Case P111

Judges:
HP Stevens Ch
JR Harrowell M
BR Pape M

Court:
No. 1 Board of Review

Judgment date: 31 August 1982.

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H.P. Stevens (Chairman); J.R. Harrowell and B.R. Pape (Members)

The question at issue in this case is whether the taxpayer, in receipt of a Zone Allowance under an Arbitration Award, is entitled to deductions in respect of elements taken into account in arriving at that Award.

2. In 1979 the taxpayer applied for a position with the Snowy Mountains Hydro-Electric Authority and, by letter of 22 August 1979, was advised that, subject to satifactory medical examinations, his application had been successful. The position was located at Cabramurra and the letter informed him, inter alia, that, in addition to the stated salary, ``a married person who maintains a home in Cabramurra is paid a Zone Allowance of $13.00 per week''. The taxpayer commenced work in October 1979 and resided with his wife and child in Cabramurra for the balance of the income year ended 30 June 1980.

3. The Zone Allowance in question is that awarded in relation to the Australian Conciliation and Arbitration Commission No. C 3541 of 1973 - decision issued 7 June 1974. The decision refers to the ``claim'' in the following terms:

``After amendment during the negotiations referred to above, the Unions' claim was that an Alpine Zone Allowance of $19.10 per week for married employees and $13.50 per week for single

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ATC 578

employees of the Authority should replace the current District Allowances of $5.95 and $3.00 per week for married and single employees, respectively, at Cabramurra, and of $3.25 and $1.50 per week, respectively, at Talbingo, Khancoban and Jindabyne. The terms in which the original claim was sent to the Authority on 29 November 1973 are as follows:

• `That the SMA pay an allowance to subsidize the additional cost of food, fuel, household commodities, clothing, vehicle operation and maintenance, so as to bring their employee's earnings to a level comparable to that if living in Cooma, and to compensate for remoteness from the usual facilities such as medical, pharmaceutical, hospital, dental, vehicle service, and recreation and entertainment.'''

and gives the following initial thumbnail sketch of Cabramurra:

``Cabramurra. This village exists solely for the maintenance and operation of two powerstations and the Upper Tumut Group Control Centre. All activities revolve around that function. It is set high in the Australian Alps above the winter snow line. The municipal functions are conducted by the S.M.H.E.A. All buildings are owned and maintained by the employer. The wet canteen is conducted by the Authority. In winter the village can be snowbound for any time up to 12 hours. Access even when the roads are cleaned can be difficult, even hazardous. There is no resident doctor, chemist, dentist, hairdresser, butcher or policeman. There is no coffee or snack bar available to the single men. No public transport is available.''

4. Before the Commission, Mr. Anderson, for the Electrical Trades Union of Australia, put forward five main areas of additional cost and these are recorded as:

``Firstly, in relation to health services such as doctors, dentists, pharmacies and hospital treatment, particularly in relation to confinements.

Secondly, the additional cost of food and commodities in the Snowy Mountains towns and in obtaining them from the nearby towns around those Snowy Mountains towns.

Thirdly, in respect of transport and the additional cost of running a vehicle, and the necessity to run a private motor vehicle in the Area, difficulties in obtaining service, even such simple things as registration, and the distance one has to travel in obtaining service in the Snowy Mountains Area.

Fourthly, in respect of additional clothing required in the Snowy Mountains Area because of the nature of the climate, and the cost of that additional clothing as compared to similar clothing in nearby places; and the fact that more clothing than normal is required for reasons I will explain in due course.

Fifthly, the problems involved and the cost involved in seeking recreation in the Snowy Mountains towns, and the additional cost of the facilities that are available.''

and the Commission dealt with the overall claim under the headings of Recreation, Additional Clothing, Travel Out of the Employment Area, Transport, Health Services, Food and Household Commodities.

5. In relation to Recreation it was commented ``that persons employed in Cooma... often choose to travel considerable distances pursuing their leisure activities'' and that, whilst the Commission was aware ``of compensatory advantages offered by Nature to almost all the senses'', it was ``fair to make a modest allowance for `recreation journeys'''. Accordingly a figure of $1 per week for married employees was arrived at. In respect of Additional Clothing this claim was opposed by the Authority and was awarded only for the Cabramurra area at the rate of $2 per week for married employees. Reference was made to the need for heavy jumpers for home use, socks for home and work use, etc., and it was commented that ``it is hard to see justification, on the basis of comparison with similar employees at Cooma, for the full reimbursement of such clothing costs''. However it was concluded that ``because of the extreme conditions of snow encountered

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ATC 579

uniquely... at Cabramurra, some partial reimbursement is warranted''.

6. Under the heading Travel Out of the Employment Area reference was made to a married man at Cabramurra expecting a further working day (outside leave provisions) to be required ``for medical, dental and `natal' visits'', to a one-quarter day working time a year to be lost on taking private vehicles outside the Area for ``major repairs'', and to journeys to obtain ``other goods and services''. No amounts were fixed under this heading being referred to under succeeding heads.

7. For Transport the complete basis of the Union Claim was not stated - reference being made to the Authority asking the Commission to disregard costs ``in connection with tyres, both ordinary and winter-tread, snow chains and anti-freeze mixture'' - and, by recasting the cost analysis put forward (in an unstated manner), the Commission adopted a figure of $1 per week. In relation to Health Services reference was made to the lost working time and ``number of journeys notionally made outside their home stations'' and the necessity to bring in a housekeeper when an employee's wife enters hospital to have a child ``notionally once every four years''. Overall a figure for $2 per week at Cabramurra was fixed.

