Case U110

Members:
BJ McMahon SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 7 May 1987.

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B.J. McMahon (Senior Member)

From the time of his arrival in Australia in 1973 the applicant was employed as a contract administrator by a large building company in Adelaide. His employment was not covered by the terms of any award or formal service agreement. He did, however, have a letter of appointment. This set out the package of benefits to which he was entitled, which included a salary, superannuation and the use of a vehicle. In 1978 he separated from his wife. For the purpose of custody proceedings in respect of their daughter, his employer provided a letter confirming that at that time he was not required to work outside of South Australia. For the time being, this was the only indication of the area in which he would be required to serve his employer.

2. In July 1983 he was approached by the general manager of the New South Wales division of the company with whom he had previously worked. The company had a problem project in Sydney and the manager sought his assistance in resolving it. With the consent of the manager of the South Australian building division of his company, the applicant agreed to travel to Sydney to oversee the project. At the time he was told it would take between six and nine months. However, he gave evidence that, being experienced in the building industry, he thought it more likely to take nine months than six months.

3. It was arranged that there was to be no adjustment to his salary. The company entered into a lease of a small cottage in a Sydney suburb where he was to be housed. Rental for that cottage was paid directly by the company to the managing agent. In addition, the applicant was paid a sum of $60 per week to

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cover estimated additional living expenses in Sydney. This amount, together with his salary, was paid by bank transfer from the company in Adelaide to his bank account which he had transferred from Adelaide to Sydney.

4. In his income tax return for the year ended 30 June 1984 he returned this gross allowance of $2,676 as a benefit and claimed a deduction relating to this living-away-from-home allowance of $2,586. This claim was disallowed in full. Through his agent, the taxpayer objected in rather informal terms as follows:

"I refer to your notice of assessment No. [relevant no.] dated 15 January 1985 for the year ended 30th June 1984 and claim that the assessment should be amended by the allowance as a deduction of the sum of $2,586.00 being an amount correctly claimed and allowable under section 51A."

Apart from these terms no further grounds of objection were put forward.

5. The objection was disallowed and the present application is brought to review that objection decision.

6. There is no question that the gross amount of the allowance was taxable under sec. 26(e) of the Income Tax Assessment Act. The claim for the deduction is based on the former sec. 51A of the Act, the relevant parts of which were as follows:

"51A(1) 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.

(2) 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 of value of the allowance exceeds $2, as the Commissioner considers reasonable in the circumstances.

(3) For the purposes of this section -

• ...
• `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."

7. In order to demonstrate entitlement to the deduction, the applicant must show that the amount paid to him was a "living-away-from-home allowance" as defined in sec. 51A and that the amount claimed is reasonable. It has also been suggested (in Case R99,
84 ATC 650) that an applicant is obliged to show that he did in fact incur additional expenses. If he did not incur them, the argument is that the allowance could not be paid by way of appropriate compensation. This then is the first issue to be decided in the present application.

8. The second issue to be decided is whether the applicant was obliged to "live away from his usual place of abode" so as to be entitled to relevant compensation within the meaning of the definition of "living-away-from-home allowance".

9. The applicant owned a house in Adelaide having acquired his former wife's joint interest in it. There he lived with his daughter, then aged eight years. When he decided to move to Sydney, he arranged for his daughter to stay with friends for a few weeks whilst he arranged the removal of all his furniture to Sydney and cleaned up the premises. He took up his Sydney position on 15 August 1983. His daughter joined him in Sydney at the end of that month.

10. With the assistance of his company's personnel officer he found tenants for the unfurnished house. They signed a lease for six months at a weekly rental of $110. It happened that at the end of the six months term, the tenants were ready to move on. The applicant said that after six months, the end of the Sydney job was visible. Both because he then intended to return to Adelaide and because his

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employer company was unable to find further tenants for a short period, the property remained empty after the initial tenants left until at least the end of the financial year.

11. During his period in Sydney the applicant maintained contact with friends in Adelaide. On one occasion he returned to attend a wedding there. As a result of the earlier custody proceedings, it was necessary for him to obtain a court order to take his daughter to Sydney. It was a term of that order that she be returned three times per year to her mother. However, as it transpired, according to his evidence, the child's mother chose not to have her stay with her during his Sydney sojourn.

12. The Sydney premises was a small house set in the garden of a much larger house. It is possible that it had been built for elderly members of the family that lived in the large house. It contained two bedrooms, a lounge, a kitchen, bathroom and garden. It was furnished with the furniture from the Adelaide house. After his daughter joined him, the applicant made arrangements for her to attend the local school. He kept house for himself and arranged for her to be looked after at those times when he was not at home.

13. During the whole of the period under review, he claims to have paid an average of $59.47 per week by way of non-deductible living expenses over and above those for which he would have been liable had he continued to live in Adelaide. The applicant presented as a quiet and patently honest man, not given to exaggeration. I accept his evidence that he did in fact incur these additional expenses. They consisted chiefly of amounts paid for food. His experience, after keeping house both in Adelaide and in Sydney, was that the weekly food bill in Sydney was some $30-$40 more than the Adelaide bill. In Adelaide he had friends who could look after his daughter. In Sydney he was obliged to pay for child-minding facilities. The basic cost of minding his daughter before and after school was $14 per week. If he were to be late attending meetings; he used to arrange for one of the local teenage children to look after his daughter at an additional cost of $3 per hour until such time as he returned home. Whereas he carried out the house cleaning in Adelaide himself, he found that the demands of the job in Sydney were such that this was no longer possible. He therefore arranged for cleaning to be done at a cost of $20 per fortnight.

