Case Q1

Judges:
KP Brady Ch
LC Voumard M
JE Stewart M

Court:
No. 2 Board of Review

Judgment date: 26 January 1983.

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

These references, covering the years ended 30th June, 1976, 1977, 1978 and 1979, raise the question whether expenses incurred by the taxpayer in travelling by car between her

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place of residence and her place of employment at the several schools of which she was principal during those four years, are allowable deductions under sec. 51(1) or, to a lesser extent, sec. 53 or 54 of the Income Tax Assessment Act 1936. Claims made in the relevant returns of income for deductions in respect of purchases of Time magazine and newspapers had also, like the car travel expenses, been disallowed by the Commissioner and referred at the taxpayer's request to a Board, but these claims were withdrawn by the taxpayer. The only references remaining for our decision, therefore, are those covering the said travelling expenses. The issues raised in each of the four references were identical, and they were therefore consolidated into the one hearing.

2. At all relevant times the taxpayer was a primary school principal employed by the Education Department of her State, having been appointed a Principal Class 3 and posted to X School on 1st January, 1975. On 1st January, 1976, she was promoted to Principal Class 2 and transferred to Y School. On 1st January, 1979, she was promoted to Principal Class 1 and transferred to Z School, a position she still holds. The taxpayer agreed that, having regard to her age, further promotion was for all practical purposes out of the question.

3. During the whole of the four years in dispute and, for that matter, during earlier years dating from her time as a classroom teacher, it had been the taxpayer's almost invariable practice to travel between her residence and her school in her car. The costs, including depreciation and repairs, of doing so in the four years in issue, had been agreed between her and the Commissioner to be the following amounts:

      Year ended 30th June,       1976...........$1,544
                                  1977..............606
                                  1978..............458
                                  1979..............999
          

4. The taxpayer gave evidence that she was obliged to and did do some of her school work at home, out of school hours. She was understandably averse to working in a deserted school building after darkness had fallen, and therefore continued the practice, begun as a classroom teacher, of taking work home. She continued her practice of travelling to and from her school in her car, and used the car to transport between school and home the material relating to work left undone when she left school for the day. Work carried out at home involved the study of material of all kinds, ranging for example over curriculum notes, teaching programmes, library matters and students' projects. Many of the books, manuals and folders that she took home with her were bulky and would be awkward to carry on public transport, and her habit was simply to ``throw into the car'' material that she might want to read that evening, and take it home with her. There, she said, she spent some time each school night studying the material, or some or it. Generally, the materials would accompany her when she drove to school the next week-day morning. Her days were very full, and she did not always have time to make a careful selection of the material to be taken home; this sometimes led to her taking home more than she could conveniently cope with that night.

5. The taxpayer expressed the view that if she did not keep up to date in her normal work by continuing it beyond school hours, that might have an adverse effect upon her as principal and upon her school. We took this general statement to mean that the Education Department might form the opinion that her performance was below expectations, and that if the question of her promotion had remained a realistic possibility this would constitute an unfavourable factor. Further, she seemed to consider that slackness on her part would lead to a fall in the standards of the school. But much of this was mere conjecture, and in any event neither she nor the school was adversely criticised. The taxpayer stopped short of claiming that she was obliged by the terms of her employment to do some of her work out of hours and at home. The only evidence given of the duties of a school principal was that the taxpayer thought she had seen a schedule of duties, expressed only in general terms, some years ago. She also agreed that her willingness to work beyond normal hours would have been but one factor to be taken into account when promotion was being considered and, again, there was no evidence that it had had any direct effect upon her several promotions.

6. The picture that emerges is that of an extremely dedicated and hard working school

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principal who, because there were insufficient hours in the normal school day, took work home, just as many other professionals do. The taxpayer no doubt went to a great deal of trouble to ensure that ``her'' school achieved and maintained high standards, and if this required that she work additional hours, then so be it. But we are bound on the evidence to find that the expenses of car travel associated with the additional work done at home were not incurred as a result of some term, express or implied, in her contract of employment with the Education Department.