8. The Commission found most difficulty in quantifying a figure for Food and Household Commodities. It fixed $2.15 per week for married men at Cabramurra for travelling and, after referring to a basket of goods - fresh meat and ``additional cost of 21 middies per week'' being treated separately - arrived at ``an additional weekly cost of $4.70 at Cabramurra'' - this calculation including a drinking cost of 75c.

9. Overall the individual components totalled $12.85 and the Commission rounded this off to $13.00 per week.

10. The taxpayer's office is located five miles from Cabramurra - it is heated as is the Authority vehicle that he has at his disposal. This vehicle is under his control at all times and can be used at weekends. He however also possesses a private vehicle in which he said he makes all private journeys. Although he spends most of his time in his office he is out and about and can, at times, be out of his official vehicle walking around on inspections, etc., for up to two hours. He mainly works a nine-day fortnight - either Monday or Friday off - and he travels for shopping, etc., on a fortnightly basis. Although it is a 125 km trip to Cooma he usually travels to Canberra - sometimes to Wagga Wagga - for shopping and recreation.

11. Evidence given by an officer of the Authority was, in the main, corroborative of that of the taxpayer. He produced relevant documentation (including the duties of the position) which indicated that the taxpayer had applied in January 1982 for an Alpine Clothing Allowance. Such application had been rejected since such special allowance applied only to those ``who are required to be engaged for the majority of their time during the winter outdoors at high elevations'' - such persons do ``not include administrative staff'' (per Minute of 24 March 1982). This Minute further stated ``that the Zone Allowance paid to personnel at Cabramurra includes a component for the additional clothing necessary for everyone living in that area''.

12. In his return for the year ended 30 June 1980 the taxpayer returned as income the Zone Allowance of $435 received by him during that year and claimed deductions in respect of the following as an offset:

                                                            $
      Health Service - 3 visits -
            3 X 240 km X 12c                              86.40
      Food & Commodities -
            36 weeks @ $2 pw                              72.00
      Transport & M.V. Costs
            For food and recreation
            14 X 240 X 12c                               403.20
            Snow chains 2 X 18                            36.00
            2 maintenance trips
            2 X 240 X 12c                                 57.60
            4 winter tread tyres                         104.00
      Additional Clothing
            Self, wife and child (listed)                427.00
      Recreation - 3 trips -
            3 X 240 X 12c                                 86.00
                                                      ---------
                                                      $1,272.60
                                                      ---------
          

The figure of 240 km represents the return figure of 250 km from Cabramurra to

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ATC 580

Cooma less the distance of 10 km that a Cooma contempory could be expected to travel for the same services.

13. Under the heading of Cost of Extra Work Clothing incurred by reason of working at Cabramurra an additional amount of $180 was claimed. This included the following item:

      3 sets of economical long underwear
         @    $10.00 top
              $14.00 trousers       $72
          

14. In assessing the return the amount of $1,272.60 was disallowed whilst $30 ``underwear'' - presumably the three underwear tops - was also disallowed. The taxpayer objected stating -

``The grounds for my objection are as follows: The allowance I am paid called Zone Allowance is an allowance paid to the employees of the Snowy Mountains Hydro-Electric Authority as the result of an arbitrated judgment which was opposed by the employer. This allowance sought to reimburse employees in specified localities for expenditure incurred in respect of peculiar conditions of isolation and hardship attributed to those localities. A photostat copy of this judgment was sent with my return, and I would appreciate a thorough examination of this document.

The claims which were refused under code 44 were made to reflect the many years since this allowance had been increased, although the judgment identified specific areas. In fact this allowance has been increased effective 1/1/80, being more than doubled. The payment of the retrospective increase was made in income year ended 30/6/81.''

15. The taxpayer, in argument, contended that the Zone Allowance was a reimbursement of expenditure and that such expenditure should be allowed as a deduction. The purpose of the allowance was, as indicated in the original claim (see para. 3) ``to bring the employee's earnings to a level comparable to that if living in Cooma'' and, if the allowance was to be, in effect, taxed then the respective net earnings would not be at a comparable level. There would be double taxation it was claimed.

16. Although the word ``reimbursement'' was used at one point in the Commission reasons (see para. 5), we do not think that the allowance finally granted was in the true sense a reimbursement - i.e. of expenditure already laid out. It, in some respects, included notional items (see para. 7) and, therefore, any direct relationship with the actual expenditure of a specific recipient would be purely coincidental. The allowance, in our view, is properly assessable in terms of sec. 25(1) and/or sec. 26(e) and, if any relief is to be obtained, it is through the deduction provisions of the Act. In this regard we would emphasise Dr. Gerber's comment in Case N34,
81 ATC 178 at p. 182, viz. -

``N.B. an employer's allowance is NOT an automatic deduction.''

17. In relation to the question of deductibility it is our clear view that the expenditure does not qualify. Even if it could be regarded as satisfying the positive limbs of sec. 51(1) - which it does not - it is beyond doubt expenditure of a private or domestic nature (for the snow chains and tyres capital). It is impossible to say, for example, in relation to a trip to Canberra for the purposes of recreation and food purchases, that 240 km thereof should be regarded as different to the balance of the journey.

18. We recognise the force of the taxpayer's plea that, if the Zone Allowance is in effect fully taxable, then the purpose of the Award has, to the extent of the taxation involved, been frustrated. As pointed out the same can be said in respect of cost of living of an individual - after tax that individual having in his hand less than the actual additional cost. However, as present enacted, the Act does not provide for either non-assessment of such increase or the deductibility of the additional cost.

19. For the above reasons we would uphold the Commissioner's decision on the objection and confirm the taxpayer's assessment for the year ended 30 June 1980.

Claim disallowed