14. In July 1984, after the year of income in question, the applicant was offered promotion in New South Wales and decided to accept it. He subsequently moved out of the company rented premises and bought his own house in Sydney in which he presently lives.

15. The question to be decided on these facts is whether during the year ended 30 June 1984 the applicant was obliged to live away from "his usual place of abode". As there were only two places of abode, this involves deciding whether the Adelaide or the Sydney premises at the relevant time were "his usual place of abode".

16. The respondent contends that the applicant's former residence in Adelaide was not in fact his usual place of abode during the relevant year. He argued that where he lived - the rented cottage in Sydney - was not only his actual place of abode but that during the year in question it was his usual place of abode.

17. In
R. v. Hammond (1852) 17 Q.B. 781 Lord Campbell said "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". This dictum, although not a recent one, has been referred to with approval in Case N31,
81 ATC 167 and Case C77,
71 ATC 342. It cannot be assumed, however, that application of this simple test can always answer the question "where is this person's place of abode" let alone assist in determining his usual place of abode.

18. The identification of a place of abode will always be a question of fact. Some assistance in determining whether or not it is his "usual" place of abode can be derived from cases that have considered the meaning of "permanent place of abode". In
F.C. of T. v. Applegate 79 ATC 4307, Fisher J. equated "usual" with both "habitual" and "permanent". His observations concerning "permanent place of abode" in that case are therefore pertinent to the present application. At p. 4317 he said:

"It follows that it is in my view proper to pay greater regard to the nature and quality of the use which a taxpayer makes of a particular place of abode for the purpose of determining whether it qualifies as his

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permanent place of abode. His intentions with respect to the duration of his residence is just one of the factors which has relevance. Obviously if his stay is purely temporary and he intends to move on or return to Australia at some definite point of time this denies the place of abode an essential characteristic of a home, namely durability. Moreover it seems appropriate to view objectively the nature and quality of the use which the taxpayer makes of the place of abode to determine whether it has the characteristics of his fixed place of abode, his home. It is to my mind perfectly consistent with the establishing of a home in a particular place that the taxpayer is aware that the duration of his enjoyment of the home, although indefinite in length, will be only for a limited period. The knowledge that eventually he will return to the country of his domicile does not in my opinion deny him a capacity to make his home outside of his country domicile. Such a conclusion is particularly open in the present circumstances where the taxpayer was not a completely free agent in the choice of when to return, it being a matter for negotiation between him and his employers.

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."

19. It seems to me that as a matter of fact the Adelaide home could not, during the year, be said to be the applicant's place of abode. For six of the 12 months it was occupied by another family with their furniture. At no time during that period could the applicant have knocked on the door and demanded that he be allowed to sleep there with his family. He had granted the right of exclusive possession to others. More importantly, he did not, as a matter of fact sleep there. For the remainder of the period it was empty of both tenants and furniture. Without fanciful hardships, it would not have been possible to stay there during this time - the remainder of the financial year. More importantly, again, the applicant did not in fact do so. A place of abode is more than a place one merely owns. It is a place where one lives. Since 1576, the Shorter Oxford English Dictionary says, abode has meant habitual residence. In that sense, the word "usual" in the statutory phrase is probably unnecessary. After the applicant left the Adelaide house, it ceased to be either his usual or any other adjectival place of abode. An applicant must first establish that a place of abode existed in fact before he begins to prove that it is his usual place of abode.

20. The purpose of the legislation, it has been said, is to compensate a person for being obliged to keep up two homes because of his employment. Here the applicant simply turned his former home into a revenue-earning asset, against which he claimed and was allowed appropriate deductions. He was not put to the expense of a dual establishment.

21. There have been two decisions of Boards of Review dealing with this section which were decided in the taxpayer's favour, namely Case C55,
71 ATC 242 and Case R99, 84 ATC 650. In the former case, the taxpayer's family continued to live in the main place of abode (or "home" as the Board referred to it) while the taxpayer, a miner, lived in sparse conditions near his place of work. He came home to his family every second weekend. In the latter case, an electrical mechanic, forced to find employment on the Central Coast, stayed with friends while working in the area. Having left most of his belongings at the home of his parents, where he lived before taking up this employment, he would return there each weekend. It will be seen that such were the ties with the places of abode where the taxpayers' families lived, that they could also be said to be the taxpayers' usual places of abode. The taxpayers usually lived and slept in the places of abode at regular intervals. This cannot be said of the present applicant.

22. The applicant's agent submitted that his client had not, in fact, severed his ties with Adelaide. He believed he was travelling to Sydney on a temporary basis. Because of his personal situation, he had thought long and hard before taking up the offer and agreed to it only after some investigations. He had always intended to return to Adelaide during the year

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in question. It was necessary for him to bring his daughter with him because of her age. The temporary nature of the move, he submitted, confirmed that his original home throughout the year in question was his usual place of abode.

23. To my mind the supposed temporary nature of the move has no relevance in determining the issue. Ties with friends have nothing to do with ties to the former place of abode. He does not appear to have had any ties of this nature save those of a landlord and later of an empty property owner. These would not be sufficient to convert the premises to his usual place of abode even if, as I do not believe, they could be regarded as his unusual, or casual place of abode. His heart may well have been in Adelaide but at all material times his home was in Sydney.

24. The moneys the subject of this claim are taxable and are not deductible pursuant to sec. 51A or any other section of the Act. The objection decision must therefore be affirmed.