Case N31

Judges:
KP Brady Ch
LC Voumard M
JE Stewart M

Court:
No. 2 Board of Review

Judgment date: 1 May 1981.

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K.P. Brady (Chairman); L.C. Voumard and J.E. Stewart (Members)

The matter in issue in this reference is whether an amount paid to an employee on his transfer to Sydney from his home capital city of Perth was a living-away-from-home allowance as defined in sec. 51A(3), giving rise to a deduction under the terms of sec. 51A(1) and (2).

2. In the year of income in question, that ended 30 June 1979, the taxpayer was a single man of 24 years of age. He was employed as an engineer with a construction company. He had worked for the company for a little over a year. Due to a lack of construction work in Perth in 1978, he was given the option of either being retrenched or being transferred temporarily to Sydney to work on projects which the company had afoot in that city. It would seem that the taxpayer was not given any firm commitment as regards being transferred back to Perth. The employer mentioned six months as the likely period that he would be required to work in Sydney, but as matters eventuated the period of his stay there was close to 17 months and it was not until 27 February 1980 that he completed his assignment and returned to Perth.

3. The taxpayer had lived with his parents in K, a country town in Western Australia, prior to moving to Perth in 1975 in order to complete his engineering studies. Whilst completing those studies he boarded with relatives. Upon obtaining his engineering qualification he returned to K and worked there for a short time with the Railways Department. However the opportunities to further his engineering career in his home town appeared limited, and so he decided to obtain more gainful employment in Perth and he moved there again in 1976 where he obtained a position as an engineer with his present employer.

4. He rented a house in a Perth suburb, P, for approximately 12-18 months, and then moved to another house in suburb Q, which he rented on a shared basis with two other young men.

5. It was from that residence that he transferred to Sydney, the date being 7 October 1978, after living there for a period of approximately 15 months. He left there in situ in the care of another lodger, a bed, a wardrobe and some other personal possessions.

6. On arrival in Sydney he lived in a hotel for the first week, then rented a house for $65 per week in the suburb of A, close to where he worked. He lived there for a period of four months, when, upon being transferred to another work site (still in Sydney) he moved to a neighbouring suburb, B, and there he rented a house in company with a friend, again on a rental sharing basis, for $120 per week. He lived there for the remainder of his stay in Sydney, amounting to some 13 months.

7. On returning to Perth he resumed renting the house in Q on a shared basis with two other young persons. In his absence, the room which he had occupied previously had been occupied by one of the other lodgers and his bed and wardrobe used by the occupant. He made no charge for that use. He spent only a month there before moving on to another house in suburb R where he is still in residence.

8. When the taxpayer made his decision to move to Sydney, his employer company paid to him the money equivalent of the airfare from Perth which then amounted to approximately $230. The taxpayer in fact used his own car to drive there, and took with him all his possessions other than the items of furniture and bedding left in his room at Q, and a television set which he left at an aunt's home in Perth. In addition to the amount of $230, the company agreed to pay him an allowance over and above his salary, and amounting to $154 per fortnight. In giving evidence, the taxpayer spoke of the allowance as follows:

``The allowance is paid to an employee of X [his employer company] who is required to travel away from his usual place of abode, as to which I interpret it in order to perform his duties for his employer.''

Later he stated:

``The amount was $154 a fortnight or $77 per week which is what they regarded as a

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standard allowance to help compensate your needs, any additional expenditure required by yourself for working away from home.''

9. The arrangement made between the taxpayer and his employer was oral only.

10. As from the date the taxpayer commenced work in Sydney (in October 1978) up to the end of that year of income, 30 June 1979, he received allowances amounting to $2,750. That amount was included in his group certificate (which was tendered in evidence) under category 3, travelling or other allowance. In preparing his income tax return for that year he included the amount as assessable income under Item 6(c), living-away-from-home allowance, and claimed as a deduction under Item 14 an amount of $2,678, being a deduction relating to living-away-from-home allowance.

11. The taxpayer claimed such deduction under the provisions of sec. 51A(2)(c), which state:

``The amount of the deduction allowable under this section shall be -

• ...
• (c) in any other case - 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.''

Accordingly, the taxpayer calculated the deduction of $2,678 by subtracting from the allowance the amount of $2 multiplied by the number of weeks in the year of income for which he received the allowance, viz. 36.

