return.
11. At the hearing before us, the representative of the Commissioner sought to uphold the disallowance of the taxpayer's claim upon two grounds. We shall deal first with the ground which was that originally relied upon and communicated to the taxpayer by the Commissioner. This was that in the year of income the ``usual place of abode'' of the taxpayer within the meaning of that phrase as used in sec.51A(3) as referred to above, was R, and that it was not material that his wife and family had taken up residence at B or that the taxpayer intended ultimately to reside at B. As far as this aspect of the matter is concerned, the problem is certainly rather unusual, since the case put for the taxpayer must maintain that when his family moved to B his ``usual place of abode'' ceased to be at R and was rather to be found at B, notwithstanding that before and after the move he remained in the same employment, which was of course at R, and that after the move he seems to have spent only one weekend in two at B, spending the remainder of his time at R during which time he made use of the same
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accommodation, though sparsely furnished, as had been used by himself and his family prior to the move. On the whole, however, we are of the opinion that undue weight should not be given to the fact that the taxpayer was living at R in the accommodation described prior to his family's move to B. The matter should be tested on the basis that the situation were as if the taxpayer had lived with his family at B and had then gone to R and taken up the employment and accommodation which we have described, and had returned to B only for the stated periods. The circumstances of the taxpayer as far as his accommodation and his relationship with his family were concerned were so different prior to their move to B that we think that it would not be correct to stress the fact that he lived in the same house or even in the same town before and after the move.12. Two decisions of Boards of Review that may be regarded as relevant to the problem arising in this case must be referred to, but before doing so we consider it desirable to consider the terms of the definition of ``living-away-from-home allowance'' set out in sec.51A(3). The critical words in that definition for present purposes are ``his usual place of abode''. The Oxford New English Dictionary gives a number of meanings for the word ``abode'', of which the following are relevant: ``Habitual residence, dwelling; an abiding-place, a dwelling-place, place of ordinary habitation; house or home.'' The main emphasis in the definition set out appears to rest upon the notions of house or home rather than upon mere physical residence, but if there is any doubt at our correctness in identifying such an emphasis, such doubt is, in our view, resolved by the fact that the word ``abode'' is here used in the context of, and for the purpose of defining, the phrase ``living-away-from-home'', and we emphasise the word ``home''. This must be borne in mind when considering the decisions to which we shall refer, since these decisions assimilate the meaning of the word ``abode'' to that of the word ``residence''. The words are in many respects similar, but they are not in our view always to be regarded as identical. Indeed, caution must even be used when considering the definition of the word ``abode'' itself when used in different contexts. In
Price v. West London Investment Building Society Ltd. (1964) 1 W.L.R. 616; 1964 2 A.E.R. 318, the question arose whether what was in effect a notice to quit had been properly served within the provisions of the Landlord and Tenant (Notices) Regulations 1954 (U.K.) which provided that notice under that Act might be served on a person by leaving it for him at his ``last known place of abode''. It was held by the Court of Appeal that a notice had been properly served within the terms of such provisions where it had been served at the place of business of the recipient. Danckwerts, L.J., after referring to the fact that a large number of authorities show that for certain purposes ``residence'' or ``place of abode'' may include a place where the person in question works and has his business, said at p.621 of the report: ``The reason for the results reached in those cases really depends upon the purposes for which the statutory provisions in question were intended. If they were intended to make sure that proceedings or notice of proceedings or the like should come to the knowledge of a certain person it might very often, as was pointed out in those cases, be far more likely that a person would receive due notice of the matters in question if the notice was sent to him at his usual place of business than if it was sent to the place where he happened to go home and sleep at night.'' Again in
R. v. Hammond (1852) 17 Q.B. 772 (117 E.R. 1477), where a voting paper had to state the place of abode of the candidate, the issue was again between the place of residence and the place of business. We mention these authorities because it will immediately be seen that any construction placed upon the word ``abode'' in those two cases will be of but marginal relevance in the case before us in this reference. The statutory provision appears to us to be here clearly dealing with a situation wherein a man has a home and lives away from it for the purposes of his work, thus having to maintain a home in one place while partly, or may be in some cases wholly, having to maintain himself in another place. The important matter, if there should be any doubt as to the construction of the words used in the section, is the purpose for which the statutory provision in question was intended.