7. In considering the deductibility of the travelling expenses we have to consider sec. 51(1), 53(1) and 54(1) of the Income Tax Assessment Act. So far as relevant to these references, those sections provide as follows:

``51(1) All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income... shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature...

...

53(1) Expenditure incurred by the taxpayer in the year of income for repairs, not being expenditure of a capital nature, to any premises, or part of premises, plant, machinery, implements, utensils, rolling stock, or articles held, occupied or used by him for the purpose of producing assessable income, or in carrying on a business for that purpose, shall be an allowable deduction.

...

54(1) Depreciation during the year of income of any property, being plant or articles owned by a taxpayer and used by him during that year for the purpose of producing assessable income, and of any property being plant or articles owned by the taxpayer which has been installed ready for use for that purpose and is during that year held in reserve by him shall, subject to this Act, be an allowable deduction.''

As the taxpayer is an employee, and not carrying on a business, that part of sec. 51(1) that refers to losses and outgoings ``necessarily incurred in carrying on a business'' does not apply, for the definition of ``business'' in sec. 6 expressly excludes occupation as an employee. Sections 53 and 54 likewise are expressed to apply where the item in question (the taxpayer's car in this case) was used to produce assessable income. To this extent, the three elements in the claims depend upon a common ground, and we go first to sec. 51(1).

8. The taxpayer relied heavily upon the decision in
F.C. of T. v. Vogt 75 ATC 4073, where it was held that a professional musician who transported bulky and valuable instruments between his home and places where he performed was entitled to deduct the costs incurred in connection with the use of his car for these purposes, and the eventual loss on its disposal. But while there is a superficial resemblance between that case and the facts now before us, there are very important distinguishing features. Thus in Vogt, his employment by the Marrickville R.S.L. Club and the Daly Wilson Big Band was upon terms that he was to provide his own instruments and to bring them to performances and rehearsals. No such term formed part of the present taxpayer's contract of employment - see our finding expressed in para. 6 of these reasons. Secondly, there was a direct link between the income derived by the taxpayer in Vogt from the performances and rehearsals in which he engaged and his car expenses, but we cannot see any such connection between the present taxpayer's assessable income - that is, her salary - and the travelling expenses incurred. And finally, Waddell J. (at p. 4078) characterised the outgoings in Vogt as incurred in gaining or producing the assessable income upon the basis that first,

``the expenditure was incurred as part of the operations by which the taxpayer earnt his income. Secondly, it was essential to the carrying on of those operations: there was no other practicable way of getting his instruments to the places where he was to perform. Thirdly, in a practical sense, the expenditure should be attributed to the carriage of the taxpayer's instruments rather than to his travel to the places of performance.''

Yet we do not regard the evidence before us as justifying like findings. On the contrary we would regard the expenditure as incurred

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simply in travelling from the taxpayer's home to her place of employment which, on the authority of
Lunney v. F.C. of T. (1958) 100 C.L.R. 478 is of a non-deductible private nature under sec. 51(1). In our opinion, none of the three factors which influenced Waddell J. to decide the claim in Vogt in the taxpayer's favour is present here.

9. This Board has recently considered in detail the whole question of deductibility of expenses associated with travel from a taxpayer's home (where some work was done and income derived) to his place of employment. This was a far stronger case than the present taxpayer's, yet the claim failed (see Case P6,
82 ATC 30). We do not think it necessary to repeat here what we said there, except to emphasise that the present taxpayer's travel was still between her home and her place of employment.

10. Our conclusion that the expenditure on the running of the car was not incurred in gaining or producing the taxpayer's income is really fatal to the claims for repairs and for depreciation as well, in each case because the car could not be said to have been used to gain assessable income.

11. As the taxpayer's claims must therefore fail, we would uphold the Commissioner's decisions upon the objections and confirm the taxpayer's assessments for the years of income ended 30th June, 1976, 30th June, 1977, 30th June, 1978, and 30th June, 1979.

Claims disallowed