Case Q13

Judges:
MB Hogan Ch
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 11 March 1983.

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M.B. Hogan (Chairman) and Dr. G.W. Beck (Member)

This taxpayer is employed by a State Prisons Department and while working at a gaol in Location 1 he bought a house in a city suburb and lived in it for some time. He was subsequently transferred to Location 2 in a provincial town and without selling his house in Location 1 he purchased a second house. After some years he put himself forward for promotion and, being successful, was transferred in October 1976 to a gaol at Location 3. At Location 3 a house and electricity were provided free for the taxpayer and his family and he was assessed under sec. 26(e) in 1977, 1978 and 1979 on what the Commissioner regarded as the value to him of the benefits received. He objected in every year to the amounts included in his assessments and these objections having been determined unfavourably to him by the Commissioner the matters were referred to this Board. Prior to the hearing the Commissioner amended the assessments and reduced the amounts included in each year, but the Board papers did not record these changes. Copies of the amended assessments were handed up by the Commissioner's representative and the assessments for consideration were then, of course, the amended assessments (sec. 191). The amounts included in the amended assessments and the amounts that should be inserted in lieu according to the taxpayer are as follows:

                                                  Contended by
                    Year       In assessment       taxpayer
                                     $                $
                    1977            540               80
                    1978            780              120
                    1979            780              120
        

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2. In evidence the taxpayer said he still owns the house at Location 1 and that it is convenient and comfortable and he would like to live in it. He has sold the house at Location 2. To live at Location 1 and drive each day to the gaol at Location 3 is not physically reasonable and, in any case, regulations to the Prisons Acts require him to occupy the government-owned house at Location 3. Not all prison officers at his level are provided with houses and when they are not provided the officers were in the tax years in question paid an allowance of $5.50 per fortnight. The taxpayer's group certificates showed the value of quarters at $120 for a full year. The taxpayer was not at Location 3 for the full 1977 year. The payment of $5.50 per fortnight totals to $143 per year and the Board had no evidence as to why or how the taxpayer's employer came to a figure of $120, but that appears of no real consequence.

3. The house occupied by the taxpayer is a simple modern timber structure containing three bedrooms and the taxpayer seemed to overemphasise its shortcomings. One indisputable shortcoming was, however, that it was located on the prison reserve, and the taxpayer's family had to suffer all the constraints and inconvenience that security factors imposed. Prisoners moved and worked not far from the house and in view of the nature of the crimes committed by some of them the taxpayer had to insist on careful behaviour by his family. We appreciate the problems imposed on families by positioning residences within the boundaries of the prison and can only ponder why they should be so located. The location must, in our view, cause a heavy discounting of the commercial renting value of the house occupied by the taxpayer. In fact, it might have to be conceded that a house located inside a prison would generally have no commercial renting value. But sec. 26(e) refers to the assessability of ``value to the taxpayer'' and not to commercial value. We find it impossible to accept that the accommodation of the type provided has no value to the taxpayer.

4. The Commissioner's representative called a valuer from the Taxation Office and this man had carefully checked on the commercial rents for more or less equivalent accommodation in centres in the general area of the gaol. He considered the house in question would have rented during the years in question for at least $30 per week if it were located in one of these centres. He told the Board that he had carried out a number of rent appraisals on houses in industrial areas in and around provincial centres and he had developed a practice of reducing the commercial rents by 25% on such houses because of the unsatisfactory environment mainly due to noise and air pollution. He thought the disadvantages of a prison location warranted a 50% reduction and he estimated that the house provided to this taxpayer was therefore worth $15 per week to him. It is clear that these are arbitrary reductions, and it is possible that any number of valuers could come to a similar number of different discounting percentages.

5. The valuer also advised that on the basis of information regarding 1976 to 1978 costs and electricity consumption by ``the average dwelling'' (whatever that might be) obtained from a senior officer of the Consumer Installation Section of the relevant electricity supply authority he had calculated that the taxpayer received free of charge electricity worth $4.90 per week during the years in question. It appears to us impossible to maintain that the location of the house reduced the benefit of free heating and lighting and, after allowing for a degree of imprecision in the calculation, we consider an amount of $4 per week should be included in respect of electricity as a benefit to be assessed under sec. 26(e).

6. Section 26AAAA applies in determining the value to the taxpayer under sec. 26(e) of allowances in the form of provision of housing from 1 July 1977. Because of the proximity of the prison to a major population centre, subpara. (i) of para. (a) of sec. 26AAAB(1) cannot be ``satisfied'' and accordingly that section has no application in the circumstances of this case.

7. On the evidence, it is apparent that para. (b), (c) and (e) are ``matters'' which the Commissioner and the Board must take into account in determining for purposes of the application of sec. 26(e) the value of the benefit granted to the taxpayer. What has emerged from the assessments, notice of which issued immediately prior to the date of

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the hearing, is that, allowing for the incorporation of an amount of $4 per week for light and heating in the value assessed in accordance with sec. 26(e), the Commissioner can be seen to have discounted the commercial rental determined by his valuer by over 60% of the value of that rental; the value of the ``rental content'' under sec. 26(e) emerges as $11 per week.

8. The valuer, on whose recommendations the values used in the assessments the subject of the Board's consideration are based, has from his evidence taken account of the ``onerous conditions'' attached to occupation of the premises inside the prison compound. He has discounted his commercial rental of $30 per week to $15 per week. From his evidence, he has not taken into account either of the matters raised by para. (b) and (c) of sec. 26AAAA, each of which may be the medium of a ``reduction in the amount that would otherwise be the value to the taxpayer''. But the Commissioner in making his assessment of the value of the total allowances by way of housing, light and heating has adopted only the figure of $780 per annum ($15 per week). He must therefore be seen to have applied further discounting factors to the valuer's recommended figure when notice is taken of the fact that the valuer's report contained reference to the electricity authority's valuation of the provision of lighting and power. Effectively there has been allowance made in respect of matters falling under (b) and (c) of sec. 26AAAA.

9. Mr. Pease, who very ably represented the taxpayer, pressed heavily on the Board what he labelled ``the social oppression of the environment'', the fact that the taxpayer and his family, living as they do within the confines of the prison establishment, are during all daylight hours under the surveillance of the prisoner population, and the inhibitions that this placed on any normal form of social life. There is no doubt that these are factors calling for heavy discounting of ordinary commercial rental values but the evidence is that the Commissioner has had regard to those factors and other matters as directed by sec. 26AAAA. In the circumstances, we have not found in the material advanced by, and on behalf of, the taxpayer sufficient to prove to us that the Commissioner's valuation is excessive.

10. Accordingly, we would confirm the assessments, notice of which issued on 18 February 1981.

Objections disallowed