12. In making his assessment, the Commissioner disallowed the deduction of $2,678 and, upon the taxpayer objecting, the Commissioner decided to disallow it and that decision has now been referred to this Board for review.

13. Section 51A provides deduction from assessable income of an amount which would otherwise be precluded under sec. 51 as being of a private or domestic nature. The main thrust of the provision is contained in sec. 51A(1), which states:

``Notwithstanding anything contained in section 51 where the assessable income of a taxpayer who is an employee includes the amount of any living-away-from-home allowance, an amount ascertained in accordance with this section shall be an allowable deduction.''

14. The words ``living-away-from-home allowance'' for the purposes of the section have a special meaning which does not coincide with the meaning of the words used in an industrial sense or, for that matter, in common parlance. The definition of the term is to be found in sec. 51A(3), which reads as follows:

```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 as a deduction 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.''

15. Because the additional expenses must be incurred by a taxpayer through having to live away from his usual place of abode, the term ``living-away-from-home allowance'' has a narrower meaning than as used in its popular sense.

16. The payment made to the taxpayer by the employer doubtless acknowledged the fact that the taxpayer would necessarily incur higher living expenses through residing in Sydney on a short term basis rather than continuing to live in Perth, but the deduction under sec. 51A becomes available to the taxpayer only if the house which he rented on a shared basis at Q in Perth can be considered to be his ``usual place of abode''.

17. In
(1957) 8 T.B.R.D. 499 Case H109 at p. 501, the then Chairman of the No. 3 Board carefully studied the various meanings ascribed to ``place of abode'', and quoting from Wharton's Law Lexicon (14th ed.) at p. 6, he said:

``For some purposes in law, a man may be deemed to have an `abode' where he has a place of business, even although he reside

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elsewhere, or where he has a temporary residence, although his permanent residence is elsewhere or even abroad. But `abode' or residence is quite distinct from domicile, which means much more than even a place of permanent residence, whereas it would seem that `abode' does not even necessarily imply that. `Abode' seems larger and looser in its import than the word `residence' which in strictness means the place where a man lives, i.e. where he sleeps or is at home. `A man's residence, where he lives with his family and sleeps at night is always his place of abode in the full sense of that expression' (
R. v. Hammond (1852) 17 Q.B. 781).''

The word ``usual'' as the adjective describing ``place of abode'' has its normal meaning of ordinary or customary (ref. Shorter Oxford English Dictionary).

18. The same words ``usual place of abode'' are to be found in sec. 6(1) of the Income Tax Assessment Act in the definition of the term ``resident'' or ``resident of Australia''. In the recent case of
F.C. of T. v. Applegate 79 ATC 4307, the Federal Court had cause to examine the concept of permanent place of abode, which term is also to be found in the definition of resident, and many of that Court's observations are helpful in examining the parallel words of qualification, ``usual place of abode'' as contained in sec. 51A(3). To the extent the definition of resident is relevant in the instant case, sec. 6(1) states as follows:

```resident' or `resident of Australia' means -

• (a) a person, other than a company, who resides in Australia and includes a person -
  • (i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia;
  • (ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia;...''

19. In giving his decision in Applegate's case, Fisher J. pointed to a connection between the words of qualification ``permanent place of abode'' and ``usual place of abode'' as contained in (a)(i) and (a)(ii) respectively, stating at p. 4317 as follows:

``To my mind the proper construction to place upon the phrase `permanent place of abode' is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.''

20. In the same case it was said that the enquiry as to whether there is or is not a permanent place of abode outside Australia is an objective one, notwithstanding the fact that the intention of the taxpayer in relation to the length of time that he would reside in a place outside Australia is a relevant factor to be taken into account.

21. In the result, the Court found that the taxpayer's place of abode was outside Australia because during the period in question he did not reside in Australia, he had no home in Australia and did not carry on business or work in Australia, nor did he receive any income from sources within Australia. The Court further found that the taxpayer had a permanent place of abode outside Australia, notwithstanding that he ultimately intended to return there, ruling that ``permanent place of abode outside Australia'' means something less than a permanent place of abode in which a taxpayer intends to live for the rest of his life. Accordingly, the taxpayer was ruled to be a non-resident within the definition of sec. 6(1) and therefore exempt from Australian tax on the income earned by him in his permanent place of abode.