13. We turn now to the Board of Review decisions to which we have referred. In
2 T.B.R.D. Case B47, a taxpayer who lived in Perth was required by his employers to work at a town some 130 miles out of Perth. He maintained his home in Perth where his wife lived and to which he returned at weekends. During the week he lived at a hotel and his employers paid him an allowance of £2.2.0 per week on account of the extra expense to which he was put by being compelled to live in a hotel. The taxpayer claimed, inter alia, that he was entitled to a deduction in respect of the sum of £2.2.0 under sec.51(1) or sec.51A. This Board as then constituted held, in a majority decision, that the allowance was a ``living-away-from-home allowance'' within sec.51A(3) and the amount of the deduction therefore allowable fell to be calculated in accordance with sec.51A(2)(c). At p.204 of the report, Mr. Nimmo (Member) (as he then was) said -
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``The definition of `living-away-from-home allowance' (an expression which itself indicates the kind of allowance the Legislature had in mind when the section was enacted) suggests to me that the section is intended to apply where the Commissioner (and upon a review, the Board of Review) is satisfied that: (a) a taxpayer maintains a home or other place of abode, but because of the distance between it and his place of employment he cannot live in it; (b) the allowance the taxpayer receives by reason of these circumstances is in the nature of compensation to him for the additional expense he thereby incurs. The words `additional expenditure' in the definition seem to me to imply that the taxpayer is already under some expense in connection with his usual place of abode. I think it is to meet the case where he incurs further expense by having to live away from that place of abode in order to perform his duties as an employee that the section was enacted. In my opinion, the purpose of the enactment is to remove any taxation disadvantages which would otherwise arise from receipt by the taxpayer of the compensation which it is considered proper for him to receive in respect of that additional expenditure. The fact that the Legislature in sub-sec.2(c) is careful to provide that a taxpayer is not to get a deduction for what it considers his food would cost him wherever he lives, also appears to me to support the view that the Legislature intended that he should have a deduction to the extent he is compensated for the additional expense he incurs by having to provide accommodation for himself at his place of employment and, at the same time, maintain a home or other place of abode elsewhere.''
14. The other decision to which we must refer is
3 T.B.R.D. Case C6, a decision which was strongly relied upon by the representative of the Commissioner at the hearing of this reference. In that case a taxpayer who was an employee of a large company and whose home was in Melbourne took up his appointment as the company's branch manager in Sydney on 21 May 1945. As at that time the company's post-war plans were uncertain, the taxpayer was advised by the company not to make a complete break with Melbourne. On 22 May 1946, the taxpayer's appointment as branch manager was confirmed as permanent and he began looking for a house in which to establish a home for his wife and family. Meanwhile his wife and family continued to live in Melbourne, and, until March 1947, when he established a home in Sydney, the taxpayer received an additional allowance from his company of £5.5.0 per week to meet the additional expenses to which he was put in having to live away from his home. He claimed a deduction in respect of this allowance pursuant to sec.51A of the Income Tax Assessment Act 1936-1947. In a majority decision, this Board as then constituted held that since the taxpayer's usual place of abode at the relevant time was Sydney, he was not entitled to the deduction claimed. The reasoning of the members of the Board constituting the majority in this decision is well set out in the decision of Mr. Cotes (Member) at p.62 of the report, where he says -
``But, despite all this, it is not easy to see how a taxpayer can be held to live away from his usual place of abode if the employment which keeps him away from what is claimed to be such is of a permanent and not of a temporary nature and if the position is such that, not only can there be no intention on the part of the taxpayer to return permanently to dwell there, but the distance is such that his periods of sojourn there are of brief duration and at infrequent intervals. If, in these circumstances, a taxpayer continues to maintain a home away from the locality of his employment, even if his wife and family continue to reside there, I find difficulty in regarding that home as the taxpayer's usual place of abode.''