22. Posed for our consideration in the instant case is the question of the taxpayer's usual place of abode. Had his Sydney flat become his usual place of abode, or could it be said that his links with the house in the suburb of Q in Perth still determined that

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city as his usual place of abode even though he resided in Sydney, albeit on a temporary basis? From a study of the criteria employed in Applegate's case, it would seem to us that the taxpayer's flat in Sydney was his usual place of abode in the year of income because he lived there continuously and for the greater part of that period, he had personal belongings there, he derived his income in Sydney, and there existed a legal relationship in regard to his Sydney abode as exemplified by his agreement to rent it. On the other hand, even during the time he lived in Sydney he maintained links with the house in Perth in that he kept some items of furniture there, and called in there when returning on holidays to Western Australia which he did on three separate occasions during his stay in Sydney. Also, it was always his intention to return there once he completed his assignment in Sydney. In evidence he stated:

``As I said, I had intentions of moving back to my original place. I had left Perth, but I generally say that Perth is my home. Unfortunately I have not been able to buy a place so I had to just call general Perth my home. I had no particular preference as to where I was going to live at that particular time other than that returning back to my usual place which I was at at the time which was... Road" [in Q]. "I did return back to there and then found out that due to travel I needed to get a little bit closer so I moved out of there and found myself another place.''

Also, later in cross-examination of the taxpayer, the following exchange took place:

``Q. When you were living in Sydney Mr...., did you maintain any form of house, flat, home or whatever back here in Perth?

A. Again, unfortunately no because as I said previously I was not financial enough to own any particular residence back here in Perth but I was lucky to be able to leave some of my gear with some people, and I did help out a little bit sometimes. When I used to come back from time to time there was always a place there to stay so I sort of regard that as my home, even though I was not contributing that much.

Q. Was that... Street (Q)?

A. Yes, correct. That was the place I moved out of.

Q. So you moved out of that to Sydney with the thought of moving back there?

A. That is correct, yes.

Q. During that period, you were not called upon to make any contribution for the rental or anything of that kind?

A. No.''

23. Whilst it was the taxpayer's clear intention to return to Perth, that intent can have no over-riding weight in our considerations (refer Applegate's case (supra) at p. 4309). Also, it was quite possible that the taxpayer could have been transferred to a work site in a State other than Western Australia upon completing his assignment in Sydney. Furthermore, it is worth noting that a taxpayer can be held to reside in a particular place even though he has no intention of remaining permanently in that place (ref.
F.C. of T. v. Miller (1946) 73 C.L.R. 93 at p. 99).

24. Given that the taxpayer was a young single man of 24 years of age, and perhaps thereby having tap roots of shallower depth (wherever he might reside) than if he were a married man with young children and paying off a mortgage on the matrimonial home, we are able to accept the proposition that his usual place of abode was Perth simply on the grounds that he kept in a house there a bed and a wardrobe and that this was augmented by an intention to return there once he completed his term of service in Sydney. The fact that possessions were left in a previous abode was not persuasive in causing the No. 1 Board, as then constituted, in
(1959) 10 T.B.R.D. 330 Case K64, to determine that place as the taxpayer's ``usual place of abode''. The same view was adopted by the No. 3 Board, as then constituted, in Case
H3, 76 ATC 9. In our view, the taxpayer had to possess at the very least some possessory rights in connection with the Perth house in order to advance his claim, but no such rights existed.

25. In the reference
(1951) 2 T.B.R.D. 201 Case B47, the No. 2 Board, as then constituted, canvassed the view whether a taxpayer might not have two places of abode leading to examination of the further question as to which of the two might be the more permanent and therefore ``usual'', but here we consider that the taxpayer's degree of connection with the Perth house was so

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tenuous as to involve stretching the English language to unpardonable limits to call it his abode at all.

26. The evidence showed that the taxpayer returned to his home State on a number of occasions during his temporary stay in Sydney, and doubtless he regarded Perth in the abstract as his home city, his intention to return there being completely genuine and sincere. However, those considerations fall a long way short of enabling him to call a particular house in Perth his usual place of abode (ref. Cases K64 and H3, supra). We have little difficulty in finding that his usual place of abode for the year of income in question was Sydney.

27. We therefore consider that the amount that the taxpayer received was not a living-away-from-home allowance as defined in sec. 51A(3). Therefore, the taxpayer is precluded from obtaining a deduction under sec. 51A(1) and (2).

28. Accordingly, we uphold the Commissioner's decision to disallow the taxpayer's objection and confirm the assessment.

Claim disallowed