What is emphasised here is that the taxpayer never intended to return again, save for very brief periods, to the place which he was contending was his ``usual place of abode''. Mr. Nimmo, who was the dissenting member of the Board, considered that Melbourne remained the usual place of abode of the taxpayer until he was able to abandon it and establish a new home in Sydney. For reasons which we have set out earlier in this decision, we would with respect tend to prefer the reasoning of Mr. Nimmo to that of the majority of the Board because of the emphasis which he placed on the equation of the meaning of the word ``abode'' to that of the word ``home'' in the context under consideration, but in any event it is our view that the facts in that decision are to be distinguished from those of the present reference. In the case before us it was plain that the taxpayer wished and intended to return to his home as soon as and as often as should prove possible, whereas in Case C6 the intention of the taxpayer was to abandon his former place of abode as soon as possible, thus rendering more natural a conclusion that he had so abandoned it at a relatively early point of time.
15. On the rather special facts in the case before us, we have concluded that this is a case wherein the taxpayer in the year of income maintained a home which should be regarded as his ``usual place of abode'' but in which, because of the distance
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between it and his place of employment, he could not live continuously or for long.16. The taxpayer being thus qualified to receive a living-away-from-home allowance of the kind contemplated by sec.51A, we have therefore now to consider the other point raised against the claim, namely that in the year under review the taxpayer was at no time in receipt of any amount additional to his salary which could be classified as a bona fide allowance (as to which see
Mutual Acceptance Co. Ltd. v. F.C. of T. (1944) 69 C.L.R. 389 at pp.396-7, per Latham, C.J.) and that in consequence no deduction was therefore allowable. It was pointed out that the decision made in November 1966 whereby it was decided to allocate as from 1 July 1966 from the then current salary of the taxpayer the sum of $6.00 weekly as a living-away-from-home allowance effected no alteration to the total amount of remuneration payable to the taxpayer. While he and his family were resident in R, he was paid a salary which was identical not only with the salary which was identical not only with the salary which he received after his family moved to B, but also with that which he received after the decision to allocate the sum of $6.00 weekly as a living-away-from-home allowance. It was then argued that the decision of February 1969, whereby the salary of the taxpayer was increased by $520 and the amount of salary allocated as a living-away-from-home allowance increased to $20 per week, was also ineffective to achieve the purpose intended. Since the increase in the living-away-from-home allowance was greater than the increase itself, the effect of the decision was to reduce the salary of the taxpayer.
17. We do not think that the mere fact that a decision is made to create a living-away-from-home allowance by carving it out of an existing salary is necessarily and of itself an objection to a finding that an allowance exists. As long as the salary has, prior to such decision, contained as a matter of deliberate advertence an element of bona fide compensation for having to live away from home, it does not matter that, for example through ignorance of the taxation benefit that flows from identifying it as such, the allowance has not been so identified. In other words, a living-away-from-home allowance can then be described specifically, the remaining salary nominally lowered, and a deduction claimed. This analysis, however, cannot be applied to what happened in November 1966 in this case, for the taxpayer continued to receive the same salary as he had received when R was his undoubted ``usual place of abode''. For this reason, we do not think that the taxpayer can in the year of income claim to deduct any amount pursuant to sec.51A in respect of the period prior to 20 February 1969.
18. The question then remains as to whether the same conclusion should be reached in respect of the period after 20 February 1969. The decision made on that date certainly involved a re-assessment of the remuneration to be paid to the taxpayer, and a genuine decision to prescribe the grant of a living-away-from-home allowance, but the increase in salary awarded was only to the extent of $10 per week, which is less than the amount by which the living-away-from-home allowance was increased. In all the circumstances, we think that an allowance properly so-called was thereafter paid, but only to the extent that the taxpayer's salary was increased, namely in the sum of $10 per week. In consequence, the taxpayer is entitled to a maximum deduction of $8 per week for 18 weeks, a total of $144.
19. We would uphold the taxpayer's objection to the extent of allowing a deduction under sec.51A of the Act in the amount of $144.
Claim allowed in part
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